Nigeria earns more from remittances but pays more on foreign investments

Nigeria recorded higher inflows from diaspora remittances in the second quarter of 2026, but the gains were partly offset by rising payments on foreign investments, highlighting competing pressures on the country’s external accounts.

The secondary income account surplus rose to $6.30 billion in the second quarter of 2026, from $5.47 billion in the preceding quarter, largely driven by a 10 percent increase in diaspora remittance inflows to $5.82 billion.

However, the primary income account deficit widened to $4.20 billion from $3.23 billion in the first quarter, reflecting higher interest payments on portfolio investment liabilities and increased earnings accruing to non-resident investors.

The figures highlight the dual impact of international financial flows on Nigeria’s external position, with remittances providing a significant source of foreign exchange while payments on foreign investments and external loans contributed to higher income outflows.

According to the Central Bank’s report, the improvement in the secondary income account reflected sustained gains from the Central Bank of Nigeria’s ongoing reforms, particularly the narrowing spread between the official and parallel exchange rates, which reduced the incentive to route remittances through informal markets.

General government transfers also increased to $530 million in the second quarter, from $220 million in the preceding quarter, further supporting the secondary income surplus.

On the other hand, the deficit in the investment income sub-account widened to $4.50 billion from $3.47 billion in the first quarter, driven mainly by a higher deficit in portfolio investment income, which increased by 20.3 percent to $2.49 billion.

Interest payments on short-term instruments held by non-resident investors rose to $2.11 billion from $1.90 billion, while payments on long-term debt securities increased to $480 million from $190 million.

The deficit in direct investment income also widened to $1.82 billion from $1.40 billion, reflecting higher reinvested earnings accruing to non-resident investors, which rose to $900 million from $780 million.

At the same time, earnings on residents’ direct investments abroad fell to $110 million from $430 million, contributing to the widening deficit.

Dividend payments to non-resident investors moderated slightly to $1.02 billion from $1.04 billion, while income on reserve assets declined to $530 million from $570 million.

The deficit in other investment income also widened to $710 million from $630 million, reflecting higher interest payments on external loan liabilities. However, the surplus in the compensation of employees sub-account increased to $300 million from $240 million in the preceding quarter.

Beyond the income accounts, Nigeria recorded a higher net foreign exchange inflow of $21.09 billion in the second quarter, compared with $20.30 billion in the first quarter, supported by a decline in aggregate foreign exchange outflows.

Total foreign exchange inflows fell by 4.24 percent to $30.03 billion from $31.36 billion, while outflows declined by 19.17 percent to $8.94 billion from $11.06 billion.

Foreign exchange inflows through the Central Bank fell by 20.47 percent to $8.12 billion from $10.21 billion, while inflows through autonomous sources increased by 3.59 percent to $21.91 billion from $21.15 billion.

Consequently, autonomous sources recorded a net inflow of $17.74 billion, compared with $17.53 billion in the first quarter. The Central Bank’s net inflow also increased to $3.35 billion from $2.77 billion.

Meanwhile, average turnover at the Nigerian Foreign Exchange Market declined by 7.56 percent to $530.42 million from $573.81 million in the preceding quarter.

The average exchange rate of the naira strengthened to N1,365.95 per dollar in the second quarter from N1,384.48 in the first quarter, representing a 1.36 percent appreciation during the review period.

The performance of other emerging-market currencies was mixed during the quarter. The Chinese renminbi and Russian ruble appreciated by 1.74 percent and 5.33 percent, respectively, supported by export earnings and other market factors, while the South African rand depreciated by 0.79 percent amid global risk aversion linked to uncertainty in the Middle East and domestic concerns over anti-immigration demonstrations. (BusinessDay)