In 2019, nearly half of Nigeria’s states attracted foreign capital investment. Fast forward to 2024 and early 2025, and that number has shrunk to just six. This sharp decline reveals a stark truth: Nigeria’s economic growth is uneven, leaving many regions behind and undermining hopes for truly inclusive development.
Foreign Direct Investment, often channelled through multinational enterprises (MNEs), plays a pivotal role in driving economic development. As VoxDevLit, a platform for economists and policymakers explains, these firms boost host countries’ growth by transferring technology and management know-how, and by creating jobs through their connections with local businesses.
In Nigeria, the geographical concentration of FDI suggests these spill-over benefits are reaching fewer parts of the country. The fact that MNEs often choose regions with better infrastructure, security, governance, and access to markets means that states left behind either lack or are losing the foundational conditions to attract investment.
Nigeria’s road to attract FDI is long and winding
While experts have maintained that Foreign Portfolio Investment (FPI) and naira stability will lay the ground for the inflow of Foreign Direct Investment (FDI), it now, however, appears that the FDI will be a journey that is far from starting.
The latest data from the National Bureau of Statistics (NBS) shows that year on year (YoY), FDI increased by 5.97 percent. However, compared to the previous quarter (Q4 2024), FDI in Q1 2025 declined sharply by 70.06 percent. FPI, on the other hand, grew by 150.75 percent YoY, while it grew by 30.14 percent QoQ.
This can only mean one thing: while citizens are hopeful that painful reforms will soon turn the tide, the journey to attract the desired FDI that will drive inclusive economic growth is far from starting.
As of today, Nigeria’s economy is a fertile land for reaping quick money in foreign portfolios, which is mostly induced by the current interest rate and stability in other macroeconomic variables. NBS data show that in the first quarter of 2025, portfolio investment accounted for 92 per cent of the entire capital importation, while FDI accounted for only 2 per cent.
When compared with South Africa, FDI accounted for 29.01 percent of total investment flows in Q1 2025, while Nigeria recorded just 2.24 percent. In 2024, South Africa’s FDI share stood at 30.44 percent, compared to 5.48 percent for Nigeria.
As noted by political and economic analyst, Mayowa Boyode, the banking sector attracted 55.44 percent of capital inflows while manufacturing received just 2.3 percent, or $129.92 million. “This is textbook hot money,” he says. “They’re not building anything. They’re just parking funds in your economy to chase quick returns.”
This highlights the problem: short-term capital is flowing into sectors that offer fast returns, while the productive real sector, the engine of jobs and output, remains starved of long-term investment.
Local investors signal confidence
As FDI may take a longer time than expected, Aliko Dangote offered a timely reminder during the Taraba Investment Summit. “The only way for you to attract foreign investors is by having local investors. If you don’t invite local investors to come and invest, no foreigner will come. Foreigners are attracted when things are good. Once they see that, yes, things are flowing… you don’t have to invite them; they will come.”
His words underscore a key policy insight: FDI doesn’t arrive in a vacuum. It is local investment, trust, and business confidence that signal a viable destination to global capital.
Nigeria should intensify efforts to build strong domestic investment ecosystems across its states, especially in production, infrastructure, and manufacturing, so that transformative foreign capital can follow.
