High dividend repatriations increase net deficit on Nigeria’s income account to $2.7bn

Net deficit on the income account of Nigeria’s current account increased to $2.7 billion in the first quarter (Q1) of 2023 from $2.3 billion due to higher net outflows related to investment income, most of which are dividend repatriations.

This is just as anticipations are high that the current account will move to a deficit in Q2 2023, largely due to issues around low productivity of oil output levels.

According to the most recent Quarterly Statistical Bulletin (QSB) from the Central Bank of Nigeria (CBN), despite this, Nigeria’s current account recorded a surplus of $2.5 billion in Q1 2023, slightly higher than a revised surplus of $2.4 billion in Q4 2022.

On standardised terms, the figure, according to the apex bank, improved to 2.2 percent of Gross Domestic Product (GDP) in Q1 2023 compared with 1.8 percent of GDP in the previous quarter.

With the surplus in Q1 2023, the current account has now posted surpluses for two consecutive quarters. It is worthy to note that the data is provisional and is subject to revisions.

The QSB noted that the positive outcome on the current account was mostly due to a lower net deficit on the services account, which decreased to $3.0 billion from $3.1 billion in Q4 2022.

Another contributory factor to the positive outturn on the current account was a net surplus on the trade account of $2.7 billion. However, it was slightly lower than the trade net surplus of $2.8 billion in Q4 2022.

Although the value of imports decreased slightly by $84 million to $11.7 billion, the modest quarter-on-quarter (q/q) drop in the surplus on the trade account was primarily due to a $204 million decrease in the value of total exports to $14.4 billion.

According to the CBN, the surplus on the current transfers account increased slightly to $5.5 billion compared to $5.0 billion in Q4 2022.

Workers’ remittances, which are the largest contributor to the current transfers, stood at $4.8 billion during the quarter.

Moving forward, “we expect the current transfers of Nigeria’s balance of payment to remain in surplus due to the impact of inbound remittance inflows,” the QSB read in part.

Recall that workers’ remittances in Q4, 2022, which represent a significant portion of current transfers, reached a similar sum of $5 billion during the period.

In 2022, these remittances accounted for approximately $19.9 billion of total inflows.

Additionally, the income and services account recorded lower net deficits of $2.3 billion and $3.1 billion compared with $3.4 billion and $4.0 billion in Q2 and Q3 2022, respectively.

Considering the dominance of crude oil in Nigeria’s merchandise export trade, there are anticipations that the current account will shift to a deficit this year. This is largely due to the moderation of oil prices in comparison to 2022.

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