According to the most recent Quarterly Statistical Bulletin (QSB) from the central bank (CBN), Nigeria’s current account posted a higher surplus of USD5.1bn in Q2 ’22 compared with a revised surplus of USD2.6bn in Q1 ’22. With the surplus in Q2, the current account has now recorded surpluses for five straight quarters.

In standardised terms, the surplus has improved to 4.7% of GDP in Q2 ’22 from 2.4% the previous quarter. Similar to recent quarters, the positive development on the current account reflects an improvement in the trade account, whose surplus improved to USD5.7bn during the quarter, from USD3.5bn in Q1.

Driving the trade surplus was a 5% q/q increase in total exports to USD18.2bn and a 10% q/q decrease in total imports to USD12.5bn.

The positive out-turn on the trade account was mostly due to an USD856m increase in oil exports which accounted for c.89% of total merchandise exports during the quarter, and a -USD953m decline in oil imports.

The net deficit on the services account increased to USD3.6bn from USD2.8bn in Q1.

Despite the q/q rise, the net deficit in services is still running below pre-COVID levels of between USD5bn to USD9bn because expenditures on imported services have not recovered to pre-pandemic levels.

By way of illustration, net debits on education and health services amounted to USD494m and USD113m respectively. These compare with USD1.6bn and USD682m in Q1 ’20.

The CBN's rationing of fx because of a reduction in fx supply is substantially responsible for the decline in imported services, which is largely artificial.

The net deficit on the income account decreased to USD3.9bn from c.USD2.6bn in Q1 because of lower net outflows related to investment income, mostly dividends. This reflects the challenges that multinational firms have with dividend repatriation.

The current transfers account showed a slightly smaller surplus of USD5.6bn compared with USD5.9bn in Q1. The surpluses on this account have been driven by workers' remittances which have averaged USD5.0bn per quarter for the past four quarters.

Looking ahead, we believe that the current account will remain in surplus if oil prices hold at prevailing levels, and the CBN continues with its FX demand management strategies.