Nigeria recorded a sharp increase in capital inflows in 2025 with total foreign investment rising to $23.22 billion from $12.32 billion in 2024, driven largely by renewed interest in high-yield financial instruments following recent economic reforms.
Data released by the National Bureau of Statistics showed that foreign portfolio investment accounted for the bulk of inflows, highlighting a strong return of short-term capital into the country’s financial markets.
Foreign portfolio investment surged to $19.74 billion, up from $8.38 billion in the previous year, representing approximately 85 percent of total capital inflows.
The increase reflects heightened investor appetite for Nigeria’s fixed income instruments, particularly amid elevated interest rates.
Breakdown of portfolio inflows showed that investments in money market instruments rose significantly to $13.83 billion, while bond inflows climbed nearly fivefold to $4.89 billion. Equity investments also recorded moderate growth, increasing to $2.10 billion.
The surge in inflows comes as Nigeria continues to implement reforms aimed at stabilising the economy, liberalising the foreign exchange market and improving investor confidence.
Higher yields in government securities have made the country increasingly attractive to foreign investors seeking returns in emerging markets.
However, foreign direct investment remained subdued, rising only modestly to $923 million from $675 million recorded in 2024.
The weak performance in long-term investment underscores persistent concerns around structural risks, policy consistency and the broader business environment.
Other forms of capital inflows, including loans and trade credits categorised as “other investment,” declined to $2.55 billion from $3.27 billion, indicating a shift in investor preference toward more liquid and yield-driven assets.
The United Kingdom emerged as the largest source of capital inflows, accounting for approximately 58 percent of total investments, while Nigeria’s banking sector attracted the largest share of foreign capital.
Analysts noted that while the surge in capital inflows signals improving investor sentiment, the heavy concentration in portfolio investment exposes the economy to external shocks.
Short-term flows are typically more volatile and can reverse quickly in response to global financial conditions, including changes in interest rates and risk appetite.
The dominance of yield-seeking inflows suggests that foreign investors are primarily engaging Nigeria’s markets for returns rather than committing to long-term productive investments.
This dynamic may limit the broader economic impact of the inflows, particularly in areas such as job creation, infrastructure development and industrial expansion.
Going forward, sustained reforms and policy clarity will be critical in converting portfolio inflows into more stable forms of capital, particularly foreign direct investment.
Strengthening the business environment, improving infrastructure and ensuring regulatory consistency remain key to attracting long-term investors.
While the current inflow momentum provides short-term support for Nigeria’s foreign exchange market and reserves, the composition of these inflows will remain a key focus for policymakers seeking to build a more resilient and diversified investment base.
