Financial market analysts have reiterated the need for the implementation of policies that would grow the non-oil sector of the nationâ€™s economy in order to mitigate risks associated with over-dependence on oil and attract more foreign investments.
Nigeriaâ€™s total inflows (consisting of exports and net current transfers) increased by 40.10 per cent to $20.83 billion in first quarter (Q1) of 2018, compared with $14.87 billionb in Q1 2017. However, the inflows were dominated by crude oil and gas exports, accounting for 93.28 per cent, a situation remains that vulnerable to developments in the crude oil and gas sector which presents a significant downside risk.
But analysts at FSDH Research said a way out was to reduce the countryâ€™s over reliance on oil and gas earnings, saying government at all levels must intensify efforts to implement policies that would grow the non-oil sectors of the economy.
â€œThis would ensure that the economy is mitigated against consequences attached to adverse developments in the crude oil market and would also encourage more foreign capital inflows in the form of foreign direct investments and foreign portfolio investments,â€ they said.
According to them, Nigeriaâ€™s Balance of Payments (BOP) position as at Q1 2018 confirmed their view that the countryâ€™s external position remained strong, but vulnerable to developments in the crude oil and gas market.
They explained that the provisional BOP figures for Q1 2018 published by the Central Bank of Nigeria (CBN), indicates that the overall BOP for Nigeria shows a surplus of $7.32 billion in Q1 2018, an increase from a surplus of $2.98 billion in Q1 2017.
â€œThe overall BOP as a percentage of Gross Domestic Product (GDP) grew to 7.85 per cent in Q1 2018 from 3.49 per cent in Q1 2017. A strong BOP helps to sustain stability in the foreign exchange market and reduce exchange rate risk. Our analysis of the current account component of the BOP shows that it increased to a surplus of $4.47 billion in Q1 2018 from a surplus of US$3.42 billion in Q1 2017. Total inflows (consisting of exports and net current transfers) increased by 40.10 per cent to $20.83 billion in Q1 2018 compared with $14.87 billion in Q1 2017. Nigeriaâ€™s inflows were dominated by crude oil and gas exports, accounting for 93.28 per cent of total exports and 64.46 per cent of total inflows. Outflows were dominated by the non-oil imports and net payments for services,â€ FSDH Research added.
The analysts noted that the financial account closed the quarter at a net outflow of $10.29 billion from a net inflow of $355.88 million in Q1 2017.
Inflows into the financial account were dominated by other investments and portfolio investments, accounting for 52.73 per cent and 40.85 per cent of total inflows respectively.
The BOP report shows that the external reserves as at Q1 2018 stood at $46.73 billion compared with $30 billion in Q1
2017. The reserves as at Q1 2018 could finance approximately16.2 months of imports higher than the global and West African Monetary Zone benchmarks of 3 months and 6 months respectively.