Foreign investment in Nigeria is gaining renewed momentum as the country recorded a total capital inflow of $5.642 billion in the first quarter (Q1) of 2025, a staggering 67.12% rise compared to the same period last year, according to the latest data released by the National Bureau of Statistics (NBS).
This growth, which also marked a 10.86% increase from the $5.089 billion recorded in Q4 2024, signals a stronger appetite among investors despite lingering economic challenges.
A closer look at the numbers reveals that portfolio investment accounted for the lion’s share of the capital inflow. Investors pumped $5.204 billion into short-term instruments, representing a whopping 92.25% of the total figure. Other investments followed at $311.17 million, while Foreign Direct Investment (FDI) trailed significantly at $126.29 million, making up just 2.24% of total inflows.
While the surge in total capital importation paints a rosy picture on the surface, the breakdown reveals Nigeria is still heavily reliant on “hot money”, fast-moving speculative investments, rather than long-term financial commitments that build infrastructure and create jobs.
The banking sector emerged as the biggest winner in the investment landscape, attracting $3.127 billion, which translates to 55.44% of total inflows in Q1 2025. The financing sector followed with $2.097 billion (37.18%), while production and manufacturing saw $129.92 million (2.30%).
This heavy concentration of foreign capital in financial services reflects investors’ confidence in Nigeria’s evolving monetary environment, especially after key reforms like foreign exchange unification and subsidy removal. However, sectors like manufacturing continue to struggle. Capital into that sector declined by over 32%, showing persistent concerns about energy costs, policy unpredictability, and consumer spending power.
Geographically, Abuja (FCT) outshone Lagos for the first time as the top destination for foreign investment. The capital city received $3.047 billion, 54.11% of the total inflow. Lagos, previously the go-to hub for capital, followed with $2.564 billion (45.44%). Ogun, Oyo, and Kaduna states recorded a fraction of the inflows, with amounts below $8 million each.
This shift in destination might be attributed to government-backed infrastructure projects, investor relations initiatives in the FCT, and improved ease of doing business within Abuja.
In terms of capital origin, the United Kingdom maintained its dominance with $3.681 billion, over 65% of the total foreign capital. South Africa came next with $501.29 million, while Mauritius ranked third at $394.51 million. This aligns with existing investment patterns and shows the UK’s continued confidence in Nigerian financial markets, especially in debt instruments and banking.
The top financial institutions that facilitated these inflows include Standard Chartered Bank Nigeria, which led the pack with $2.103 billion in capital importation. Stanbic IBTC followed with $1.398 billion, and Citibank Nigeria recorded $1.052 billion.
Despite the boost in foreign investment in Nigeria, the low FDI figures raise concerns about the quality and sustainability of current capital inflows. Economists warn that while portfolio investments boost reserves and help defend the naira in the short term, they are volatile and can flee at the first sign of economic instability.
Experts point to factors such as high interest rates, which are drawing investors to Nigerian treasury bills and bonds, and short-term profit expectations. Until there is more macroeconomic stability, better infrastructure, and policy predictability, Nigeria might continue to struggle with attracting stable, long-term capital.
However, optimism lingers. The implementation of tax reforms expected in the next fiscal year, a slowing inflation rate (now at 22.2% as of June 2025), and a more market-driven economic structure could gradually shift investor sentiment towards deeper commitments.
While Nigeria celebrates the foreign investment surge, the real challenge lies in ensuring that this capital contributes meaningfully to job creation, industrialization, and economic transformation, not just fleeting speculative gains.
