Nigeria’s Balance of Payments: A Sign of Prudence or Caution?

Nigeria’s balance of payments (BoP) data for Q1 2025 shows a net lending balance of $7.6 billion, indicating a reduction in external financial liabilities and a disposal of foreign assets. This marks the second consecutive quarter of net lending, following a similar position of $7.8 billion in Q4 2024.

The financial account balance was driven by portfolio debt redemptions and short-term loan repayments across the public and banking sectors. The Central Bank of Nigeria’s (CBN) redemption of short-term debt securities, mainly OMO bills, contributed to the reduction in external liabilities.

Key Drivers of the Financial Account Balance:

• Portfolio investment: $5.0 billion reduction in financial liabilities
• Other investment: $4.3 billion decline in external liabilities, driven by loan repayments and a drop in foreign currency deposits
• Direct investment: $798 million net inflow, consisting of a $551 million decrease in foreign assets and a $247 million increase in foreign liabilities

Implications:

• The financial account’s net lending position signals continued external deleveraging and cautious balance sheet management.
• The reduction in external liabilities and disposal of foreign assets may indicate a prudent approach to managing external debt.
• However, it may also suggest caution in attracting foreign investment and accessing global financing markets.

Looking Ahead:

• We anticipate gradually improving external financing conditions and a pickup in cross-border investment flows over the next few quarters.
• The CBN’s continued management of external debt and reserves will be crucial in maintaining macroeconomic stability.

Key Statistics: