Nigeria’s external sector is experiencing a notable turnaround, underpinned by a series of strategic reforms in the financial and macroeconomic landscape. Data from the Central Bank of Nigeria (CBN) shows that the country recorded a Balance of Payments (BOP) surplus of $4.60 billion in the third quarter of 2025, marking a reversal from the deficit recorded in the preceding quarter.

Analysts note that this performance reflects a combination of stronger external sector fundamentals, rising investor confidence, and the cumulative impact of targeted interventions in the foreign exchange market, monetary policy, and the domestic energy sector.

The BOP turnaround is significant because it signals the gradual stabilisation of Nigeria’s external accounts after years of volatility driven by oil price shocks, import dependence, and currency pressures. The surplus demonstrates that structural reforms and macroeconomic policy coordination are beginning to yield tangible results, not only in the short-term balance sheets but also in long-term investor sentiment and economic resilience.

External sector dynamics

The third-quarter BOP surplus of $4.60 billion was underpinned by a sustained current account surplus of $3.42 billion. This improvement reflects stronger trade performance, resilient diaspora remittances, higher financial flows, and steady accumulation of external reserves. In particular, the goods account registered a surplus of $4.94 billion, reflecting higher export earnings. Exports increased to $15.24 billion from $14.90 billion in the second quarter of 2025, driven by both crude oil and refined petroleum product exports.

The shift from net importer to net exporter of refined petroleum products is particularly noteworthy. Imports of petroleum products declined by 12.7 percent to $1.65 billion, while exports of refined products surged by 44 percent to $2.29 billion. Analysts point out that this trend underscores the early benefits of domestic refining capacity expansion and the government’s deregulation policies in the energy sector. By reducing import dependence, Nigeria is not only improving its trade balance but also insulating its foreign exchange market from external shocks.

In the services account, net outflows increased slightly to $4.07 billion from $3.74 billion, largely due to higher net payments for transport, travel, insurance, IT services, business services, and government services abroad. Similarly, the primary income account recorded a debit balance of $2.95 billion, up from $1.25 billion, largely attributable to repatriation of reinvested earnings by domestic banks on foreign investments. Meanwhile, the secondary income account, dominated by workers’ remittances, remained robust at $5.50 billion, including $5.24 billion from Nigerians in the diaspora.

From a macroeconomic perspective, these flows reflect a combination of short-term liquidity dynamics and structural adjustments. Strong export receipts improve Nigeria’s foreign currency position, while stable remittance inflows provide a quasi-stable source of FX liquidity that cushions the naira against excessive volatility. The slightly higher services outflow is consistent with an economy engaging more intensively in global trade in services, reflecting growth in sectors such as IT, finance, and transport.

Capital account and foreign investment flows

The financial account also contributed to the overall BOP surplus, with a net lending position of $0.32 billion. Foreign direct investment (FDI) inflows rose to $0.72 billion, while portfolio investment remained robust at $2.51 billion. This reflects both improved investor sentiment and ongoing non-resident participation in Nigerian financial markets, indicating that the country’s capital account is responding positively to reforms that enhance transparency, governance, and macroeconomic predictability.

As a result of these developments, Nigeria’s external reserves increased to $42.77 billion at the end of September 2025, up from $37.81 billion at end-June. This accumulation strengthens the country’s external buffers and provides policymakers with more flexibility in managing currency volatility, servicing foreign debt, and supporting trade finance. In macroeconomic terms, reserve growth reduces external vulnerability and lowers the probability of a balance of payments crisis, enhancing the country’s creditworthiness and risk profile in the eyes of international investors.

How the reforms took shape

The turnaround in Nigeria’s external accounts is no accident; it stems from a series of deliberate reforms by the CBN and the federal government. Since 2023, the administration, led by Governor Olayemi Cardoso, implemented measures aimed at liberalizing the foreign exchange market, ending central bank financing of the fiscal deficit, reforming fuel subsidies, and strengthening revenue collection. These reforms were designed to restore macroeconomic stability, reduce inflationary pressures, and attract foreign investment.

A key component was the unification of exchange rates, which eliminated the multi-tiered FX system and reduced distortions in the market. Clearing a backlog of over $7 billion in pending foreign exchange obligations improved the credibility of the official market and encouraged both domestic and foreign investors to participate actively. Analysts view these measures as critical to Nigeria’s efforts to improve sustainability in the long term, with multilateral organisations like the World Bank describing them as bold interventions in the country’s economic trajectory.

In addition, Nigeria successfully returned to international capital markets in late 2024 and received upgrades from several rating agencies, which further enhanced investor confidence. These moves reduced sovereign risk spreads to levels not seen since January 2020, erasing pandemic-era risk premiums. A more credible fiscal and monetary framework, combined with energy sector deregulation and new private refineries, positioned Nigeria as a more attractive destination for foreign capital inflows.

Diaspora remittances: A reliable FX source

Diaspora remittances remain a vital source of foreign exchange, estimated at $23 billion annually. The CBN has actively worked to make remittance channels more efficient by licensing new International Money Transfer Operators (IMTOs), implementing a willing-buyer-willing-seller FX model, and improving naira liquidity for IMTOs. These interventions have made remittance flows more predictable, contributing directly to the accumulation of gross FX reserves and supporting the stability of the naira.

The government’s efforts to improve investor and public confidence have also been critical. By expanding digital payments, contactless cards, and agent-banking networks, the CBN has increased the efficiency of remittance absorption into the domestic economy. Analysts suggest that these initiatives could double formal remittance receipts within a year, offering a sustainable channel for FX inflows and reducing reliance on volatile capital flows.

Inflation and disinflation

Achieving a BOP surplus is not only about external inflows; it also depends on internal macroeconomic stability. Nigeria has made substantial progress in taming inflation, which peaked at 34.6 percent in November 2024 but fell to 16.05 percent by October 2025. Food inflation, the largest component of the consumer price index, decreased from 21.87 percent in August 2025 to 13.12 percent in October.

This steady disinflation demonstrates the effectiveness of orthodox monetary policy, which replaced unorthodox interventions such as fiscal financing by the central bank. The CBN has improved data analytics, strengthened policy communication, and coordinated with fiscal authorities to anchor inflation expectations. Lower inflation has restored real purchasing power for households and businesses, reinforcing the positive impact of external inflows on domestic economic activity.

The Monetary Policy Committee (MPC) has responded to improving inflation trends by easing the policy stance, reducing the monetary policy rate to support economic recovery. These measures, combined with ongoing structural reforms, are expected to sustain growth momentum while maintaining macroeconomic stability.

Banking sector resilience

The CBN has also focused on strengthening the banking sector, introducing new minimum capital requirements effective March 2026. This ensures that banks remain resilient and capable of supporting a growing economy projected to approach $1 trillion in nominal GDP. A robust banking sector is essential for efficient financial intermediation, mobilization of savings, and transmission of monetary policy, all of which underpin sustainable balance of payments stability.

Governor Cardoso has emphasised that banking sector reforms, along with technological modernisation, digital payments, and fintech innovation, are central to deepening financial inclusion. A more inclusive and technologically advanced financial system ensures that both domestic and international capital flows are efficiently intermediated into productive sectors of the economy.

Crude oil exports also rose to $8.45 billion, reflecting steady production and market access, while total goods exports stood at $15.24 billion. These developments indicate that structural reforms in the energy sector are not only increasing domestic value addition but also enhancing Nigeria’s foreign exchange earnings potential.

Investor confidence and sovereign risk

Investor perception has been pivotal to the current external account improvements. The clearing of FX backlogs, liberalisation of the currency market, and adherence to orthodox monetary policy have reduced sovereign risk spreads and enhanced Nigeria’s credit profile. Multilateral institutions and rating agencies now recognize Nigeria’s reforms as credible and sustainable, which has translated into stronger portfolio and direct investment inflows.

The rise in FDI to $0.72 billion and portfolio inflows of $2.51 billion reflect this confidence. With a more predictable economic environment, foreign investors are increasingly participating in domestic financial instruments, supporting liquidity, and contributing to reserve accumulation. Analysts argue that sustained investor confidence is crucial to maintain the current BOP surplus and reduce susceptibility to external shocks.

Achieving economic turnaround

Over the past 12 months, Nigeria has transitioned from crisis management to laying the groundwork for a sustainable recovery. Real GDP growth, which averaged about 2 percent over the past decade, rose to 4.23 percent in the second quarter of 2025, driven by improvements in telecommunications, financial services, and oil production.

The combination of stronger external accounts, declining inflation, and robust financial sector reforms provides a solid foundation for macroeconomic stability. This recovery reflects the coordinated approach of the CBN, the federal government, and private sector actors in restoring investor confidence, ensuring price stability, and promoting sustainable growth.

Governor Cardoso has reiterated that continued vigilance and proactive policy measures are essential. Nigeria’s economic turnaround depends on sustaining disinflation, maintaining FX market stability, expanding domestic production, and strengthening the financial sector to support investment and growth.

Outlook and policy priorities

Looking forward, the CBN’s priorities for 2026 include strengthening the banking system, ensuring price stability, modernizing payments, deepening financial inclusion, and supporting responsible fintech innovation. Maintaining multiple FX sources, encouraging diaspora remittances, and supporting productive investment will be crucial to sustaining

BOP surpluses

Policy coordination between fiscal and monetary authorities remains central. Nigeria’s experience illustrates that external stability is deeply linked to internal macroeconomic discipline. By maintaining orthodox monetary policy, reducing fiscal financing by the central bank, and promoting structural reforms in energy and finance, the country is positioning itself for sustainable economic growth and resilience to global shocks.

In conclusion, the $4.60 billion BOP surplus in Q3 2025 is not merely a statistical outcome; it is a macroeconomic signal that Nigeria’s reforms are yielding results. Strengthened external sector fundamentals, improved investor confidence, stable FX reserves, and disciplined fiscal-monetary management are laying the groundwork for a sustainable recovery..

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