According to the World Bank, Nigeria’s current account balance stood at a deficit of $16.98Billion in 2020 compared to a deficit of $14.63 Billion in the previous year making the 2020 current account balance the lowest Nigeria has recorded in the last three decades.
The current account balance started its descent into deficit from 2018 when it was $6.26Billion and reached a negative balance in 2019 to reach an all time low of -$16.98 in 2020.
The current balance of an economy is a key indicator of its health. The balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends), and net transfer payments (such as foreign aid) make up the current account. A positive current account (surplus) shows that the economy is a net creditor to the rest of the world, whereas a negative current account (deficit) indicates that the country is a net debtor to the rest of the world, mainly due to high imports.
Nigeria’s 2020 current account balance indicates that the country is importing more than it is exporting and this poses a challenge for its foreign reserve.