CBN Reforms Anchor Balance Of Payment Turnaround

In this article, MARK ITSIBOR highlights some of the reforms of the monetary and fiscal authorities that are helping to restore confidence in Nigeria’s external economy

Nigeria’s external sector is showing renewed strength as far-reaching monetary and structural reforms begin to yield measurable results. The country’s Balance of Payments (BoP) surplus of $4.60 billion in the third quarter of 2025 marks a decisive turnaround from the deficit recorded in the preceding quarter, reinforcing growing confidence in the policy direction of the Central Bank of Nigeria (CBN) and broader macroeconomic management.

The improvement reflects strengthening external sector fundamentals, sustained diaspora remittance inflows, improved foreign exchange market functionality, and renewed foreign investor participation.

Industry experts say the outcome validates the CBN’s shift to orthodox monetary policy and disciplined market-based reforms.

Monetary and fiscal authorities have made visible progress in restoring macroeconomic stability, moderating inflation, improving data transparency, ending monetary financing of deficits, and narrowing the gap between official and parallel exchange rates to historically low levels. These measures, experts argue, have significantly strengthened investor confidence and policy credibility.

According to data released by the CBN, Nigeria recorded an overall BOP surplus of $4.60 billion in Q3 2025, supported by a current account surplus of $3.42 billion. The outcome was driven by stronger trade performance, resilient remittance inflows, improved financial flows, and continued accretion to external reserves.

The goods account remained firmly in surplus at $4.94 billion, reflecting higher export earnings. Total exports rose to $15.24 billion, up from $14.90 billion in the previous quarter, largely on the back of increased crude oil and refined petroleum product exports.

“Exports increased to US$15.24 billion in Q3 2025 from US$14.90 billion in Q2, on account of increases in crude oil and refined petroleum products exports. The country is gradually transitioning from a net importer of refined petroleum products to a net exporter,” the CBN stated, adding that imports of petroleum products declined by 12.7 per cent to $1.65 billion.

Crude oil exports rose to $8.45 billion, while exports of refined petroleum products surged by 44 per cent to $2.29 billion, underscoring progress in domestic refining capacity and the impact of energy sector deregulation. Analysts describe this shift as a structural improvement with long-term implications for Nigeria’s trade balance.

Net outflows in the services account increased to $4.07 billion, reflecting higher demand for transport, travel, insurance, and business services. The primary income account also widened to a debit of $2.95 billion, largely due to the repatriation of reinvested earnings by Nigerian banks on foreign investments.

The secondary income account remained strong at $5.50 billion, with workers’ remittances from Nigerians in the diaspora amounting to $5.24 billion, highlighting the continued confidence of Nigerians abroad in the domestic financial system.

Industry experts note that the resilience of remittance inflows, even amid global uncertainties, reflects growing trust in Nigeria’s foreign exchange framework. A senior economist at a Lagos-based investment firm observed that “the narrowing of FX market distortions and improved transparency have encouraged diaspora inflows to pass increasingly through formal channels.”

The financial account also supported the overall BOP outcome, with Nigeria recording a net lending position of $0.32 billion. Foreign direct investment inflows rose to $0.72 billion, while portfolio investment inflows remained robust at $2.51 billion, reflecting improved sentiment and renewed non-resident participation in Nigerian financial assets.

As a result, Nigeria’s external reserves climbed to $42.77 billion at end-September 2025, up from $37.81 billion three months earlier. Market analysts say the reserve build-up strengthens Nigeria’s external buffers and enhances its capacity to absorb shocks.

According to the CBN, the Q3 2025 BOP outcome underscores the positive impact of reforms in the foreign exchange market, monetary policy execution, and the domestic energy sector.

CBN Governor Olayemi Cardoso has consistently maintained that the banking system remains resilient and that reforms are deliberately sequenced to restore confidence and sustainability. Speaking at the 60th Annual Bankers’ Dinner, he outlined the apex bank’s priorities for 2026, including strengthening the banking sector, ensuring price stability, modernising payment systems, deepening financial inclusion, and supporting responsible fintech innovation.

He cited the rapid growth of digital payments, wider adoption of contactless cards, improved agent-banking controls, and Nigeria’s exit from the FATF grey list as major confidence boosters for the financial system.

Economic analysts say these developments have materially improved Nigeria’s risk perception. A fixed-income strategist at a leading asset management firm noted that “Nigeria’s sovereign risk spread has fallen to levels last seen before the pandemic, reflecting renewed investor confidence in policy direction and macroeconomic discipline.”

The reform journey began in 2023, when the CBN, under Cardoso, liberalised the foreign exchange market, unified exchange rates, ended deficit monetisation, and supported fuel subsidy reforms. These actions were complemented by improved revenue mobilisation and tighter monetary policy to address inflation.

Since then, Nigeria has returned to international capital markets, received positive rating actions, and cleared over $7 billion in FX backlog, significantly improving its investment outlook. Multilateral institutions have described the reforms as bold and necessary for long-term sustainability.

In a bid to further anchor inflation expectations, the CBN recently hosted the Monetary Policy Forum 2025 themed “Managing the Disinflation Process.” The forum brought together fiscal authorities, legislators, private sector leaders, development partners, and subject-matter experts to improve coordination and policy communication.

Cardoso reiterated that price stability remains the cornerstone of sustainable growth and that the CBN is transitioning toward a full inflation-targeting framework. “Managing disinflation amidst persistent shocks requires robust policies and close coordination between fiscal and monetary authorities to anchor expectations and maintain investor confidence,” he said.

The apex bank has also introduced new minimum capital requirements for banks, effective March 2026, to enhance resilience and position the financial system to support Nigeria’s long-term ambition of a $1 trillion economy.

Multiple FX sources activated

As part of efforts to boost dollar liquidity, the CBN has activated multiple foreign exchange inflow channels. These include improving diaspora remittance products, licensing new International Money Transfer Operators, implementing a willing buyer-willing seller FX framework, and ensuring timely naira liquidity for IMTOs.

These measures have contributed to sustained reserve accretion and improved naira stability. Diaspora remittances, estimated at $23 billion annually, remain a strategic source of foreign exchange.

Director of trading at Verto, Charlie Bird, said dollar liquidity conditions have become more balanced. Speaking at a Cordros Asset Management seminar titled “The Naira Playbook,” he noted that foreign investors and airlines can now repatriate funds more easily, describing Nigeria as “increasingly attractive to global investors due to improved FX liquidity driven by CBN reforms.”

Achieving economic turnaround

According to Cardoso, Nigeria has transitioned from crisis management to laying the foundation for sustainable recovery. Real GDP growth accelerated to 4.23 per cent in Q2 2025, the strongest in four years, while inflation has moderated steadily from its peak.

From 34.6 per cent in November 2024, headline inflation declined to 16.05 per cent by October 2025, marking seven consecutive months of disinflation. Food inflation also eased significantly, restoring purchasing power and reinforcing confidence.

“This decline demonstrates disciplined execution and Nigeria’s return to orthodox monetary policy,” Cardoso said, stressing that while progress has been made, the CBN remains committed to driving inflation down further.

The analysts agree that sustained vigilance and policy consistency will be critical. As one economist put it, “the credibility now being rebuilt by the CBN is Nigeria’s strongest asset—and it must be protected.”