The banking sector saw its highest inflow in more than ten years in the first quarter of 2025, as various reforms of the Central Bank of Nigeria (CBN) to make the country more attractive to investors have begun to yield fruitful results.
The sector, which is currently undergoing a recapitalisation process, attracted $3.1 billion in inflow, representing 55.4 percent of the total capital inflows to the economy.
That value is 51 percent higher than the $2.06 billion recorded in 2024 and more than 27 times what was obtained 10 years ago, indicating renewed confidence and appetite for Nigeria’s assets.
Analysts linked the rising investors’ interest to the fallout of crucial reforms instituted by the Central Bank of Nigeria (CBN) under the Olayemi Cardoso leadership.
Upon assuming office in October 2023, the apex bank leadership had prioritised reforms to rebuild Nigeria’s economic buffers and strengthen resilience.
CBN’s policies, including the currency reforms, led to investment inflows from abroad and reduced interventions in the domestic forex market.
The unification of exchange rates and the clearing of over $7 billion in FX backlog raised the country’s investment outlook, with multilateral organisations, like the World Bank, describing it as a bold intervention to improve the economy’s sustainability in the long run.
Also, Nigeria’s sovereign risk spread has fallen to the lowest level since January 2020, erasing the premium accumulated during the pandemic and subsequent strain on its economy. All these are deliberate efforts to woo investors and sustain capital inflows to the economy.
Reforms lure in $5.6bn in investments in Q1
The sweeping reforms embarked upon by the CBN have led to a surge in capital inflows into the Nigerian economy, which rose to $5.6 billion in the first quarter of 2025, the National Bureau of Statistics (NBS) report has shown, representing a 67.12 percent jump from the $3.4 billion recorded in the same period of last year.
The NBS also stated that portfolio investment ranked top with $5.2 billion, accounting for 92.25 percent, followed by other investment with $311.17 million, accounting for 5.52 percent.
The bulk of the FPI flows was to money market instruments, up 162.2 percent year-on-year to $4.2 billion, while bonds grew 108.5 percent and equities saw a 137.7 percent rise and attracted $877.4 million and $117.3 million, respectively.
Foreign Direct Investment, on the other hand, recorded the least with $126.29 million, accounting for 2.24 percent of total capital importation in Q1 2025.
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Banking sector takes front row in Nigeria’s $1trn ambition
Nigeria’s hope of achieving a $1 trillion economy by 2030 will gain significant support from the banking sector.
The apex bank, last year, directed commercial banks to improve their capital base in a move targeted at improving the financial soundness of the lenders and by extension grow the economy.
So far, eight banks have met the recapitalisation target, according to CBN governor Olayemi Cardoso.
A report by Proshare revealed that Nigerian banks have collectively raised over N13 trillion in fresh equity capital as of mid-2025, significantly strengthening their capital buffers and improving resilience to credit risk.
The substantial capital raise implies improvements in key financial health indicators. Banks can now report stronger Capital Adequacy Ratios (CARs), reduced Cost of Risk (CoR), larger and more diversified asset bases, more robust capital buffers capable of absorbing non-performing loans (NPLs), and healthier Cost-to-Income Ratios (CIRs).
“Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1tr economy in the near future?” Cardoso asked
“In my opinion, the answer is “No!” unless we take action. That action was the ongoing recapitalisation of banks, meant to prepare them for expansion and attract big ticket transactions to support economic growth”.
The Policy Advisory Council report on the national economy, had set an ambitious goal of achieving a GDP of $1 trillion, with clearly defined priority areas and strategies.
Rebased GDP opens opportunities
Nigeria’s statistician-general, Adeyemi Adeniran, had explained how the economy fared in the rebased Gross Domestic Product (GDP) report. He said: “In nominal terms, the rebased GDP for 2019 stood at N205.09 trillion N213.63 trillion in 2020, N243.30 trillion in 2021, N274.23 trillion in 2022, N314.02 trillion in 2023, and N372.82 trillion in 2024”.
The NBS noted that in 2019, the rebased nominal GDP at basic prices represented an increase of 41.7 per cent over the nominal GDP of 2019 of the old base year (2010), 39 percent in 2020, 38.7 percent in 2021, 36.1 per cent in 2022, 34.6 per cent in 2023 and 35.4 per cent in 2024.
“The results show that the structure of the Nigerian economy has changed significantly with a rise in the share of agriculture and services sectors and a fall in the share of the industries sector in nominal terms, indicating a shift in the structure of the Nigerian economy from earlier reports,” the NBS said.
Adeniran further explained that the rebasing allows the country to better reflect the realities of the economy. “It’s not just about a bigger number but about accurate, timely data that supports smarter policy and economic planning,” he said.
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Seun Onigbinde, director of Civic Technology Group BudgIT, said the previous rebasing underscored the substantial impact of policy changes in the services and ICT sectors, such as telecommunications deregulation and banking sector recapitalisation.
“Rebasing of the GDP must reflect changes in the economy, which are a product of public policies over time,” he added.
Rebasing is also critical for domestic policy. It allows the government to better assess tax collection efficiency, measure sectoral contributions, and design social programmes that are data-driven and results-oriented.
Gabriel Okeowo, country director for BudgIT, said, “Rebasing allows planners to be more intentional about solving Nigeria’s biggest problems: poverty, infrastructure gaps, and job creation.”
Lagos-based economist, Nelson Adedeji, explained that despite the bump in GDP size, rebasing is never a silver bullet.
“We must acknowledge that genuine economic growth extends beyond statistical adjustments. For ordinary Nigerians to experience meaningful improvement in living standards, the President Bola Tinubu administration must complement GDP rebasing with substantive policies addressing infrastructure deficits, security challenges, agricultural productivity, manufacturing capacity, and the overall ease of doing business,” he stated.
Experts weigh in
While US President Donald Trump’s widening trade war has taken emerging markets on a wild ride, Nigeria has quietly held its own, attracting foreign capital reassured by currency reforms and other measures designed to revive the economy of Africa’s most populous nation.
“Nigeria appears to be back in business as long-awaited economic reforms take shape,” said Emre Akcakmak, portfolio manager at East Capital. Key measures include improved currency liquidity, leeway for investors to repatriate their profits, and a stable naira.
“We feel the Central Bank of Nigeria will continue to stem any sharp appreciation of the naira to limit profit-taking from the fast-money community,” Akcakmak said.
“Portfolio inflows have likely been supported by improved confidence amid key structural reforms, better FX market functioning, and moderating dollar-naira volatility, as well as the still-robust nominal yield buffer,” Samir Gadio, head of Africa strategy at Standard Chartered Plc told Bloomberg.
“Besides, Nigeria’s local market is seen as less correlated with global risk conditions than more liquid EM peers,” he said.
Nigeria’s economy is already exiting the most painful phase of the reform adjustment process in 2025, Bismarck Rewane, managing director of Financial Derivatives Company Limited, predicted.
Rewane projected that the economy would begin to recover from the toughest phase of its reform adjustments this year, emphasizing the importance of strategic policy implementation and institutional reforms.
He noted that while the fundamentals of Nigeria’s exchange rate indicate that the naira should be stronger, achieving stability depends on an efficient and effectively managed FX system. He stressed that the primary challenge lies not in the reforms themselves but in their management, citing poorly sequenced policy changes and insufficient structural reforms as significant obstacles.
Rewane underlined the critical role of investment in driving economic growth. “Revenue alone is not enough,” Rewane stated. “Investment is key, but it will be influenced by confidence, transparency, and the right policies.”
He also called attention to persistent challenges such as power supply inefficiencies and the lack of transparency in the oil and gas sector, which require immediate attention through structural reforms.
