by Chi Ibe
A report by the Central Bank of Nigeria (CBN) has noted that Nigeria’s external reserves declined by 6.1% with trade balance reducing to 8.9 in the last quarter (Q3).
Comparing results of Q3 in with the levels recorded in Q1, 2013 and Q2, 2012, the bank however said the external account remains strong, though with volatile huge financial inflows, relatively robust external reserves and current account surplus.
According to The Telegraph:
Notwithstanding, the sector experienced severe pressures in Q2, reflected in huge payments for imports especially fuel and food items, as well as the negative net outcome in the services and income accounts. Consequently, the overall balance of payments swung into a deficit equivalent to 4.1% of the gross domestic product (GDP).
External reserves, at US$44.96 billion, declined by 6.1%, while trade balance, as a percentage of GDP, reduced from 15.8% in Q1 2013 to 8.9%. The stock of external debt trended upwards to US$6.92 billion but within sustainable level. The computed indices of NEER and REER, and major indicators of integration declined in the quarter. Against this backdrop, there is the need to put in place a comprehensive backward integration production strategy to enhance domestic manufacturing output that would curtail huge import bills, while ensuring that refineries are functional and optimal to reduce fuel importation. In addition, more emphasis should be on value-reorientation towards increased patronage for domestically produced goods.
The report stated that at US$5.01 billion, the estimated current account balance, declined by 26.3% from the level recorded in Q1 2013. This development was traced to the higher import bills and lower export earnings arising from the decline in crude oil production from 2.05 million barrels per day (mbpd) in Q1 2013 to 1.93 mbpd on account of production shut-ins and crude oil theft.
Further analysis revealed that aggregate imports increased by 21.3% from US$11.30 billion recorded in the preceding quarter to US$13.71 billion. It however, declined by 11.7% when compared with the level recorded in the corresponding quarter of 2012. Aggregate exports declined by 6.4% and 8.8%, respectively, when compared with the preceding quarter and corresponding quarter of 2012.
However, the deficit in the income account narrowed significantly from US$4.97 billion and US$6.00 billion recorded in Q1 2013 and Q2 2012, respectively to US$2.95 billion owing to lower repatriation of dividends and distributed branch profits by foreign investors. The deficit in the services account also narrowed relative to Q2 2012 but widened when compared with the level in Q1 2013, while the surplus in the current transfers account increased when compared to the levels recorded in the preceding quarter and the corresponding period of 2012.