Nigeria’s $23.2bn capital inflows expose weakness in FDI recovery
Nigeria attracted a record $23.22 billion in foreign capital in 2025, up sharply from $3.9 billion in 2023, but the overwhelming dominance of short-term portfolio funds and conflicting figures on foreign direct investment (FDI) have raised questions about the quality and sustainability of the recovery.
An economic assessment by the Independent Media and Policy Initiative (IMPI), authored by its Chairman, Omoniyi Akinsiju, PhD, described the surge in capital importation, stronger external reserves and improved trade balances as evidence of a changing external economic outlook following the foreign exchange reforms and removal of petrol subsidy in 2023.
However, the composition of the inflows suggests that Nigeria is yet to secure the level of long-term productive investment required to expand manufacturing, create jobs and strengthen domestic production.
Portfolio investment accounted for approximately 85 per cent of the $23.22 billion capital importation in 2025, amounting to $19.74 billion, compared with $8.38 billion in 2024.
By contrast, the National Bureau of Statistics (NBS) put FDI at just $923.01 million, representing about four per cent of total inflows. This is significantly lower than the $4.01 billion FDI figure cited by IMPI, which described it as a 148.1 per cent increase from $1.61 billion in 2024.
The two figures present a material discrepancy that requires clarification. While IMPI’s assessment points to a strong recovery in actualised FDI, the NBS data cited in the same analysis indicate that direct investment remains a relatively small component of Nigeria’s foreign capital inflows.
The distinction matters because portfolio funds, which are invested largely in government securities, equities and other financial instruments, can move quickly in response to changes in interest rates, exchange rate expectations and global market conditions. FDI, on the other hand, is more closely associated with long-term commitments to productive assets, technology and employment.
The assessment warned that the headline increase in capital importation should not be mistaken for an equivalent expansion in factories, infrastructure or productive capacity. It argued that Nigeria must develop policies to channel more foreign capital into manufacturing, technology, infrastructure and other sectors capable of generating sustainable economic growth.
The concentration of inflows in portfolio investments also raises questions about how durable the recovery will be, particularly as monetary policy easing and declining yields on government securities could reduce the attraction of short-term investments.
Beyond capital importation, IMPI identified improvements in Nigeria’s external accounts as an important factor supporting investor confidence. It attributed the stronger current account and merchandise trade positions partly to the foreign exchange reforms and petrol subsidy removal, which it said helped address longstanding distortions in the country’s external payments.
Gross external reserves reportedly increased from about $45 billion to $55 billion by the third quarter of 2026, strengthening the Central Bank of Nigeria’s capacity to manage external shocks and support exchange rate stability.
The assessment also linked the improvement to increased domestic refining capacity, which has reduced reliance on imported refined petroleum products and helped retain more value within the economy.
Non-oil exports, including gold, lead, cocoa, cashew nuts, sesame seeds and urea fertiliser, were identified as additional sources of foreign exchange earnings. IMPI said expanding trade within the Economic Community of West African States could further improve Nigeria’s export position.
On sectoral investment, the report estimated that oil and gas accounted for 42 per cent of inflows between 2025 and 2026, citing the $2.4 billion Renaissance-Shell onshore acquisition as a major transaction. Information and communications technology attracted an estimated 24 per cent, manufacturing and industry 18 per cent, while banking and financial services accounted for 11 per cent.
It argued that these investments could strengthen productive capacity if they translate into expanded operations, technology transfer and greater domestic value addition. However, persistent weaknesses in electricity supply, transportation, logistics and port infrastructure remain significant obstacles to industrial competitiveness.
IMPI also drew lessons from the 2000–2014 commodity boom, when Nigeria’s external reserves rose from less than $8 billion in 2000 to approximately $62 billion in September 2008, while the Excess Crude Account accumulated about $22 billion.
Despite the windfall, the report argued, inadequate investment in infrastructure and economic diversification left the country exposed when crude oil prices collapsed in late 2014, contributing to foreign exchange pressures and recession.
The assessment identified JPMorgan Chase’s move to secure a merchant banking licence in Nigeria as another indication of renewed international interest, with potential benefits for trade finance, corporate lending, underwriting and syndicated financing.
Nevertheless, it cautioned that improved macroeconomic indicators had yet to translate fully into better living conditions, with households and smaller businesses still facing high operating costs.
For Nigeria, the central challenge is therefore no longer simply attracting foreign capital, but ensuring that the money finances productive activities, expands exports, creates employment and improves household welfare.
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