Market News

Nigeria’s current account (CA) balance is projected to decline by 31.4 percent to $11.8 billion in 2025 after it reached $17.2 billion last year, its highest in about five years.

This bearish outlook is driven by weaker domestic oil production, volatility in global oil prices and a likely softer remittance inflows, according to Afrinvest West Africa.

Nigeria has consistently reported a surplus current account for the 10th straight quarter, a development that has helped foreign reserves accretion and the appreciation of the naira.

But with a rather tepid growth in the first quarter (Q1) of 2025, together with structural challenges such as weakening domestic production capacity and ripple effects of global shocks across key economies where the Nigerian diaspora are residents, a slowdown in CA is unlikely.

“While we have flagged weaker average crude oil & condensates production (from 1.74mbpd in January to 1.66mbpd in May) and falling global crude prices (from $79.99/bbl in January to $67.61/bbl in June) as key headwinds, the size of the secondary income component ($5.3bn – equivalent to 1.3x the net merchandise balance) suggests it will also be a critical swing factor for the year-end CA outcome,” Afrinvest said in a note recently.

Growth in countries such as the US, UK, Canada and European Union is expected to be slower, a situation that is likely to drag down remittances that crossed $20 billion last year. “Against this backdrop, we project CA balance for 2025-FY to $11.8bn,” the firm noted.

Data obtained from the Central Bank of Nigeria show that Nigeria’s current account balance printed at a surplus of $3.7 billion in the first three months of 2025, representing a 1.1 percent year-on-year increase. However, it slowed by 1.8 percent on a quarterly basis.

For context, the CA records the net value of a country’s transactions with the rest of the world involving the exchange of goods, services, investment income, and transfers such as remittances and foreign aid.

An increase in inflows relative to outflows results in a surplus balance while the latter outpacing the former would imply a deficit. Typically, a surplus CA is supportive of foreign reserves accretion and currency appreciation, other things being equal.

Samuel Oyekanmi, research and insights lead at Norrenberger Financial Group, noted that while remittances may come under pressure, trade statistics in Q1 suggest significant inflows from export generally, including both oil and non-oil.

The analyst explained that the impact is expected to net off each other.

“On the other hand, the positive sentiments around the equities market is expected to attract FPIs, which would serve as a positive net on the current account,” Oyekanmi told BusinessDay.

Analysts at CardinalStone research see the country maintaining its surplus streak though with an overall CA slightly lower than that of last year due to lower oil prices which will likely mask the slight improvement in oil production.

They however see hope on the horizon as exports are expected to improve significantly in the medium term once Dangote Refinery begins to get adequate crude from the government and aggressively ramps up the export of refined products.

According to the analysts, Nigeria is expected to witness lower imports as companies continue to look inwards for local alternatives to hedge against currency risk, a move that bodes well for the country as there would be less pressure on the naira and by extension, the FX reserves.

“Overall, we expect CA to settle at 8.0 percent of GDP in 2025, slightly lower than last year’s level of 9.2 percent,” the Lagos-based consultancy firm said in its mid-year outlook.