In its most recent report on the state of Nigeria’s External Sector Development issued on Monday, the Central Bank of Nigeria (CBN) has concluded that the country’s economy came under intense pressure in the second quarter of the year, as overall balance of payments recorded a 4.1 per cent deficit of the gross domestic product (GDP) amid a 6.1 per cent decline in external reserves and a slide in trade balance from 15.8 per cent in the first quarter to 8.9 per cent.
Total stock of the country’s external debt equally showed signs of significant pressure, with an upward movement to $6.92 billion during the corresponding period, though the Debt Management Organisation (DMO) said it was within sustainable level.
The report showed that the country’s external reserves, which stood at about $47.88 billion in the first quarter of the year, dropped to about $44.96 billion during the period. The CBN attributed the drop mainly to the sales of foreign exchange to the authorized dealers, payments of joint venture companies (JVC) cash calls as well as public sector payments, though it also showed that the ratio of short-term capital flows to external reserves increased from 14.2 per cent in the previous quarter to 14.5 per cent.
In its report, the CBN called for more emphasis to be placed on value-reorientation towards increased patronage for domestically produced goods.
It also stressed the need to ensure the rehabilitation of the country’s refineries to function optimally and ensure adequate domestic supply of petroleum products.
The country’s estimated current account balance of $5.01 billion declined by 26.3 per cent from the $6.68 billion level attained during the first quarter; a development traced to the higher import bills and lower export earnings arising from the decline in crude oil production from 2.05 million barrels per day, MBPD, at the beginning of the year to 1.93 MBPD due to production shut-ins and crude oil theft.
The report also showed that the Nigeria's aggregate imports increased by 21.3 per cent from $11.30 billion recorded in the previous quarter to $13.71 billion, a decline of 11.7 per cent when compared with the level recorded in the corresponding period on 2012. In turn, aggregate exports declined by 6.4 per cent when compared with the preceding quarter, though the report noted that the deficit in the income account narrowed significantly from $4.97 billion recorded in the first quarter to $2.95 billion owing to lower repatriation of dividends and distributed profits by foreign investors. Nigeria’s estimated trade balance declined from $9.80 billion in Q1 2013 to $6.34 billion in Q2 2013
Estimated capital and financial accounts balance recorded a net liability of $3.54 billion, which was equivalent to 5 per cent of GDP, compared to net asset of $2.19 billion. Total financial asset, representing financial outflows, declined by 46 per cent, following the decline in external reserves.
Direct investment abroad during the period under review also declined from $0.36 billion to $0.15 billion on account of the sluggish global economic recovery, while portfolio investment abroad recorded significant growth from $1.07 billion to $2.72 billion, reflecting, probably, the desire of Nigerians in the diaspora to take advantage of the cheaper financial assets abroad.
Besides, the report said that foreign direct investment (FDI) inflows increased from $1.29 billion recorded previously to $1.47 billion in the review period due to renewed confidence of foreign investors and conducive macroeconomic environment.
Finally, as a result of the decline in aggregate exports proceeds and surge in imports, with aggregate exports down by 6.4 per cent, to $21.16 billion, compared with the levels in the preceding quarter, and aggregate imports increasing by 11.6 per cent from $11.30 billion in Q1 2013 to $13.71 billion in the review period