 gains crash 73% in H1 2025, falling to ₦589.45bn as the Federal Government aligns exchange rates.){kind=link}
Nigeria’s foreign exchange (FX) windfall sharply declined by 73% in the first half of 2025, falling to ₦589.45 billion from ₦2.199 trillion in the same period of 2024. The dramatic drop marks a turning point in Nigeria’s budgetary structure as currency arbitrage gains, long a cushion for fiscal gaps, lose their relevance amid tighter exchange rate alignment.
This decline in Nigeria’s FX revenue was revealed in data obtained from the Federation Account Allocation Committee (FAAC) and signals a strategic shift by the Federal Government to move away from reliance on exchange rate differentials and toward more sustainable revenue sources.
In 2024, the Federal Government benefited massively from a dual exchange rate regime, with the official budget benchmark set at ₦800/USD, while the actual market rate hovered around ₦1,455/USD. This divergence created room for windfall profits when converting dollar inflows like oil receipts and remittances into naira.
However, by January 2025, the Federal Government adjusted the benchmark rate to ₦1,500/USD, closely aligning with market rates and effectively erasing the arbitrage gap. Consequently, FX gains evaporated, with zero exchange rate revenue recorded in February and March 2025, and a steep drop continuing through mid-year.
Despite the slump in FX-derived income, total FAAC allocations grew by 35.6% year-on-year to ₦9.723 trillion in H1 2025, up from ₦7.171 trillion in H1 2024. This suggests the Federal Government has ramped up efforts to bolster non-oil, non-FX revenue streams, possibly through improved tax collection and asset recovery.
The contribution of FX gains to total disbursements plummeted from 30.7% in H1 2024 to a mere 6.06% in H1 2025, a clear indicator that foreign exchange differentials are no longer a significant source of fiscal padding.
Of the ₦589.45 billion in FX gains recorded in H1 2025:
The Federal Government received ₦280.93 billion
State governments took ₦140.26 billion
Local Government Councils got ₦113.14 billion
Oil-producing states secured ₦64.52 billion under the 13% derivation formula
While the total pool shrank significantly, the distribution pattern remained heavily skewed in favor of the central government, underlining Nigeria’s centralized fiscal architecture.
In contrast, in H1 2024:
FG received ₦889.93bn
States: ₦450.10bn
LGs: ₦362.08bn
Derivation-based states: ₦200.91bn
This reflects a year-on-year drop of over 68% across all levels of government.
Meanwhile, the Central Bank of Nigeria (CBN) has injected a record $4.1 billion into the FX market in the first half of 2025—215% more than the $1.3 billion injected in the same period in 2024. The move was aimed at stabilizing the naira, which has shown modest strength, appreciating from ₦1,535/USD in January to ₦1,530/USD by end of June.
According to CSL Stockbrokers, the apex bank’s largest intervention came in April 2025, when the naira weakened to ₦1,630/USD amid global market jitters following the U.S. trade tariff announcements. This aggressive defense of the naira, while providing short-term relief, has sparked concerns about sustainability, given ongoing weak oil revenues, sluggish foreign investment, and external debt pressures.
With FX windfalls drying up and external reserves dropping by $3.67 billion in H1 2025, economic analysts warn of increased scrutiny on the CBN’s ability to continue defending the naira.
While the realignment of the exchange rate fosters transparency and reduces market distortions, it also eliminates a key revenue stream, exposing deeper vulnerabilities in Nigeria’s fiscal framework. Experts argue that unless foreign direct investment (FDI) and oil receipts pick up, the country may struggle to maintain currency stability and fund ambitious social and infrastructure programs.