Naira, external reserves under pressure as current account surplus drops by 65%

NIGERIA’S current account surplus dropped sharply in the fourth quarter (Q4) of 2025, falling by 65.52 percent to $1.4 billion from $4.06 billion recorded in the third quarter (Q3).

Figures released by the Central Bank of Nigeria (CBN) on Wednesday also showed that the country’s overall balance of payments position weakened, declining to a $2.67 billion surplus in Q4 2025 compared to $4.6 billion in the previous quarter.

The data reflects a clear softening in Nigeria’s external sector, as weaker export earnings and stronger import demand outweighed support from remittances and portfolio inflows.

At its core, the report shows that Nigeria earned fewer dollars from trade while spending more on imports and external obligations, leaving a thinner foreign exchange (FX) cushion than in the previous quarter.

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The CBN noted that the current account surplus of $1.40 billion was also significantly lower than $4.06 billion in Q3 2025 and $4.98 billion in the same period of 2024, pointing to a sustained weakening in external earnings.

Trade pressures behind the decline

The goods account surplus fell by 60.93 percent to $1.77 billion from $4.53 billion, driven mainly by weaker export performance.

Crude oil exports declined by 20.54 percent to $6.77 billion, while refined petroleum exports fell 13.97 percent to $1.97 billion. At the same time, non-oil imports rose sharply by 24.93 percent to $8.77 billion, increasing pressure on the trade balance.

Total exports dropped to $13.36 billion from $15.31 billion in Q3, while higher import volumes further eroded the surplus position.

What this means is that Nigeria earned less foreign exchange (FX) from exports, especially oil, while spending more dollars on imports. This directly increased pressure on the naira, as more FX demand chased fewer FX inflows.

Wider external account movements

The primary income account deficit widened by 47.30 percent to $3.27 billion, driven by higher dividend and interest payments to foreign investors.

The services account improved slightly, with net outflows narrowing to $3.32 billion from $3.95 billion, supported by lower service-related imports.

The secondary income account offered some relief, as diaspora remittances rose to $6.21 billion, helping to cushion overall external pressures. This means that remittances from Nigerians abroad helped to support dollar inflows, but they were not strong enough to offset rising profit repatriation and weak export earnings.

Mixed capital flows and reserves implications

Financial flows showed mixed performance. Net borrowing rose to $1.96 billion from $0.79 billion, reflecting greater reliance on external financing.

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Portfolio inflows surged to $5.27 billion from $2.51 billion, showing renewed short-term investor interest in Nigerian assets. However, foreign direct investment (FDI) fell to $1.11 billion from $1.46 billion, indicating weaker long-term confidence.

External reserves rose by 6.97 percent to $45.75 billion by December 2025, compared to $42.77 billion in September.

What this means for naira and reserves

Higher portfolio inflows and borrowing provided short-term FX support, helping to stabilise the naira in the near term. However, weaker export earnings meant less sustainable dollar inflow, making FX stability more fragile.

Rising imports and external payments increased pressure on reserves, as the Central Bank of Nigeria (CBN) needed to draw more heavily on buffers to smooth volatility. While reserves increased, the slower current account inflow growth suggested future reserve accumulation could weaken if export earnings remained soft.

“What this actually means is that despite stronger remittances, rising portfolio inflows, and higher reserves, Nigeria’s external position became more vulnerable due to declining oil export earnings and rising import dependence,” said a Lagos-based economist, Mr Jite Andrews.

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“In simple terms, Nigeria earned more dollars than it spent, but the gap narrowed, while the quality of inflows weakened.”

“This left the economy more exposed to shocks such as falling oil prices, production disruptions, or sudden capital reversals. For the naira, it meant continued short-term stability was possible, but with increasing risk of depreciation pressure if inflows slowed or oil earnings weakened further. For reserves, it means slower and more fragile accumulation going forward, with greater reliance on volatile capital inflows rather than strong trade surpluses.”