…Naira steady despite sharp fall in current account surplus
Foreign direct investment into Nigeria surged by about 700 percent in the third quarter of 2025, even as foreign portfolio inflows declined sharply by 52.5 percent, underscoring a shift in the composition of capital inflows amid a softening current account position.
This was revealed in the provisional balance of payments report published by the Central Bank of Nigeria (CBN) on Monday, which also showed that the naira remained largely steady despite a significant narrowing of the country’s current account surplus.
According to the data, direct investment, which represents long-term foreign investment into businesses and productive assets, rose to $0.72 billion in the third quarter of 2025 from just $0.09 billion in the preceding quarter. The sharp increase points to stronger foreign commitment to Nigeria’s real economy, as direct investors typically focus on factories, infrastructure, services and long-term business expansion rather than short-term financial returns. Analysts say the rebound suggests growing confidence in specific sectors of the economy despite persistent macroeconomic challenges.
In contrast, portfolio investment liabilities, which reflect foreign funds invested in Nigerian financial assets such as bonds, treasury bills and equities, recorded an inflow of $2.51 billion in the third quarter of 2025. While this indicates that foreign investors continued to bring funds into Nigerian markets, the inflow was significantly lower than the $5.28 billion recorded in the second quarter of 2025. The 52.5 percent decline suggests a slowdown in short-term foreign investor appetite, possibly influenced by global risk conditions, profit-taking, and expectations around interest rates and currency movements.
Read also: NNPC chases $2 billion to fix theft-ravaged pipelines
The changing pattern of capital flows came against the backdrop of a notable deterioration in Nigeria’s current account balance. The CBN report showed that the country’s current account surplus declined by 40.8 percent year-on-year and by about 41 percent on a quarter-on-quarter basis.
Provisional balance of payments statistics for the third quarter of 2025 showed that Africa’s most populous country recorded a current account surplus of 3.42 billion dollars, down from 5.81 billion dollars in the previous quarter and 5.78 billion dollars in the corresponding period of 2024.
Despite the decline, the current account remained in surplus, meaning Nigeria continued to earn more foreign exchange from exports and income inflows than it spent on imports, services and outward transfers. However, analysts noted that the weaker position could reflect higher import bills, increased spending on services such as travel and education, lower export receipts, or softer oil and non-oil earnings during the quarter. In practical terms, a smaller current account surplus implies reduced net foreign exchange inflows into the economy, which could limit support for external reserves and place mild pressure on the naira if the trend persists.
Even so, the naira showed resilience across foreign exchange markets on Monday. After trading, the local currency appreciated marginally at the Nigerian Foreign Exchange (FX) Market, with the dollar quoted at N1,442.51, gaining 86 kobo compared with N1,443.37 recorded on Friday, according to CBN data. The naira also traded flat in the parallel market, closing at about 1,480 naira to the dollar. External reserves, meanwhile, rose to 45.27 billion dollars as of December 24, 2025, providing some buffer for the currency.
The report attributed the sustained, though narrowing, current account surplus to improvements in key trade indicators. Crude oil exports increased to $8.45 billion in the third quarter of 2025 from $7.66 billion in the previous quarter, representing a rise of 10.31 percent. Refined petroleum product exports also grew significantly, rising to $2.29 billion from $1.59 billion, an increase of 44.03 percent. At the same time, refined petroleum product imports declined by 12.70 percent to $1.65 billion from $1.89 billion, reinforcing signs that Nigeria is gradually transitioning from a net importer to a net exporter of refined petroleum products. The secondary income account also remained in surplus at $5.50 billion.
The goods account, a major sub-account of the current account, recorded a lower surplus of $4.94 billion in the third quarter of 2025 compared with $5.28 billion in the preceding quarter, though it was higher than the $3.93 billion recorded in the same period of 2024. The positive balance was driven by higher exports, which rose to $15.24 billion in the third quarter of 2025 from $14.90 billion in the second quarter, largely on the back of increased crude oil and refined petroleum product exports. Petroleum product imports fell further, reinforcing the improvement on the trade side.
However, pressures persisted in other components of the balance of payments. Net outpayments in the services account increased to $4.07 billion in the third quarter of 2025 from $3.74 billion in the previous quarter, reflecting higher net imports of transport, travel, insurance, computer and information services, other business services, and government services not included elsewhere. The primary income account also recorded a significantly wider debit balance of $2.95 billion in the third quarter of 2025, up from $1.25 billion in the second quarter, largely due to the repatriation of reinvested earnings by domestic banks on their foreign investments, particularly direct investments abroad.
The secondary income account balance declined marginally to $5.50 billion in the third quarter of 2025 from $5.51 billion in the preceding quarter. Personal transfers, mainly workers’ remittances from Nigerians in the diaspora, also slipped slightly to $5.24 billion from $5.30 billion in the second quarter of 2025.
Further details from the report showed mixed movements across financial account components. Portfolio investment liabilities recorded an inflow of $2.51 billion in the third quarter of 2025 compared with the stronger inflow of $5.28 billion in the previous quarter, while direct investment inflows rose sharply to $0.72 billion from $0.09 billion. Direct investment assets recorded a net reversal of $0.16 billion during the period, while portfolio investment assets posted an outflow of $0.82 billion. Other investment liabilities recorded an inflow of $0.84 billion, while other investment assets reversed by $0.86 billion in the third quarter of 2025.
