Nigeria’s balance of payment fragile, report says

A new report by the FSDH Merchant Bank has revealed that Nigeria’s balance of payment is still fragile and that it was dominated by transactions in the oil and sector.

In the report titled: ‘Fragile Balance of Payment Position: Policy option’, the FSDH Merchant Bank insisted that Nigerian economy was still vulnerable to movements in the oil and gas market.

The report also noted that this conclusion based on the latest report of the Central Bank of Nigeria on the estimate of Balance of Payment position of Nigeria as of Q4 2018, adding that the weak BOP position buttressed the urgent need to create multiple sources of revenue and foreign exchange earnings for Nigeria.

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The report reads: “These transactions are usually carried out by individuals or businesses, or by governments on behalf of their countries. The record of these transactions with other countries is known as BOP and is made up of three major components: Current Account, Financial Account and the Capital Account.

“The Current Account is usually the largest component of the BOP and it measures a country’s trade balance plus the effects of net income and direct payments. The Financial Account measures the changes in domestic ownership of foreign assets and foreign ownership of domestic assets.

“The Capital Account is usually the smallest component of the BOP and it measures the financial transactions that do not affect a country’s income, production, or savings. In some cases, Capital Account may be added to the Financial Account Transitions.”

The report also noted that there the BOP, just like the financial accounts of individuals and businesses, could be in a surplus or in deficit, adding that surplus meant the country received more money from other countries than it paid out.

“In Q4 2018, Nigeria recorded a surplus of $2.8m lower than the surplus of $6.18bn it recorded in the corresponding period of 2017 but higher than the deficit of $4.52bn recorded in Q3 2018. Between Q3 2018 and Q4 2018, Nigeria was able to reduce its imports and increased its export of goods,”a the report added.

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