Nigeria’s current account balance is at risk of turning into a deficit if oil prices dip below $60 per barrel, according to AGG Capital Limited. The firm also raised concerns about the impact of the new 14% tariff on Nigeria’s exports, which poses a threat to the 2025 budget by directly affecting foreign revenue projections.
In its latest macroeconomic update, AGG Capital explained that the current account measures the inflow and outflow of goods, services, and investment income between Nigeria and the rest of the world. Over the past three years, the country has seen favorable trade balances, bolstered by strong export and import revenue.
However, AGG Capital noted that the performance of Nigeria’s current account had been significantly stronger in recent years, largely due to a rebound in global oil prices from $59.4 per barrel to $87.01 per barrel, despite Nigeria’s inability to meet OPEC production quotas. These trends highlight the need for diversification in Nigeria’s economy and the expansion of non-oil exports to stabilize external balances.
The surplus in Nigeria’s current account rose by 14.2% year-on-year to $3.82 billion in 2024. Yet, on a quarterly basis, the surplus contracted, reflecting a narrower surplus in the goods account, with weaker export earnings and a rising import bill.
AGG Capital expressed concerns over the potential downside risks to Nigeria’s external account position, especially following global developments, including U.S. President Trump’s pro-oil stance and tariff policies. These challenges could jeopardize the current account’s ability to support Nigeria’s external reserves in 2025.
As of the latest data, Brent crude oil traded at $64.21 per barrel, its lowest level in nearly four years. Should oil prices fall below the critical $60 per barrel threshold, Nigeria’s economy could face a current account deficit, given that oil constitutes over 83.5% of the country’s export earnings.
