September 21, 2026/Cordros Report
Nigeria’s external position strengthened materially in Q2-26. The current account surplus widened to USD7.54 billion, up 67.9% q/q from USD4.49 billion in Q1-26 and 45.8% y/y from USD5.17 billion in Q2-25. The improvement was driven almost entirely by the goods account, with the surplus rising sharply to USD10.12 billion (Q1-26: USD5.95 billion), supported by higher crude oil export receipts and a significant decline in crude oil imports. However, the current account performance masks two structural vulnerabilities: (1) the services and primary-income deficits widened; and (2) the broader external financing mix tilted further towards reversible portfolio inflows rather than direct investment.
Nigeria’s balance of payments recorded its fourth successive quarterly surplus in Q2-26, with the overall balance widening to USD3.51 billion in Q2-26 from a deficit of USD0.27 billion in Q2-25 and rising by 47.5% q/q from USD2.38 billion in Q1-26. This placed the surplus at 4.0% of GDP in Q2-26, up from 3.0% in Q1-26. Analysing the BOP breakdown, the outturn was anchored by robust growth in the current account surplus, which rose 45.8% y/y (+67.9% q/q) to USD7.54 billion (Q1-26: USD4.49 billion | Q2-25: USD5.17 billion). This performance is underpinned by a stronger goods account as firmer crude oil and gas export receipts met a sharp contraction in crude oil imports. Beneath the headline improvement, however, the composition was uneven: gains were concentrated in goods and secondary income accounts, while the services and primary income deficits widened.
The financial account recorded net borrowing of USD1.74 billion in Q2-26, down 14.3% q/q from USD2.03 billion in Q1-26 and significantly higher than a deficit of USD7.15 billion recorded in Q2-25. This indicates that net foreign liabilities increased by more than the economy’s acquisition of foreign assets during the quarter. We, however, flag the relatively narrow composition of these financing flows: portfolio investments (FPI) rose sharply, while foreign direct investment (FDI) increased only marginally, leaving the bulk of the inflows concentrated in more reversible “hot money”. Meanwhile, FX reserves climbed to a record high, strengthening the external buffer and supporting relative naira stability throughout the quarter. In our view, the Q2-26 external position is therefore better read as oil-and PFI-led rather than broad-based, leaving the external account vulnerable to a reversal in oil prices or portfolio sentiment. Going into Q3-26, we expect the BOP to remain in surplus, supported by softer imports and firmer export earnings as domestic crude oil production and refined petroleum product exports improve. Elevated oil prices should provide additional support to total export receipts.
Current Account Surplus Widens, but Composition Matters
Nigeria’s external improvement in Q2-26 was fundamentally a trade story. The current account surplus widened to USD7.54 billion, up 67.9% q/q (Q1-26: USD4.49 billion) and 45.8% y/y (Q2-25: USD5.17 billion), with the goods balance accounting for most of the expansion. The goods account surplus rose to USD10.12 billion (Q1-26: 5.95 billion), reflecting a stronger export position across crude oil and refined petroleum products alongside lower crude oil imports. However, the strong headline performance masks the important underlying vulnerabilities. Of the four current account components, the goods and secondary income balances improved, while the services and primary income deficits widened in Q2-26. From our assessment, the current account’s performance in Q2-26 was trade-driven and oil-levered rather than broad-based. For Q3-26, our expectation of a wider current account surplus is premised on higher domestic crude oil production, stronger refined petroleum products trade, and elevated oil prices.
The goods account’s surplus rose by 69.8% q/q to USD10.12 billion in Q2-26 (Q1-26: USD5.95 billion), as exports increased by 29.6% q/q to USD20.08 billion on stronger crude oil (+15.8% q/q to USD9.39 billion), gas (+40.2% q/q to USD3.63 billion) and refined-product (+66.2% q/q to USD3.94 billion) earnings. Meanwhile, imports also increased by 3.9% q/q to USD9.97 billion, driven by an 83.3% q/q surge in refined petroleum product imports to USD0.31 billion. Non-oil imports also increased by +11.2% q/q to USD8.73 billion, reflecting a shift in Nigeria’s import basket towards capital goods and raw materials. From our assessment, the shift towards capital goods and raw materials is a constructure development for the composition of imports, although its contributions to a more durable external position will depend on whether it translates into stronger domestic productive capacity and export earnings.
The services and income accounts remained the main weaknesses within the current account. The services deficit widened by 23.2% q/q to USD4.67 billion (Q1-26: USD3.71 billion), driven by higher net debits in travel and other business services – a recurring structural drag that has persisted even as the trade balance improves. The primary income deficit further increased by 30.0% q/q to USD4.20 billion (Q1-26: USD3.23 billion) due to higher dividend and interest payments to non-resident investors. Meanwhile, the secondary income surplus rose by 15.2% q/q to USD6.30 billion, as workers’ remittances increased to USD5.82 billion (Q1-26: USD5.30 billion). We will continue to monitor remittance flows closely, given their importance as a relatively stable source of non-oil FX inflows.
Net Borrowing Deepens, Portfolio Dominates Capital Inflows
The financial account recorded net borrowing of USD1.74 billion (Q1-26: USD2.03 billion), alongside the current account surplus. In practical terms, the Nigerian economy recorded larger foreign liabilities (inflows) than foreign asset acquisitions, with the resulting balance largely reflected in the accumulation of official FX reserves.
The composition of inflows mirrors the 2025FY trend, with portfolio investment dominating while FDI remained limited. The CBN’s capital importation data provides a similar picture from the investment-flow perspective. Of the total USD9.67 billion in capital inflows in Q2-26 (88.8% y/y | -6.8% q/q), portfolio investment inflows accounted for c.95.6%, compared with 1.7% (USD165.00 million) for FDI. We also note a sharp increase in resident outward investment. Other investment assets recorded a USD7.96 billion outflow (Q1-26: USD1.93 billion), while portfolio assets recorded a USD0.70 billion outflow (Q1-26: USD0.26 billion). This suggests that resident investors are increasing their foreign asset holdings even as foreign capital inflows strengthen.
This highlights a familiar vulnerability in Nigeria’s external financing composition. The financial account is increasingly dominated by reversible portfolio inflows, supported by elevated naira yields and relative FX stability, rather than longer-term foreign direct investment (FDI). These inflows coincided with higher FX reserves, which averaged USD49.41 billion in Q2-26, and supported relative naira stability during the quarter. However, portfolio flows are also more vulnerable to reversal during periods of risk aversion, particularly if global interest rates decline, domestic yields fall, or oil prices weaken.
External Indicators Confirm Adequacy of External Reserves
The CBN’s FX management strategy, aided by foreign capital inflows, sustained the build-up in gross external reserves over the quarter. Reserves rose to USD51.46 billion at end-Q2-26 (Q1-26: USD49.24 billion), an accretion of USD2.22 billion, taking the stock to a record high. On the CBN’s measure, this represents approximately c.10.0 months of goods and services imports cover, well above the commonly cited global three-month adequacy benchmark and the six-month WAMZ minimum, and more than 15 months on a goods-only basis. However, import cover primarily gauges the adequacy of FX reserves against current account needs. The reserve-to-external-debt ratio provides an additional measure of external resilience where market access is significant but uncertain. On this basis, the rising external debt stock has tempered the improvement in reserve adequacy despite the recent accumulation of FX reserves.
On the currency front, we maintain that the current market driven arrangement is better suited to the prevailing environment than a managed float, which could amplify capital outflow pressures and exchange rate pass-through to domestic prices. The framework is not without strain, with the NFEM/parallel-market spread at times approaching the IMF’s 2.0% guideline. However, with reserves at multi-year highs and the naira broadly stable to firmer through Q2-26, we see the near term FX risk as primarily a reversal in oil prices or portfolio sentiment, rather than sustained one-way currency depreciation pressure.
Conclusion
The Q2-26 BOP performance reflects distinctive macroeconomic backdrops: elevated oil prices, an improving domestic oil sector, expanding domestic refining capacity, substantial portfolio inflows, and an FX regime that has supported investor confidence.
Converting this cyclical strength into a more resilient external position will, in our view, depend on improving the quality and durability of capital inflows, particularly by attracting more direct investment, while addressing the structural weaknesses in the services and primary income accounts.