Fat stores estrogen, as you lose fat, your system gets flooded with estrogen, unfortunately your sex drive is controlled by your Testosterone levels. But, the good news is, that once you flush out a good amount of fat, and your body has a chance to balance out again, your sex drive should come back with a vengeance!
As far as the dryness... get yourself some lube. Water based stuff doesn't hang around long, but it's condom friendly. Oil based stuff works amazing, but isn't condom friendly. Silicone lubes are more expensive typically but are both condom friendly AND has good staying power. And no need to go to an adult store for lube, all pharmacies carry lube and personal massagers now.