Despite higher inflows, long-term investment remains weak as portfolio funds dominate Nigeria’s financial landscape….
Nigeria may be attracting more foreign capital, but the type of investment flowing into the country is raising fresh concerns about long-term economic stability.
According to the latest report from the National Bureau of Statistics, foreign direct investment (FDI) accounted for less than 4 per cent of total capital imported into the country in 2025 highlighting a continued reliance on short-term, easily reversible funds.
Capital Inflows Rise, But Structure Remains Fragile
The data shows that total capital importation surged to $23.22 billion in 2025, nearly doubling from $12.32 billion in 2024.
However, only $923.01 million of that total came from FDI, representing just 3.97 per cent of overall inflows.
Although this marks a 36.8 per cent increase from the $674.71 million recorded in 2024, FDI’s share of total capital actually declined, underscoring how much faster other forms of investment are growing.
Portfolio Investment Dominates the Market
A deeper breakdown reveals that portfolio investment continues to overshadow all other inflows.
Foreign portfolio investors brought in $19.74 billion in 2025, more than double the $8.38 billion recorded a year earlier. This means:
- Portfolio flows accounted for 03 per cent of total inflows
- More than 8 out of every 10 dollars entering Nigeria came through short-term investments
Quarterly trends show this dominance was consistent throughout the year, with portfolio inflows making up over 80 per cent in every quarter and peaking above 90 per cent early in the year.
FDI Gains Momentum—But Still Marginal
While still small, FDI showed signs of improvement over the course of the year.
Quarterly inflows climbed steadily:
- Q1: $126.29 million
- Q2: $142.67 million
- Q3: $296.25 million
- Q4: $357.80 million
Notably, nearly 71 per cent of total FDI came in the second half of the year, with the fourth quarter alone contributing almost 39 per cent.
Despite this late surge, FDI remained overshadowed even the strongest quarterly FDI performance was far below portfolio inflows recorded in the same period.
Where the Investment Is Going
Within FDI, equity investment remained the dominant component, accounting for over 94 per cent of total inflows at $868.29 million.
Other forms of direct investment, classified as “other capital,” were minimal but showed some growth, rising from just $9.20 million in 2024 to $54.72 million in 2025.
This suggests that while FDI is improving, it remains narrow in scope and concentrated in limited areas.
Why the Imbalance Matters
The composition of capital inflows is as important as the volume.
- Portfolio investment provides liquidity and reflects investor interest, but it is highly sensitive to:
- Interest rate changes
- Exchange rate movements
- Global risk sentiment
- Foreign direct investment, on the other hand, is typically linked to:
- Factory development
- Business expansion
- Long-term job creation
The heavy tilt toward portfolio flows means Nigeria remains exposed to sudden capital reversals if market conditions shift.
A Growth Story With Lingering Risks
The latest figures tell a mixed story.
On one hand, Nigeria has succeeded in attracting significantly more foreign capital. On the other, the structure of those inflows shows that long-term investor confidence in the real economy is still limited.
Until FDI begins to take up a larger share of total inflows, analysts say the country’s investment profile will remain vulnerable, reliant on short-term capital rather than the kind that drives sustained economic growth.
