Nigerian businesses are increasingly turning to local raw materials in place of imported inputs a trend that is contributing to the country’s sustained current account surplus and strengthening its external financial position.

A recent report from investment firm CardinalStone highlights this shift, noting that the adoption of import substitution particularly among fast-moving consumer goods (FMCG) manufacturers has played a key role in reducing non-oil imports. The move comes amid ongoing foreign exchange reforms that have made imports more expensive and less accessible.

According to Nigeria’s current account data for Q1 2025, the country maintained a surplus for the tenth consecutive quarter, averaging around 7.5% of Gross Domestic Product (GDP). The positive balance was largely driven by improved trade performance and resilient remittance inflows.

Trade surplus stood at 8.3% of GDP during the first quarter, up significantly from the 5.2% recorded in Q4 2024. This was attributed to an acceleration in exports outpacing a modest rise in imports. Crude oil exports, in particular, showed slight improvement, with production rising to 1.67 million barrels per day (mbpd) from 1.64 mbpd in the previous quarter. However, this still falls short of the government’s 2025 target of 2.06 mbpd, constrained by persistent issues such as oil theft and pipeline vandalism.

On the import front, the data revealed a slight drop in non-oil imports, which helped offset higher costs associated with importing crude and refined petroleum products. The shift towards domestic sourcing has eased pressure on foreign reserves and improved trade metrics.

Remittance inflows also played a supportive role, contributing $4.9 billion or 9.8% of GDP during the quarter. Analysts noted that this continues to serve as a critical buffer for the current account, especially in light of global uncertainties.

“While we maintain a conservative outlook for the rest of the year, given oil price volatility and production challenges, the underlying momentum from trade and remittance inflows should continue to support Nigeria’s external balances,” the report stated.

The country’s financial account remained in positive territory as well, accounting for 15.1% of GDP. Analysts credited this to the Central Bank’s recent foreign exchange reforms, improved liquidity in the FX market, and attractive carry trade opportunities, which have increased foreign investor interest in local assets.

However, foreign capital inflows were slightly lower than in the previous quarter. CardinalStone attributed the decline to cautious investor sentiment amid geopolitical tensions, including the now-ceased Iran-Israel conflict, and evolving U.S. trade policies.

Despite these headwinds, the outlook remains cautiously optimistic. “There’s room for a rebound in capital inflows, especially with improving macroeconomic indicators, Nigeria’s stronger credit outlook, and the possibility of re-entry into the JPMorgan Emerging Market Bond Index,” the report added.

As businesses deepen local sourcing strategies and government reforms continue to gain traction, Nigeria’s path toward a more self-reliant and export-driven economy appears to be taking clearer shape.