The most recent data from the CBN shows that Nigeria’s current account moved to a deficit of -USD603m in Q3 ‘22 from a revised surplus of USD861m in Q2 ’22. On a standardised basis, the current account deficit is equivalent to -0.5% of GDP. A striking observation is that the balance of payments (BOP) data series for Q3 ‘22 contains significant revisions to the initial data provided for Q2 ‘22. For instance, the latest BOP data show a current account deficit of -1.1% of GDP in Q1 ’22 compared with a surplus of 2.4% previously. It also shows a smaller current account surplus of 0.8% in Q2 ’22 compared with 4.7% previously..
A significant implication of the revisions is that, in contrast to the five consecutive quarters of current account surpluses suggested by the Q2 data, the string of current account surpluses that started in Q2 '21 was broken by a current account deficit in Q1 '22.
Moving back to Q3, although the current account deficit was driven by a combination of factors, the two primary drivers were a deterioration in the income account and a smaller surplus in the trade account.
The net deficit on the income account increased to -USD3.5bn from -USD2.6bn in Q2 ’22 primarily due to a higher net outflow of -USD3.8bn related to investment income, mostly dividend repatriations.
The surplus on the trade account declined by -16% q/q to USD1.5bn, due to a -22% q/q reduction in merchandise export to USD14.2bn from USD18.2bn in Q2 ’22.
Proceeds from crude oil and gas exports which accounted for 91% of total merchandise exports declined by -20% q/q to USD12.9bn from USD16.2bn in Q2 ’22.
According to OPEC data from secondary sources, Nigeria’s crude oil output dropped to a little under 1.06 million barrels per day (mbpd) in Q3 ’22 from 1.2mbpd in Q2 ’22. Also, the average oil price declined by -9% q/q during Q3.
Imports of goods declined by -22% q/q to USD12.7bn, clearly reflecting the ongoing difficulties with fx liquidity.
Beyond Q3, we expect the current account to post a larger deficit in Q4 ’22, due to the issues with low oil productivity and a -15% q/q reduction in oil prices during the quarter.