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Business News

Nigeria’s growing current account deficit fans devaluation flames 

Nigeria’s alarming current account deficit is a possible bellwether for a devaluation if it persists.

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CBN renew focus to grow the non-oil sector

Nigeria’s current account deficit ballooned to net $2.85 billion (N876 billion) at the end of the second quarter of 2019. This is according to data from the Central Bank of Nigeria. The current account deficit occurs when a country’s foreign liabilities exceed its foreign assets. It is exacerbated when the country imports more than it exported.  

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. Nigeria has reported a negative current account balance in 7 quarters out of the 15 quarters reported under this government. The figures are stated net because the inflows are set-off against outflows thus a negative balance is a deficit. 

High import services  

A cursory look at the data indicates Nigeria’s services sector has been the major contributory reason for the growing foreign account deficit. The data reveals a net services import was a whopping net amount of $ 8.1 billion in the second quarter of 2019 (Q1 2019: N8.1 billion). Net services imports in the last 4 quarters is now about $31.6 billion compared to $19.6 billion net in the preceding 4 quarters.  

Specta

Transport & Travel: This 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. Transport and travel include items such as passenger travels, freights, business travels, personal travels (education and health). Education-related travel alone has gulped a whopping $3 billion net this year alone.  

Tens and thousands of Nigerian youth have recently left the country for Canada in search of better jobs and educations. A recent report claims about 6,000 Nigerians were admitted into Canada in 2018 alone. For these Nigerians, traveling means selling nearly all their property and belongings and then converting the proceeds into forex before traveling.  This piles pressure on our forex reserves.

Business services – 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 Ofice 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.  

What this means: 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.
  • Oil remains dominant as Nigerian businesses haven’t been able to attract significant sales induced forex inflows.
  • However, we continue to rely heavily on services to power the economy while also still spending billions on imports physical goods. The report reveals about net $5.6 billion have been spent importing goods.  

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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Hospitality & Travel

KLM demands rapid antigen tests from Lagos passengers, as Netherland bans flights to UK, others

Passengers are to obtain rapid antigen tests at Murtala Mohammed International Airport before departure via Air France KLM Royal Dutch Airlines.

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KLM, Air France to resume flight operations in Nigeria from December 7

Air France KLM Royal Dutch Airlines has asked passengers departing from Lagos to obtain a rapid antigen test at Murtala Mohammed International Airport before departure from January 26, 2021.

This was disclosed by the Commercial Team Nigeria, Air France KLM Royal Dutch Airlines in its newsletter.

The airlines explained that customers, who are traveling to France as their final destination, now need to show a negative COVID-19 test result before boarding the aircraft and that the test result cannot be older than 72 hours and only PCR or LAMP tests are accepted.

Also, to fight against COVID-19, the Dutch government imposed flight ban to the United Kingdom, South Africa and South America.

It stated, “In addition, a second COVID-19 test will be required (rapid test – antigen) for all customers traveling to The Netherlands, including transfer customers.

Specta

“No passengers will be allowed to board the aircraft without both the negative PCR test (72 hours before departure) and antigen test results (4 hours before departure) and will be rebooked accordingly. For now, all flights to/from U.K will be suspended until 27 January 2021.”

Steps to obtain rapid test

  • Antigen testing for passengers flying to The Netherlands including transfer customers need to be done as of 4
    hours prior to flight departure. In order to undergo the test, each passenger must complete a biodata form
  • The payment for the COVID-19 antigen test needs to be made via cash or card. The venue for sample collection is at the airport close to the check-in desks.
  • Rebook policy for mandatory PCR test: Customers that are not able to provide negative test results on time can take advantage of Air France and KLM PCR-test rebook policy.

What you should know

In December 2020, Nairametrics reported that KLM Royal Dutch Airlines and Air France resumed flight operations to Abuja and Lagos.

The airlines in a statement disclosed that international passengers can now fly Air France and KLM from Nigeria (Abuja and Lagos) to Paris and Amsterdam, with the possibility of further transfers to other European and North Atlantic destinations.

In a piece of travel advice, the airline asked customers to ensure they are well prepared for their trip and check the entry and travel requirements for their destination and transit countries in line with travel restrictions and governmental authorizations before making any travel plans. This is as the entry requirements may change with short notice.

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Tech News

Twitter acquires newsletter service, Revue

Twitter has acquired Revue, an email service that lets writers publish newsletters.

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Twitter Acquires Revue, A Newsletter Company

Twitter has acquired Revue, a Dutch startup that makes it free and easy for anyone to start and publish editorial newsletters. This is coming after a failed attempt to acquire Revue’s competition Substack.

Twitter has made massive moves over the past two months to acquire start-ups as it tries to expand beyond its core timeline product.

What they are saying

  • According to a blog post by Twitter VP of Publisher Products, Mike Park and Product Lead, Kayvon Beykpour, “Many established writers and publishers have built their brand on Twitter, amassing an audience that’s hungry for the next article or perspective they Tweet. Our goal is to make it easy for them to connect with their subscribers, while also helping readers better discover writers and their content. We’re imagining a lot of ways to do this, from allowing people to sign up for newsletters from their favorite follows on Twitter, to new settings for writers to host conversations with their subscribers. It will all work seamlessly within Twitter.

They added that Twitter will continue to operate Revue as a standalone product, with its team remaining “focused on improving the ways writers create their newsletters, build their audience and get paid for their work.”

  • “Revue will accelerate our work to help people stay informed about their interests while giving all types of writers a way to monetize their audience – whether it’s through the one they built at a publication, their website, on Twitter, or elsewhere,” the Twitter executives said.

They also said that bringing Revue to Twitter will supercharge this offering, helping writers grow their paid subscribers while also incentivizing them to produce engaging and relevant content that drives conversations on Twitter.

Twitter will make Revue’s Pro features free for all accounts and lower the paid newsletter fee to 5%, a competitive rate that lets writers keep more of the revenue generated from subscriptions.

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What you should know:

  • In December, Twitter bought Squad, a multi-participant video chat app, and this month it acquired the social broadcasting service, Breaker to create audio conversations for Twitter users. And now, they have added Revue to the collection of startups.
  • Revue was originally founded in 2015 in the Netherlands.
  • Twitter’s acquisition of Revue also places it in direct competition with Substack, a rival email newsletter service that has been growing in popularity recently.

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Coronavirus

Benue State Governor, Ortom tests positive for COVID-19

Benue State Governor has commenced treatment after testing positive for COVID-19.

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Governor Samuel Ortom of Benue State has tested positive for COVID-19.

This was disclosed by his Chief Press Secretary, Terver Akase, in a statement issued on Wednesday.

He stated, “This follows the test results of most of the Governor’s close aides who also returned positive in the last few weeks.

“Though the Governor has not shown any symptoms of the disease, he has already commenced treatment as prescribed by medical personnel.”

According to him, the governor has advised those who have come in contact with him in the last couple of days to go for a test.

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“The Governor says it is equally important that those who came in contact with other persons who have tested positive for the virus should go for a test to ascertain their COVID-19 status.

“Governor Ortom urged Benue people to continue to observe the protocols for the prevention of the virus such as wearing of face masks, use of sanitisers, regular hand washing and physical distancing,” he added.

What you should know

Some of the governor’s aides which included his personal physician, aide de camp, orderly, permanent secretaries among others had recently tested positive for the virus.

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