…As weak FDI threatens Tinubu’s $1 trillion target
Nigeria’s foreign investment is projected to surge to its highest levels in at least six years driven by higher-than-expected returns on naira yields due to the Central Bank of Nigeria (CBN)’s monetary tightening measures to lure in capital.
Total capital importation into Africa’s most populous nation is estimated to hit $19.3 billion by the end of 2025, according to research and asset management firm Afrinvest West Africa.
That’s 56.91 percent ahead of $12.3 billion recorded last year and both lower than $23.9 billion posted in 2019 — a year before COVID-19 dealt a blow on global economies, driving inflows from emerging markets like Nigeria into safer havens.
“The outlook is informed by favourable domestic interest rate environment and price-currency stability, impact of tariff-war on global investment sentiment and potential for subsequent US rate cut,” Afrinvest said in its weekly update to clients on Saturday.
Read also:Kano disputes NBS report, claims $22m foreign investment in Q1
Nigeria raked in $5.6 billion in the first quarter (Q1) of 2025 as total foreign investments into the country increased by 67 percent on rising investor confidence.
The value rose by 11 percent quarter-on-quarter, marking the highest quarterly capital inflow recorded since Q1 of 2020, a move analysts expect to be sustained all through the year.
The notable growth in capital importation was largely driven by a substantial increase in portfolio investment inflows (PFIs) to $5.2 billion in the reviewed period, up from $4 billion in the fourth quarter of 2024 (Q4’24) and $2.1 billion in the corresponding period of the previous year.
“We expect capital importation to improve further in the short to medium term, underpinned by ongoing foreign exchange reforms, rising investor confidence, competitive naira yields, and gradually strengthening macroeconomic fundamentals,” analysts at research and consultancy firm Cordros said.
Investors are becoming more confident in the economy of Africa’s top crude producer as the country continues to see a strong improvement in its macroeconomic position buoyed by various reforms, including the elimination of subsidies and unification of the exchange rate that have increased dollar inflows and phased out currency speculations.
The monetary authorities too have kept key benchmark interest rates at 27.5 percent, leaving it unchanged after meeting three times this year.
This longer hold measure has seen influx of investments into the money market instruments with the section accounting for 81 percent or $4.2 billion of the total $5.2 billion foreign portfolio investments seen in the first three months of 2025.
As FDI continues to diminish threatening $1trn target
Foreign Direct Investment (FDI), a core indicator of investors long-term commitment and confidence in an economy, plunged by more than 70 percent in the quarter being reviewed to $126 million even as it rose to its highest in at least three years, accounting for a paltry 2.2 percent of the total capital importation.
Analysts say that falling FDIs are threatening President Bola Tinubu’s drive to make Nigeria a $1 trillion economy by 2030.
Ken Ife, a professor, development economist and public policy analyst, told BusinessDay that FDI follows fundamentals. “No investor wants to come to a country where they are going to borrow money to build infrastructure, access roads to their factory.” He recalled that Nigeria once attracted $5.7 billion in FDI in 2014, noting that the numbers today are “nothing to write home about.”
Read also: Telecoms foreign investment falls 58% to $80.78m in Q1 2025 NBS
“The fact is that if you don’t have domestic investors, no investor would put their money or invest in a country where they don’t have roots.”
Ife also warned that government borrowing does little to boost GDP unless the funds are channeled into productivity-enhancing investments, such as expanding the capital base or developing economically viable infrastructure.
“Not all infrastructure is equal,” he said. “Building roads that lead to nowhere or fail to connect industrial and commercial hubs is simply a waste of money,” he said.
Damilare Asimiyu, macroeconomic strategist at Afrinvest, echoed Ife’s sentiment, noting that institutional weaknesses—insecurity, weak rule of law, bureaucracy, and corruption—are major investment deterrents.
“Unfortunately, among the three components of capital importation, FDI remains the cheapest and most impactful in terms of long-term economic growth, given its strong multiplier effects. In contrast, portfolio investment (FPI) is considered ‘hot money,’ driven largely by opportunistic flows into Nigeria’s fixed income space.
“The elevated volume of FPIs recorded in Q1 of 2025 is largely attributable to the attractive yields on government instruments – treasury bills, bonds and OMO bills – all of which offered stop rates above 20.0 percent during the period.
“However, this momentum may not be sustained. As inflationary pressures ease and monetary authorities adjust rates downward, the relative attractiveness of these instruments could decline, leading to a moderation in FPI inflows.”
President Tinubu’s broader $1 trillion economy target hinges on structural reforms and fortified capital inflows. Yet meeting that goal will demand sustained double-digit GDP growth—something economists say is virtually unattainable without bold changes, especially in governance, agriculture, and external trade structures .
For Muda Yusuf, DG of the Centre for the Promotion of Private Enterprises, there is a need for pragmatic public-private partnerships—including airport, rail, and energy concessions—to signal Nigeria’s openness and attract FDI. Yusuf pointed to the telecoms boom, brought by liberalisation policy, as a case in point.
These domestic concerns are layered over an international landscape that offers mixed signals. The Nigerian National Petroleum Company (NNPC) reported $17 billion in oil and gas sector FDI in 2024—credited to reforms like the Petroleum Industry Act—but these sector-specific gains aren’t translating across the wider economy .
FDI volatility
FDI into Nigeria has shown significant volatility over the past decade, with a sharp downward trend in recent years, according to data from the National Bureau of Statistics. (NBS).
After peaking at $4.45 billion in 2016, inflows declined to $3.51 billion in 2017 and plunged to $780 million in 2018. A brief recovery followed, with FDI reaching $2.31 billion in 2019 and $2.39 billion in 2020—a modest 3.5 percent increase.
Read also: Investor confidence boosts foreign investments into Nigeria by 67%
The upward trend continued into 2021 with a 38.9 percent jump to $3.31 billion. However, in 2022, the country recorded net negative FDI of -$186.8 million, representing a dramatic 105.6 percent decline from the previous year.
FDI rebounded to $1.87 billion in 2023 but dropped again to $674.7 million in 2024, with just $126.3 million recorded in the first quarter—signaling continued investor caution and underlying economic concerns.
According to Ayo Teriba, an economist and CEO of Lagos-based Economic Associates, the Nigerian government needs to attract FDI of at least $50 billion to bring inflation to five percent in 2025.
