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Nigeria Q1'18 Trade Report - Current account dominated by petroleum story

Current account dominated by petroleum story                                                                              

Nigeria’s trade position showed further improvement at the start of 2018 as current account surplus rose from ₦0.7 trillion and ₦1.8 trillion in Q1’17 and Q4’17 to ₦2.2 trillion in Q1’18. This represented more than half of FY’17 current account surplus (₦4.0 trillion) and a far cry from a FY’16 deficit of ₦0.3 trillion. Driving this was an 8% y/y and 56% y/y increase in imports and exports respectively.                                                                    

Nigeria’s exports rose 20% q/q to its highest value since Q3’14. Crude oil exports increased 10% q/q and 51% y/y, supported by recovered production volumes and much stronger oil prices. After two consecutive quarterly declines, imports rose 19% q/q to ₦2.5 trillion. We note that imports in the quarter were skewed towards January – accounting for 42% of Q1’18 imports, highest month on record.                                                                       

We draw attention to a significant jump in mineral fuel (petroleum product) imports in Q1’18 – up 183% q/q and 41% y/y respectively. Whilst this must have been partly driven by a higher landing cost of petroleum products on the back of stronger oil prices in the period, we are convinced that volumes also rose during the period. Indeed, this is supported by Ministry of Petroleum Resources data which shows a significant uptick in petrol truckout since the turn of the year – ytd monthly average of 52 million litres per day vs. 2017 average of 35 million litres and estimated national demand of 40 million litres. As demand for petroleum products is little changed in recent times, this may indicate a larger amount of smuggling activities.                                                                

We expect non-crude oil exports to normalise from Q2’18 onwards and foresee oil & gas exports dominating Nigeria’s exports given the healthy pricing and volume outlook in the space. Meanwhile, we expect imports to remain stable amid continued foreign exchange market stability and strengthening consumer wallets. All in all, the positive outlook for crude oil prices should buoy Nigeria’s trade balance in 2018.