Nigeria’s exchange rate revenue plummeted by 73% in the first half of 2025, dropping to N589.45 billion from N2.199 trillion in H1 2024, according to the Federation Account Allocation Committee (FAAC). This sharp decline reflects the diminishing arbitrage opportunities that once fueled significant fiscal gains, signaling a shift toward a more market-aligned exchange rate system, as reported by Nairametrics.
The fall in foreign exchange (FX) gains, which accounted for just 6.06% of FAAC allocations in H1 2025 compared to 30.7% in H1 2024, stems from the Federal Government’s adjustment of the budget benchmark rate to N1,500/$ in January 2025, up from N800/$ in 2024. This change closed the gap between the official rate (averaging N1,475–N1,500/$ in early 2025) and the budget assumption, eliminating the large naira surpluses generated from converting dollar inflows at higher market rates. Notably, no FX gains were recorded in February and March 2025, with June’s contribution dropping to N76.61 billion, or 4.6% of the N1.659 trillion shared, compared to 44% in June 2024.
Despite the FX revenue drop, total FAAC allocations rose 35.6% to N9.723 trillion in H1 2025 from N7.171 trillion in H1 2024, indicating a shift toward non-FX revenue sources. The Federal Government received N280.93 billion of the N589.45 billion FX gains, while states, local governments, and oil-producing states under the 13% derivation principle got N140.26 billion, N113.14 billion, and N64.52 billion, respectively. These figures reflect declines of 68.4%, 68.8%, 68.7%, and 67.9% compared to H1 2024, highlighting the centralized fiscal structure’s impact on subnational entities.
The Central Bank of Nigeria’s (CBN) efforts to stabilize the naira, which traded at approximately N1,529/$ on July 29, 2025, according to posts on X, have contributed to this shift. The CBN’s policies, including clearing a $7 billion FX backlog and boosting reserves to $38.63 billion by July 24, have supported naira stability, reducing arbitrage opportunities. While this leaner fiscal framework may strain short-term revenues, it fosters a more transparent and stable economic environment, aligning with Nigeria’s goal of achieving a $1 trillion economy by 2030.
