Ongoing economic reforms in Nigeria are gradually reshaping the external sector, reversing deficits, strengthening foreign exchange inflows, and restoring investor confidence across trade, reserves, and capital markets, JUSTICE OKAMGBA writes
The reforms in Nigeria’s financial sector have supported the expansion of the Balance of Payments surplus, alongside rising diaspora remittances and stronger inflows into external reserves. The $4.60bn BOP surplus recorded in the third quarter of 2025 represents a clear reversal from the deficit posted in the previous quarter. This outcome highlights improving external sector fundamentals, stronger investor confidence, and the sustained effects of reforms in the foreign exchange market, monetary policy execution, and the domestic energy sector.
A country’s Balance of Payments is its financial record of all economic transactions between its residents and the rest of the world over a specific period, typically a quarter or a year. The BOP indicates whether a country is earning more foreign currency than it spends (surplus), or spending more than it earns (deficit).
Monetary and fiscal authorities have made notable progress in restoring macroeconomic stability. Key achievements include moderating inflation, improving data analytics, ending monetary financing of fiscal deficits, and narrowing the gap between official and parallel foreign exchange markets to below two per cent.
Reforms implemented by the Central Bank of Nigeria have also supported the gradual rebuilding of foreign exchange reserves through improved market functioning and stronger non-oil export performance. These measures have contributed to growth across critical sectors of the economy, including a marked rise in foreign capital inflows.
Data released by the apex bank show that Nigeria recorded an overall BOP surplus of $4.60bn in the third quarter of 2025, reversing the deficit position of the preceding quarter. The improvement was underpinned by a sustained current account surplus of $3.42bn, driven by stronger trade performance, resilient remittance inflows, increased financial flows, and continued accretion to external reserves. The CBN noted that the goods account remained in surplus at $4.94bn, reflecting higher export earnings during the period.
“Exports increased to $15.24bn in Q3 2025, from $14.90bn in Q2 2025, on account of increases in crude oil and refined petroleum products exports. The country is gradually switching from a net importer of refined petroleum products to a net exporter. Import of petroleum products decreased by 12.7 per cent to $1.65bn,” the CBN said.
Net outflows in the services account rose to $4.07bn in Q3 2025, compared with $3.74bn in Q2 2025. “The increase in net out-payments for services was due to increases in net import of transport, travel, insurance, computer and information, other business, and government services not included elsewhere. The debit balance in the primary income account increased significantly to $2.95bn in Q3 2025, from $1.25bn in Q2 2025,” the report said.
“This was largely attributable to repatriation of reinvested earnings by domestic banks on their foreign investments abroad, especially on direct investments. The secondary income account balance declined marginally to $5.50bn in Q3 2025, from $5.51bn in the preceding quarter. Personal transfers (workers’ remittances) from Nigerians in the diaspora eased slightly to $5.24bn, from $5.30bn in Q2 2025,” it added.
Crude oil exports climbed to $8.45bn, while exports of refined petroleum products rose by 44 per cent to $2.29bn, pointing to further gains in domestic refining capacity and Nigeria’s gradual shift from a net importer to a net exporter of refined petroleum products. Total goods exports stood at $15.24bn, while imports of refined petroleum products declined by 12.7 per cent, resulting in a stronger trade balance.
Workers’ remittances remained resilient, with the secondary income account posting a surplus of $5.50bn, including $5.24bn in inflows from Nigerians abroad. Developments in the financial account also reinforced the overall BOP position, as Nigeria recorded a net lending position of $0.32bn.
Foreign direct investment inflows increased to $0.72bn, while portfolio investment inflows stayed robust at $2.51bn, reflecting improved investor sentiment and sustained non-resident participation in domestic financial instruments. External reserves rose to $42.77bn at end-September 2025, from $37.81bn at end-June, further strengthening Nigeria’s external buffers.
According to the CBN, the Q3 2025 BOP performance underscores stronger external sector fundamentals, firmer investor confidence, and the continued impact of reforms across the foreign exchange market, monetary policy framework, and domestic energy sector.
CBN Governor, Olayemi Cardoso, has reiterated that the banking system remains resilient, with the apex bank maintaining vigilance over emerging risks. Speaking earlier at the 60th Annual Bankers’ Dinner, he outlined the Bank’s 2026 priorities, including strengthening the banking system, ensuring price stability, modernising payment systems, deepening financial inclusion, and supporting responsible fintech innovation.
He also highlighted the growth of digital payments, the expansion of contactless cards, improved agent-banking controls, and Nigeria’s exit from the Financial Action Task Force grey list as significant confidence boosters. Cardoso concluded by reaffirming the Bank’s commitment to disciplined, transparent, and forward-looking policies to keep the economy stable and positioned for sustainable growth.
Economic reforms
The CBN embarked on a series of far-reaching reforms aimed at attracting foreign capital, stabilising prices, and restoring exchange rate stability. In 2023, the new administration, alongside the CBN under Cardoso, liberalised the foreign exchange market, ended central bank financing of fiscal deficits, and reformed fuel subsidies. The government also strengthened revenue mobilisation and took steps to curb rising inflation.
Following the implementation of these measures, international reserves have grown, and access to foreign exchange through official channels has improved. Nigeria also returned to international capital markets last December and has since received upgrades from rating agencies. A new domestic private refinery is positioning the country higher along the value chain in a fully deregulated market.
Currency reforms and reduced intervention in the forex market have helped attract investment inflows from abroad. The unification of exchange rates and the clearance of more than $7bn in FX backlog improved Nigeria’s investment outlook, with multilateral institutions, including the World Bank, describing the reforms as bold steps to enhance long-term economic sustainability.
Nigeria’s sovereign risk spread has also declined to its lowest level since January 2020, erasing the premium accumulated during the pandemic and subsequent economic pressures. These developments reflect deliberate efforts to attract investors and sustain capital inflows.
As part of efforts to curb inflation, the CBN recently hosted the Monetary Policy Forum 2025, which brought together fiscal authorities, legislators, private sector players, development partners, experts, and scholars under the theme, “Managing the Disinflation Process.” The forum aimed to strengthen monetary policy communication, encourage dialogue, and foster collaboration on key policy issues.
At the event, Cardoso said the Bank’s focus remains on sustaining price stability, transitioning to an inflation-targeting framework, and restoring purchasing power. He noted that the CBN continues to pursue a disciplined monetary policy stance to curb inflation and stabilise the economy, stressing that policy must remain forward-looking, adaptive, and resilient.
“Managing disinflation amidst persistent shocks requires not only robust policies but also coordination between fiscal and monetary authorities to anchor expectations and maintain investor confidence. Our focus must remain on price stability, the planned transition to an inflation-targeting framework, and strategies to restore purchasing power and ease economic hardship,” Cardoso said.
The CBN has also prioritised strengthening the banking sector by introducing new minimum capital requirements for banks, effective March 2026, to enhance resilience and position the industry for a $1tn economy. These measures reflect the bank’s commitment to creating an enabling environment for inclusive growth.
Cardoso noted, however, that sustaining macroeconomic stability requires constant vigilance and a proactive policy stance. “As we shift from unorthodox to orthodox monetary policy, the CBN remains committed to restoring confidence, strengthening policy credibility, and remaining focused on its core mandate of price stability,” he said.
He explained that recent monetary policy easing followed a review of macroeconomic conditions. According to him, the Monetary Policy Committee’s decision was informed by improving inflation trends. “The committee’s decision to lower the monetary policy rate was predicated on sustained disinflation over the past five months, expectations of further moderation for the rest of 2025, and the need to support economic recovery,” Cardoso said.
Multiple FX sources
The CBN has activated multiple foreign exchange sources to boost dollar inflows and improve access for manufacturers and retail users.
Measures include enhancing diaspora remittance products, licensing new International Money Transfer Operators, implementing a willing buyer-willing seller FX framework, and ensuring timely access to naira liquidity for IMTOs.
These initiatives have supported significant accretion to gross FX reserves and contributed to greater naira stability. Recognising the strategic importance of FX inflows, the CBN continues to intensify efforts to attract more foreign currency into the economy.
Diaspora remittances, estimated at about $23bn annually, remain a dependable source of foreign exchange. Additional policies are also being explored to sustain inflows, in line with the Bank’s objective of doubling formal remittance receipts within a year. The CBN’s actions are expected to further support remittance growth, driven by improved confidence in the foreign exchange market, a stronger banking system, and sustained price stability.
Director of Trading at Verto, Charlie Bird, said dollar liquidity conditions have become more balanced, allowing foreign investors and airlines to repatriate funds. Speaking at a Cordros Asset Management seminar titled “The Naira Playbook,” he noted that Nigeria has regained appeal among foreign investors due to improved dollar liquidity following CBN reforms.
Achieving economic turnaround
According to Cardoso, Nigeria’s economy has shifted over the past 12 months from crisis management to laying the foundation for sustainable recovery.
“After nearly a decade in which real GDP growth averaged about two per cent, reforms have restored momentum and confidence in our broader macroeconomic environment. The economy grew by 4.23 per cent in the second quarter of 2025, the strongest pace in four years, driven by gains in telecommunications, financial services, and oil production,” he said.
“More importantly for long-term stability, inflation, while still elevated, has moderated steadily. From a peak of 34.6 per cent in November 2024, it declined to 16.05 per cent in October 2025, marking seven consecutive months of disinflation. Food inflation fell to 13.12 per cent in October, from 16.87 per cent in September and 21.87 per cent in August,” he added.
The steady decline in inflation is helping to restore real purchasing power for households and businesses, while signalling disciplined policy execution and a return to orthodox monetary management.
“We remain determined to bring inflation down further. Double-digit inflation is unacceptable. Price stability is the foundation of sustainable growth. Our transition to an inflation-targeting framework is gaining traction. We have strengthened data analytics, improved communication, and ended monetary financing of fiscal deficits. These measures have enhanced policy transmission and anchored expectations,” Cardoso said.
Analysts noted that the ability of the government to further bring down inflation would go a long way in improving the lives of the masses and would further boost the reforms being carried out by the apex bank and the finance ministry.
