LAGOS – Nigeria’s services account recorded a net deficit of $3.5 billion in the latest quarter, equivalent to 7.0 percent of GDP, rising from $3.2 billion (6.8% of GDP) in the previous quarter.
The persistent deficit underscores long-standing structural challenges in Nigeria’s economy, particularly the limited capacity of its services sector to generate foreign exchange (FX) earnings.
The services account has historically remained in deficit, reflecting Nigeria’s underdeveloped services export sector.
Unlike goods exports, where non-oil sectors have seen some policy-driven growth in recent years, services exports have received limited attention in the country’s broader diversification strategy.
A closer look at the components of the services account reveals the depth of the imbalance. Excluding financial services — which was the lone bright spot, registering a surplus of $158 million — all other major components of the account recorded net deficits.
Travel services stood out as the largest single contributor to the overall deficit, with a net deficit of $1.2 billion. Within this category, spending on education-related travel alone reached $662 million, reflecting the continued exodus of Nigerian students seeking education abroad due to concerns about quality, infrastructure, and limited domestic capacity.
Health-related travel also posted substantial outflows of around $177 million, as many Nigerians continued to seek medical treatment overseas.
Transportation services were the second-largest contributor to the services deficit, with a net deficit of $1.1 billion. This was primarily driven by air travel services, which recorded a net debit of $731 million.
The figures highlight Nigeria’s heavy reliance on foreign airlines to service both business and personal travel demand, with the country’s aviation sector facing longstanding challenges such as limited fleet capacity, high operational costs, and foreign exchange scarcity that hampers airline profitability and expansion.
Other business services also recorded a sizeable net deficit of $952 million. Much of this was driven by a net debit of $780 million under technical, trade, and other professional services.
This pattern underlines Nigeria’s significant dependence on foreign expertise for critical technical and business services — an issue often attributed to skills gaps in local industries and the limited development of professional services exports.
Despite policy successes in boosting non-oil goods exports, services exports remain largely overlooked in Nigeria’s export diversification agenda.
Analysts warn that this neglect carries significant consequences for the country’s overall balance of payments position and its ability to sustainably grow FX reserves.
“Nigeria has focused heavily on boosting non-oil goods exports like agriculture and manufactured products. But services represent an untapped frontier for FX generation that has not received the same strategic attention,” Stephen Iloba, an economist observed.
“We need a national strategy to build capacity, improve skills, and invest in the competitiveness of services sectors like ICT, creative industries, healthcare, education, and professional services.”
International experience suggests services can be a powerful driver of FX earnings and job creation. For instance, countries such as India and the Philippines have leveraged the export of IT and business process outsourcing (BPO) services to grow FX inflows dramatically.
In Africa, nations like Kenya and Rwanda have invested in building competitive tourism, conferencing, and IT-enabled services industries, contributing to more diversified and resilient economies.
Experts argue that reversing Nigeria’s chronic services deficit will require targeted investment in human capital, infrastructure, and technology. For travel services, reducing outbound education and health spending depends on improving domestic universities and healthcare facilities to international standards.
For transport services, investments in the aviation sector — both in expanding local airline capacity and improving airport infrastructure — could reduce the need to rely so heavily on foreign carriers.
Similarly, developing professional and technical services will require reforms in education and training, incentives for local firms to expand internationally, and policy support to ensure Nigerian companies can compete effectively in regional and global markets.
While Nigeria’s policymakers have made notable strides in diversifying away from oil through support for non-oil goods exports, the country’s persistently high services trade deficit underscores a critical blind spot.
Without concerted efforts to develop competitive services exports, Nigeria risks continuing to bleed scarce FX through rising payments for education, health, transportation, and technical services abroad.
Unlocking the potential of Nigeria’s services sector is not just a matter of economic diversification — it is essential to building a more sustainable, resilient, and self-reliant economy.
As pressures on FX reserves and the naira persist, experts stress that the time for action is now.
