Beyond Oil: The Silent Forex Drain In Nigeria’s Services Deficit
Current Account Surplus Masks Structural Strain
NIGERIA’S external accounts posted a headline surplus in the third quarter of 2025 — but beneath the surface, a widening services deficit is raising fresh concerns about structural weaknesses in Africa’s largest economy.
New data from the Central Bank of Nigeria (CBN) show that while the country recorded a $3.4 billion current account surplus in Q3 2025, down from $5.8 billion in Q2, the services component told a more troubling story. The services deficit widened to $4.1 billion, up from $3.7 billion in the previous quarter.
Although the deficit-to-GDP ratio improved marginally to –5.3 percent from –5.6 percent, the absolute increase underscores a persistent vulnerability: Nigeria imports far more services than it exports.
Travel and Education Lead Capital Flight
Travel remains the largest contributor to the services shortfall. In Q3 alone, travel-related payments accounted for nearly $1.7 billion — about 41 percent of the total services deficit.
Personal travel dominated the outflows. Nigerians spent $880 million on foreign education and $208 million on medical treatment abroad within just three months. Another $371 million went to other personal travel expenses.
The figures highlight chronic domestic gaps. Education and healthcare infrastructure remain under strain, prompting families to seek alternatives overseas — at significant cost to foreign reserves.
Business travel declined modestly to $206 million, suggesting some corporate restraint. But this moderation was insufficient to offset the surge in personal travel spending.
Aviation and Foreign Carriers Dominate
Transportation services recorded over $1 billion in net debits, with air travel alone accounting for $773 million.
Nigeria’s reliance on foreign airlines for international routes continues to drain foreign exchange. Despite being Africa’s most populous nation, local carriers control only a fraction of long-haul traffic, allowing foreign airlines to repatriate ticket revenues.
This structural imbalance has long prompted calls for reforms aimed at strengthening Nigeria’s aviation competitiveness and expanding the global footprint of domestic airlines.
Insurance and Consulting: Quiet but Costly
Insurance and pension-related payments jumped sharply to $317 million, reflecting increased reliance on foreign reinsurance firms, especially for high-value energy and infrastructure projects.
Similarly, “other business services” — including technical consulting, engineering, and IT support — consumed $870 million.
While foreign expertise supports project delivery, analysts argue that persistent dependency signals weak domestic professional capacity.
The Bigger Picture: A Strategic Challenge
Nigeria’s economy remains heavily reliant on crude oil exports. But oil revenues, even when strong, are increasingly offset by services imports that quietly drain hard currency.
Economists warn that sustainable external stability requires more than boosting oil output. The country must develop competitive export-oriented service sectors.
Opportunities exist in ICT, digital services, healthcare, and the creative industries. Nigeria’s tech ecosystem is expanding, and its creative economy already enjoys global recognition. With supportive policy, these sectors could generate meaningful foreign exchange inflows.
Warning and Opportunity
The Q3 data serve as both caution and call to action. Nigeria’s services deficit is not new — but its persistence highlights the urgency of structural reform.
Without deliberate efforts to build domestic capacity and promote services exports, the country risks continued external pressure — even in periods of favourable oil prices.
For policymakers, the services account may become the decisive front in Nigeria’s economic transformation.
