FG’s Forex Windfall Plummets 73% in H1 2025 Amid Exchange Rate Realignment
Nigeria’s federal government saw a sharp 73% decline in foreign exchange (FX) gains during the first half of 2025, dropping to N589.45 billion from N2.199 trillion in the same period last year. This steep reduction stems from the narrowing gap between official and market exchange rates after the government adjusted its FX benchmark from N800 to N1,500 per dollar, effectively eliminating lucrative arbitrage opportunities that previously boosted revenue. Despite the fall in FX-related income, total Federation Account Allocation Committee (FAAC) disbursements increased by 35.6%, driven mainly by more stable non-FX revenue sources.
The significant contraction in FX gains is reflected across all tiers of government, with the Federal Government receiving N280.93 billion—down 68.4% year-on-year—and subnational governments also experiencing substantial drops in allocations tied to exchange rate differentials. This trend highlights the concentrated nature of Nigeria’s fiscal system, where the federal level is somewhat insulated from shocks that hit states and local governments more severely. The data also shows that the share of FX revenue in total FAAC distributions collapsed from 30.7% in H1 2024 to just 6.06% in H1 2025.
Meanwhile, the Central Bank of Nigeria (CBN) injected a record $4.1 billion into the foreign exchange market in H1 2025 to stabilize the naira, more than triple the amount injected during the same period in 2024. This intervention helped maintain relative currency stability amid weak oil revenues and subdued foreign investment inflows. Despite these efforts, Nigeria’s external reserves fell by $3.67 billion, fueling concerns over the sustainability of the CBN’s currency defense strategy given ongoing economic uncertainties.
Industry analysts and private sector stakeholders acknowledge the necessity of CBN interventions to prevent sharp naira depreciation but caution that without stronger oil earnings, foreign direct investment, and external financing, maintaining this approach may become increasingly difficult in the medium term. The government’s pivot toward less volatile revenue streams indicates a strategic shift in Nigeria’s fiscal policy as it adapts to reduced earnings from FX differentials.
Source: Punch