Thursday, July 16 , 2020 / 08:45AM / by FBNQuest Research / Header Image Credit: FBNQuest

Wesee from the CBN's latest Quarterly Statistical Bulletin that debits onthe services account decreased by close to US$1.5bn in Q1 2020 to US$8.9bn. Arise for travel almost matched the fall for transportation but debits for otherbusiness services, which capture all transactions not posted under otherheadings, fell by close to US$1.0bn. The bulletin reinforces the view that Nigeriaproduces very little in the way of services for its population of about 200million. Transportation, travel and other business services together comprised95% of total debits.

Travel debits of US$3.55bn in Q1 were far more personal (US$3.15bn) thanbusiness (US$0.40bn). Nigerians enjoy a wide range of fx allowances. They spentUS$1.58bn on education, US$0.68bn on healthcare and US$0.89bn on 'others',which we take to be holidays. Annualized, these are substantial outflows on thebalance-of-payments.

Credits on the services account of US$1.12bn were unchanged from theprevious quarter.

Looking ahead to the data release for Q2, we would expect a sharper fallin debits to reflect the domestic and external impact of the current pandemic.For at least part of the quarter, there were few, if any flights in and out ofNigeria: foreign schools and universities were closed due to the virus; andmany foreign hospitals were only admitting Covid-19 cases.

Over time, Nigeria could replicate the prominent services industries inother EMs such as transportation (Ethiopia), recreational tourism (Kenya,Egypt, Morocco and South Africa), medical tourism (India) or IT and outsourcing(India).

Progress in this direction would make a dent in Nigeria's structuralcurrent-account weakness, evident in its seven deficits in succession.

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