EUR 4.00 For Business Accounts Only

NSR H2 2020 Excerpts - Balance of Payment - A Dire Outlook

• Nigeria’s current account position continues to face pressure owing to the fast paced rise in the demand for foreign goods and services. In Q1 20, Nigeria recorded its fifth consecutive quarter of current account deficit totaling $5 billion, which marks the longest chain of quarterly deficits since 2015. This came in higher than we had estimated for the quarter at $4 billion. On capital flows, coming into the year, our view on the direction for flows in 2020 was tainted with a lot of uncertainties owing to juxtaposing   factors at play as at the end of 2019. Interestingly, at the start of the year, we saw flows increase over the first two months of the year, as total capital flows were already 38% higher than the entire Q4 19, at $5 billion. However, the tides turned from March as conflicts in OPEC and the impact of COVID 19 led to a plunge in global oil prices and invariably foreign portfolio flows.
• Going into the rest of the year, we have a more dire projection for the H2 20 current account balance than we initially estimated in the previous outlook report. We expect a worse-off trade balance and a lower current transfer surplus to push the current account deficit higher than we initially estimated to $25 billion. On capital flows, we do not think flows would come in higher in H2 20 than in the first half. With FPI flows supporting Q1 20, and multilateral loans supporting Q2 20, it is unlikely we see any surge in inflows which could beat H1. Although our OMO rate remains relatively competitive (despite the recent cuts) compared to advanced markets, and even some peers in EM, the risk on FX and subsisting concerns on repatriation is unlikely to encourage more flows this year.