Nigeria recorded a significant slowdown in its external balance position in the third quarter of 2025, as the country’s current account surplus fell sharply to $3.42 billion, representing a 41 percent decline compared to the previous quarter.
The current account reflects how a country earns and spends foreign currency through trade in goods and services, income flows, and transfers. While Nigeria remained in surplus during the quarter, the scale of the drop highlights increasing pressure on the country’s external accounts.
What Drove the Decline
The reduction in the surplus was largely driven by a combination of rising imports, higher service-related outflows, and increased income repatriation, even as export earnings remained relatively strong.
Export receipts continued to benefit from crude oil sales and improved output from local refining activities. However, these gains were not enough to offset the broader increase in foreign exchange outflows during the period.
Non-oil exports showed limited growth, reinforcing ongoing concerns around Nigeria’s dependence on hydrocarbons for foreign exchange earnings.
Rising Imports and Service Outflows
Import spending increased during the quarter, particularly on non-oil goods. Although fuel imports continued to decline, reflecting progress in domestic refining capacity, higher spending on other imports weighed on the overall balance.
At the same time, outflows related to services such as transportation, travel, and professional services expanded. These service-related payments have remained a consistent pressure point for Nigeria’s current account.
Primary income outflows also rose, driven by profit repatriation and income payments linked to foreign investments in the domestic financial system.
Remittances Remain a Key Support
Diaspora remittances remained relatively stable in the quarter, continuing to provide a steady source of foreign exchange inflows. These transfers helped cushion the impact of rising outflows and remain an important stabilising factor in Nigeria’s external position.
Why This Matters for the Economy
The narrowing of the current account surplus sends mixed signals about Nigeria’s economic outlook. While the country is still earning more foreign currency than it spends, the margin has become thinner.
A smaller surplus reduces the buffer available to support the naira, manage foreign exchange volatility, and absorb external shocks. It also underscores the importance of improving export diversification, boosting non-oil production, and reducing structural import dependence.
For sectors such as real estate and infrastructure, external balance trends matter because they influence exchange rate stability, construction input costs, foreign investor appetite, and overall macroeconomic confidence.
Looking Ahead
Nigeria’s Q3 2025 performance highlights the fragile balance between inflows and outflows in the external sector. Sustaining a healthy current account position will depend on maintaining export momentum while addressing long-standing structural issues such as service import dependence and limited non-oil export capacity.
As global economic conditions evolve and domestic reforms continue, the direction of Nigeria’s current account will remain a key indicator to watch in the months ahead.
