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Nigeria FY'17 Trade Report - It’s beginning to look a lot like 2014

It’s beginning to look a lot like 2014                                                         

Nigeria’s current account balance rose 65% q/q in Q4’17 to ₦1.8 trillion, hitting its highest value since the oil price crash (Q3’14: ₦2.9 trillion). The widening current account surplus came on the back of a 9% q/q rise in exports to ₦3.9 trillion and a 15% q/q decline in imports to ₦2.1 trillion. It is interesting to note that Nigeria’s crude oil exports – still the largest chunk of total exports at 83% – have almost recovered to pre-oil price crash levels as the subsequent currency depreciation and a recovery in production volumes have compensated for the fall in price. The decline in Q4’17 imports was as a result of lower petroleum product imports during the period. We note that imports of mineral fuels halved from ₦724 billion to ₦395 billion between Q3’17 and Q4’17, reducing the weight of petroleum products in Nigeria’s import bill to 18% (2017 average: 28%). This reduction reflects the shortage of petroleum products (particularly premium motor spirit) at the end of 2017.                                                      

Nigeria recorded a current account surplus of ₦4.0 trillion in 2017, better than the ₦0.3 trillion deficit recorded in 2016 and ₦2.9 trillion surplus recorded in 2015. This is still less than half of 2014 current account surplus of ₦8.9 trillion. 2017 Current account as a % GDP equaled 3.5%.                   

2018 current account balance is likely to be supported by a full-year recovery in Nigeria’s crude oil production and stronger oil prices through the year. We do not consider the OPEC output cap to be a significant production constraint (see our note – “Nigeria Economic Commentary: How Much Crude Oil Can Nigeria Produce in 2018?”). Likewise, we do not see damaging militant activity as likely in the next 12 months as we anticipate the government pulling out all the stops to prevent the severe socio-economic impact of heightened militant activity ahead of the 2019 Elections. Whilst strengthening consumer wallets may buoy imports, fuel imports are likely to remain weaker than normal under the current retail pricing regime. Thus, we foresee a wider current account surplus in 2018.