The recent report from the Central Bank of Nigeria (CBN) highlights a significant turnaround in Nigeria’s balance of payments (BOP) for 2024, with a surplus of $6.83 billion. This marks a notable recovery from the deficits experienced in the previous two years, driven by various macroeconomic reforms and improved trade dynamics.
Key Highlights:
- BOP Surplus: The shift from a deficit of $1.21 billion in 2023 to a surplus in 2024 indicates a robust recovery in Nigeria’s external finances. This improvement is largely attributed to a strong performance in both the current and capital accounts, which together posted a surplus of $17.22 billion.
- Trade Dynamics: The trade balance saw a significant boost, with goods trade surplus reaching $13.17 billion. This was fueled by a remarkable 48.3% increase in gas exports and a 24.6% rise in non-oil exports. Concurrently, imports decreased, with petroleum imports down by 23.2% and non-oil imports by 12.6%. These changes reflect the impact of foreign exchange liberalization and efforts to enhance local production.
- Remittances and Assistance: Personal remittances rose by 8.9% to $20.93 billion, while inflows through International Money Transfer Operators surged by 43.5%. Additionally, official development assistance increased by 6.2%, indicating stronger global support for Nigeria’s economic reforms.
- External Reserves: Nigeria’s external reserves grew by $6 billion, reaching $40.19 billion, the highest level in nearly three years. This increase is attributed to the BOP surplus and improved foreign exchange inflows from investments.
- Reform Impact: The CBN attributes this positive turnaround to the government’s macroeconomic reforms, including the liberalization of the foreign exchange market and the removal of fuel subsidies. CBN Governor Olayemi Cardoso emphasized that these reforms are crucial for macroeconomic stability and investor confidence.
Challenges Ahead:
Despite these positive developments, several challenges remain:
- Currency Depreciation: The naira has faced significant depreciation, trading above N1,600, despite CBN interventions. This suggests that while the BOP surplus is encouraging, it has not yet stabilized the currency.
- Global Trade Relations: Recent criticisms from the U.S. regarding Nigeria’s import bans on various products could complicate trade relations and limit export opportunities. This situation underscores the need for Nigeria to engage diplomatically and adjust policies to navigate the global trade landscape effectively.