…Naira stable despite sharp decline in current account surplus
Foreign direct investment into Nigeria surged by nearly 700 percent in the third quarter of 2025, while foreign portfolio flows declined sharply by 52.5 percent, underscoring changes in the composition of capital flows amid a softening of the 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 revealed that the Naira remained largely stable despite a significant decline in the country's current account surplus.
According to the data, direct investment, which represents long-term foreign investment in businesses and productive assets, increased to $0.72 billion in the third quarter of 2025 from only $0.09 billion in the previous quarter. The rapid growth points to strong 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 signals 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 inflows were significantly lower than the $5.28 billion recorded in the second quarter of 2025. The 52.5 per cent decline indicates a slowdown in the appetite of short-term foreign investors, which has likely been affected. From global risk conditions, profit taking and expectations around interest rates and currency movements.
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The changing pattern of capital flows comes against the backdrop of a significant decline 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 about 41 percent on a quarter-on-quarter basis.
Provisional balance of payments data for the third quarter of 2025 showed Africa's most populous country recorded a current account surplus of $3.42 billion, down from $5.81 billion in the previous quarter and $5.78 billion in the same period of 2024.
Despite the decline, the current account remained in surplus, meaning that Nigeria continued to earn more foreign exchange from exports and income inflows than it spent on imports, services and outward transfers. However, analysts said the weak 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 reduces net forex inflows into the economy, which could limit support for external reserves and put mild pressure on the Naira if the trend continues.
Nevertheless, the Naira showed resilience in the foreign exchange markets on Monday. After trading, the local currency gained marginally in the Nigerian foreign exchange (FX) market, with the dollar quoted at N1,442.51, up 86 kobo compared to N1,443.37 recorded on Friday, according to CBN data. The Naira also traded flat in the parallel market and closed at about 1,480 Naira against the dollar. Meanwhile, external reserves rose to $45.27 billion by December 24, 2025, providing some buffer for the currency.
The report attributed the continued, though narrowing, current account surplus to improvements in key trade indicators. Crude oil exports in the third quarter of 2025 increased to $8.45 billion from $7.66 billion in the previous quarter, showing a growth of 10.31 percent. Refined petroleum products exports also showed significant growth, increasing from $1.59 billion to $2.29 billion, an increase of 44.03 percent. At the same time, refined petroleum products imports declined by 12.70 percent from $1.89 billion to $1.65 billion, indicating 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 key sub-account of the current account, recorded a smaller surplus of $4.94 billion in the third quarter of 2025 compared to $5.28 billion in the previous quarter, although it was higher than the $3.93 billion recorded in the same period of 2024. The positive balance was driven by higher exports, which increased from $15.24 billion to $14.90 billion in the third quarter of 2025. quarter, mainly due to growth in crude oil and refined petroleum product exports. Petroleum product imports declined further, giving impetus to the improvement on the trade side.
However, other components of the balance of payments remained under pressure. Net payments on the services account increased to $4.07 billion in 3Q2025 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 recorded a significantly wider debit balance of $2.95 billion in Q3 2025, up from $1.25 billion in Q2, mainly due to repatriation of earnings by domestic banks on their foreign investments, especially direct investments abroad.
The secondary income account balance in Q3 2025 declined marginally to $5.50 billion from $5.51 billion in the previous quarter. Personal transfers, mainly workers' remittances from diaspora Nigerians, also declined slightly to $5.24 billion in the second quarter of 2025 from $5.30 billion.
Additional details of the report showed mixed movements in financial account components. Portfolio investment liabilities recorded inflows of $2.51 billion in Q3 2025, compared to a strong inflow of $5.28 billion in the previous quarter, while direct investment inflows increased sharply from $0.09 billion to $0.72 billion. Direct investment assets recorded a net inflow of $0.16 billion during the period, while portfolio investment assets recorded an outflow of $0.82 billion. Other investment liabilities recorded inflows of $0.84 billion, while other investment assets recorded reversals of $0.86 billion in the third quarter of 2025.
