The analysts, led by the Head of Africa Strategy Samir Gadio, said that a number of stress factors, notably weaker oil prices and below-potential oil output, may negatively affect Nigeria’s external balance sheet.
“The trade surplus may gradually narrow in the coming years given that there is limited upside for oil prices, while oil output remains constrained by production disruption and limited new investment,” said the SCB analysts this week in a note made available to Daily Trust.
“We estimate that the current account surplus will shrink to 1.6 percent of GDP in 2015 from 2.1 percent of rebased GDP in 2014, and narrow further thereafter,” they added.
The analysts also believed that despite the series of import substitution-oriented policies pursued by the federal government, Nigeria’s import bill of capital and infrastructure goods is likely to increase in the long run as the country bridges its infrastructure gap – further contributing to a reduction in the current account surplus.
Buoyed by strong oil prices in recent years, Nigeria has consistently posted a trade surplus estimated at $14.9 billion (N2.42 trillion) for Q1 2014, according to the National Bureau of Statistics (NBS).
However, oil prices have weakened in recent times with Brent crude closing at $99.16 per barrel (pb) on 9 September, down from $115.1 pb recorded on 19 June, according to Reuters.
The SCB analysts noted that oil prices below the $100 pb threshold could weaken the Nigerian currency and possibly trigger a sell-off in Nigerian debt and equity assets, adding that the country’s dismally low levels of accumulated oil savings, relative to other oil-exporting countries, left the economy vulnerable to such oil price shocks.
