Nigeria’s current account deficit rose to net $2.85 billion (N876 billion) at the end of the second quarter of 2019, according to latest statistics released by the Central Bank of Nigeria (CBN).
In the second quarter of 2018, Nigeria’s current account balance was a strong net positive $4.3 billion highest since the Buhari administration came into power in 2015.
A cursory look at the data indicates Nigeria’s services sector has been the major contributory reason for the growing foreign account deficit, contributing a whopping of $ 8.1 billion in the second quarter of 2019 (Q1 2019: N8.1 billion).
The transport and travel sector contributed significantly to the outflow of forex outside the country gulping about $3.9 billion net in the second quarter of 2019 taking it to a combined $8.2 billion in 2019 alone.
The most outflows appear to have come from the business services segment with over $4 billion net in the second quarter of 2019 alone and $7.7 billion net in the first two quarters of the year.
Most of these outflows are spent on paying technical services fees, professional fees and others required to power nearly all sectors of the economy.
Businesses across the economy rely on foreign services such as software, consulting and auditing, patents etc to power and scale businesses. These payments are tracked and approved by the National Office for Technical Acquisition and Promotion.
A recent Notap report indicates it has saved Nigeria about N240 billion in savings which may have been paid out as capital flight.
As Nigerians continue to enjoy a seemingly stable exchange rate that has not lasted well over two years, watchers of indicators such as current account deficit believe the negative trend is a major bellwether for another round of devaluation.
If Nigeria continues to experience current account deficits then foreign investors could ratchet up calls for an imminent devaluation.
As such, the government will have to hope that oil prices remain high while it continues to explore other export generation sectors of the country.
