Figure 1: Current Account Balance in Nigeria (2016-2024)
Source: IMF 2019, Nigeria 2019 Article IV Consultation. Note: (*) Figures from 2019 onwards are projections.
Total merchandise imports to Nigeria increased to USD 43.0 billion in 2018, from an annual average of USD 37.0 billion for 2015 to 2017[1]. Exports increased to USD 62.4 billion in 2018, from an annual average of USD 42.4 billion for 2015 to 2017[2]. The faster growth in exports has not been sufficient to improve Nigeria’s current account balance, which deteriorated from a surplus averaging USD 7.2 billion (approx. 1.9% of GDP) for 2016 to 2018, to a deficit of -USD 1.6 billion (approx. -0.4% of GDP) in 2019[3]. The volatile current account balance has deteriorated Nigeria’s balance of payments but gross official reserves have increased despite the deteriorated capital and financial account surplus.
Figure 2: Capital and Financial Account Balance in Nigeria (2016-2024)
Source: IMF 2019, Nigeria 2019 Article IV Consultation. Note: (*) Figures from 2019 onwards are projections.
Nigeria’s capital and financial account balance deteriorated from a surplus (net inflows) averaging USD 7.2 billion (approx. 1.8% of GDP) for 2016 to 2018, to a deficit of USD -2.6 billion (approx. -0.7% of GDP) in 2019[4]. As a result, Nigeria’s balance of payments deteriorated from an average of USD 4.7 billion (approx. 1.2% of GDP) for 2016 to 2018, to a deficit of -USD 4.1 billion (approx. -1.0% of GDP) in 2019[5]. Gross official reserves increased from USD 27.6 billion in 2016 to USD 42.6 billion in 2018, before decreasing to USD 38.5 billion in 2019[6]. During this period, Nigeria experienced persistent inward FDI inflows.
Figure 3: Gross Official Reserves and Balance of Payment in Nigeria (2016-2024)
Source: IMF 2019, Nigeria 2019 Article IV Consultation. Note: (*) Figures from 2019 onwards are projections.
Inward FDI inflows increased from USD 3.1 billion in 2015 to USD 3.5 billion in 2017, before deteriorating to USD 2.0 billion in 2018[7]. As a result, Nigeria’s inward FDI stock increased from an average of USD 93.9 billion for 2015 to 2017, to USD 99.7 billion in 2018[8]/a>. Nigerians’ investments abroad have remained steady as inward FDI to the country persisted.
Figure 4: Inward Foreign Direct Investment in Nigeria (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
Outward FDI outflows decreased from USD 1.4 billion in 2015 to USD 1.3 billion in 2017, before increasing to USD 1.4 billion in 2018[9]. As a result, Nigeria’s outward FDI stock increased from an average of USD 13.0 billion for 2015 to 2017, to USD 15.7 billion in 2018[10]. These capital flows have been adverse for Nigeria’s balance of payment and the country’s net international FDI position.
Figure 5: Outward Foreign Direct Investment from Nigeria (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
Nigeria’s balance of payment has been supported by the improved capital and financial account surplus despite the volatile current account surplus in the period from 2015 to 2018. Outward FDI flows have been stable as inward FDI inflows persisted. Nigeria’s net international FDI position deteriorated from net liabilities amounting to an average of -USD 83.2 billion (approx. -20.4% of GDP) for 2015 to 2017, to net liabilities amounting -USD 84.6 billion (approx. -20.9% of GDP) in 2018[11].
Figure 6: International Foreign Direct Investment Position in Nigeria (2015-2018)
Sources: UNCTAD 2019, UNCTADStat Database.
At these levels Nigeria’s foreign liabilities remain sustainable as a proportion of GDP. Given the relatively narrow domestic capital markets, Nigeria should focus on attracting inward FDI in sectors that will expand its productive capacity and diversify its exports because the country is still heavily dependent on crude oil and natural gas exports. Nevertheless, Nigeria’s balance of payments deficit is projected to recover to a surplus from 2022 onwards but gross official reserves are projected to decrease in the medium-term.
Improvements in the capital and financial account deficit and the narrowing current account deficit should support a recovery in Nigeria’s balance of payments in the forward-looking medium-term. The current account deficit is projected to recover from a deficit of -USD 1.6 billion (approx. -0.4% of GDP) in 2019 to an average of USD 20.0 million (approx. 0.01% of GDP) from 2020 to 2024[12]. Nigeria’s capital and financial account deficit (net inflows) is projected to improve to an average of -USD 780.0 million (approx. -0.1% of GDP) from 2020 to 2024[13]. Therefore, the balance of payment is projected to recover from a deficit of -USD 2.9 billion in 2020 to a surplus of USD 700.0 million in 2024, which is equivalent to an average deficit of -USD 780.0 million (approx. -0.2% of GDP)[14]. Thus, Nigeria’s gross official reserves are projected to decrease from USD 35.6 billion in 2020, to USD 34.6 billion in 2024[15].
[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 8 March 2020].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] IMF 2019. Nigeria 2019 Article IV Consultation, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 8 March 2020].
[4] IMF 2019. Nigeria 2019 Article IV Consultation, ibid.
[5] IMF 2019. Nigeria 2019 Article IV Consultation, ibid.
[6] IMF 2019. Nigeria 2019 Article IV Consultation, ibid. There are relatively significant errors and omissions in Nigeria’s balance of payments data equivalent to -USD 4.4 billion in 2016, -USD 6.1 billion in 2017, and -USD 18.7 billion in 2018.
[7] UNCTAD 2019. UNCTADStat Database, ibid.
[8] UNCTAD 2019. UNCTADStat Database, ibid.
[9] UNCTAD 2019. UNCTADStat Database, ibid.
[10] UNCTAD 2019. UNCTADStat Database, ibid.
[11] UNCTAD 2019. UNCTADStat Database, ibid.
[12] IMF 2019. Nigeria 2019 Article IV Consultation, ibid.
[13] IMF 2019. Nigeria 2019 Article IV Consultation, ibid.
[14] IMF 2019. Nigeria 2019 Article IV Consultation, ibid.
[15] IMF 2019. Nigeria 2019 Article IV Consultation, ibid.
