By Elizabeth Adegbesan
Despite the impact of budgetary delays and political uncertainties in the horizon, Nigeria’s macroeconomic outlook may remain positive going by analysts’ projections.
But this projection may also remain threatened by the persisting dependence on oil and gas market which the analysts reckon as presenting a downside risk to its external sector, especially the Balance of Payment, BOP, despite a continued surge in surplus.
The provisional BOP figures for first quarter, Q1’ 18 published by the Central Bank of Nigeria (CBN), indicates that the overall BOP for Nigeria shows a surplus of $7.32 billion in Q1’2018, an increase from a surplus of $2.98 billion in Q1’17.
Economists at FSDH Merchant Bank Limited, in an economic note early this week said, “An analysis of Nigeria’s BOP position as at Q1’18 confirms our view that the country’s external position remains strong but vulnerable to developments in the crude oil and gas market.
“A strong BOP helps to sustain stability in the foreign exchange market and reduce exchange rate risk. Our analysis of the current account component of the BOP shows that it increased to a surplus of $4.4 7 billion in Q1’18.
“Nigeria’s inflows into the current account were dominated by crude oil and gas exports, accounting for 93.28 percent of total exports and 64.46 percent of total inflows.
“The BOP report shows that the external reserves as at Q’18 stood at $46.73 billion compared with $30 billion in Q1’17. The reserves as at Q1’18 could finance approximately 16.2 months of imports higher than the global and West African Monetary Zone benchmarks of three months and six months respectively.”
FSDH, therefore, called on the government to implement policies which would protect the economy against the adverse consequences of developments in the crude oil market and increase foreign capital inflows.
“Government at all levels must intensify efforts to implement policies that would grow the non-oil sectors of the economy. This would ensure that the economy is mitigated against consequence attached to adverse developments in the crude oil market and would also encourage more foreign capital inflows in the form of Foreign Direct Investments and Foreign Portfolio Investments” FSDH added.