Analysts Forecast Current Account Surplus for Nigeria

                                                     CBN Governor, Sanusi Lamido Sanusi

 Financial market experts at Standard Bank had predicted that Nigeria would post a current account surplus of 11.2 per cent of her Gross Domestic Product (GDP) this year.

Current account is one of the primary components of balance of payments (BoP). It is one of the two major metrics of the nature of a country's foreign trade. A current account surplus increases a country's net foreign assets.

Standard Bank stated this in a report titled: “African Markets Revealed, January 2012,” a copy of which was e-mailed to THISDAY Wednesday.

The report showed that Nigeria’s current account to GDP stood at 8.2 per cent as at the end of 2011.

However, the international bank expressed concern that official trade statistics had remained problematic in the economy, “because of the continued disconnect between the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS) time series and an unexplained surge in imports in 2010.”

It argued: “This spike pushed down the aggregate trade balance and current account surplus to record low. Unlike the NBS data, CBN figures point to an improvement in the trade balance in 2011. We expect the import discrepancy to be eventually addressed and see Nigeria posting a current account surplus of 11.2 per cent of GDP in 2012.

“The magnitude of the errors and omissions category in the financial account mitigates its relevance, although we still anticipate some modest pick-up in Foreign Direct Investment and portfolio inflow this year. The key challenge on the BoP side will be to rebuild forex reserves and fiscal savings in the medium term, which will require the effective launch of the sovereign wealth fund (SWF) and improved naira confidence.”

Although the report acknowledged that certain sectors and indicators in the economy had recorded appreciable growth, it insisted that the adjustment in the fuel subsidy regime might put them under pressure due to “substitution effects within the private consumption category.”

“The government and unions agreed on a 50 per cent increase in fuel prices following a nationwide strike in January 2012 to protest the full deregulation of the sector. Nevertheless, the authorities still see the removal of the fuel subsidy as a key step to boost private sector participation in the refining business and address major fiscal and economic distortions.

“Nigerians are also awaiting promised reforms in the power sector that should ultimately smooth electricity shortages. Clearly, 2012 will test the administration’s ability to deliver in these areas. Meanwhile, security issues have also come to the fore, given the continued and increasingly sophisticated attacks by the Boko Haram group in the northern and central regions,” it said further.

Source: Thisdaylive