Portfolio investors supplied the bulk of Nigeria’s Q1 capital inflows as PwC urges the government to turn renewed foreign interest into long-term investment, jobs and productive capacity……
Nigeria recorded $10.37bn in foreign capital inflows in the first quarter of 2026, but only a fraction of the money went into businesses and productive assets, according to a new report by PricewaterhouseCoopers.
PwC said foreign capital inflows jumped 83.8 per cent year-on-year, but the surge was overwhelmingly driven by foreign portfolio investment rather than the long-term investment needed to expand businesses, infrastructure and employment.
Foreign portfolio investment rose by 89.5 per cent year-on-year and 79.77 per cent from the previous quarter to $9.86bn, accounting for 95.1 per cent of total capital imported into the country.
Foreign direct investment, meanwhile, stood at just $135.08m, representing 1.3 per cent of total inflows despite recording a 6.96 per cent year-on-year increase.
The figures were contained in PwC’s H2 2026 Nigeria Economic Outlook, which highlighted the challenge facing policymakers: attracting foreign money is one thing, but converting it into lasting economic activity is another.
Investors are coming — but mostly for financial assets
According to PwC, the composition of the inflows shows strong foreign interest in Nigeria’s financial markets, but relatively limited commitment to productive assets.
Portfolio investment was concentrated largely in money-market instruments and bonds, which attracted $6.5bn and $3.23bn, respectively.
The firm said the figures reflected increased participation by foreign investors in Nigerian financial assets, supported by attractive yields.
However, the dominance of portfolio flows also means that much of the capital can move relatively quickly when market conditions or investor sentiment change.
PwC said Nigeria’s immediate challenge was therefore to turn the renewed interest from international investors into more stable, long-term capital.
“The opportunity is to translate this investor interest into more long-term capital,” the firm said.
What Nigeria needs to attract more FDI
PwC argued that Nigeria needs to make the transition from attracting financial-market investors to attracting companies willing to commit capital to factories, infrastructure, production facilities and other long-term ventures.
It identified greater policy certainty, a stronger pipeline of bankable projects and a competitive operating environment as key requirements for increasing FDI.
According to the firm, stronger FDI would help businesses expand their productive capacity, deepen local supply chains and create more employment.
But several bottlenecks continue to stand in the way.
PwC identified challenges involving approvals, access to land, financing and foreign exchange as some of the factors preventing investment commitments from being converted into operating businesses and jobs.
Private-sector credit remains a major hurdle
The weakness in domestic financing is another concern highlighted in the report.
PwC said private-sector credit was equivalent to 21.3 per cent of GDP, significantly below the 33 per cent average for sub-Saharan Africa.
The firm warned that expensive and limited credit could undermine the ability of businesses, particularly smaller companies, to expand even as broader economic reforms improve macroeconomic conditions.
“Easing access to affordable private sector credit is critical to translating reforms into MSME-led growth,” PwC said.
The gap between government and private-sector borrowing has also widened.
According to the report, credit to government increased by 18 per cent between December 2025 and May 2026, while private-sector credit grew by only 6.9 per cent over the period.
Between February and May 2026, private-sector credit subsequently declined by 14.3 per cent, while credit to government increased by 2.6 per cent.
PwC said the trend underscored the need to channel more financing towards productive private-sector activities.
PwC proposes new financing tools for SMEs
The firm recommended the use of dedicated credit windows, partial credit guarantees and blended finance to help small and medium-sized businesses overcome financing constraints.
Such interventions, it said, could help companies seeking relatively small facilities ranging from N500,000 to N30m, which may struggle to access conventional bank financing at affordable rates.
Although tight monetary conditions have helped support price and foreign exchange stability, PwC said they have also contributed to elevated borrowing costs.
“High borrowing costs continue to constrain private-sector credit,” the firm said.
Debt remains a major pressure point
While Nigeria’s macroeconomic conditions have shown signs of stabilisation, PwC warned that fiscal pressures could remain significant during the second half of 2026.
Continued government spending, a persistent budget deficit and substantial financing requirements could keep pressure on public finances.
The firm also warned that weaker-than-expected revenue performance could force the government to borrow more if the situation persists.
Debt servicing remains a particularly serious concern.
PwC described debt service as Nigeria’s “key fiscal vulnerability”, noting that nearly half of government revenue was consumed by debt payments in 2025.
The heavy debt-service burden, it said, limits the government’s ability to direct more resources towards infrastructure and other investments capable of supporting long-term economic growth.
Economic stability yet to fully reach households
PwC said the improvement in Nigeria’s macroeconomic stability had not yet translated into a comparable improvement in household welfare.
High living costs, limited access to credit, weak income and employment gains and insufficient social protection continue to weigh on household purchasing power.
The firm noted that while economic reforms are necessary to restore stability, they can also create short-term pressures for households and businesses during the adjustment period.
To ease those pressures, PwC recommended more targeted support for households alongside measures to raise agricultural productivity and improve storage and logistics.
It also called for increased domestic energy supply to help reduce some of the costs confronting households and businesses.
For Nigeria, the latest capital-importation figures offer both an encouraging sign and a warning. Foreign investors are showing renewed interest in the economy, but the overwhelming dominance of portfolio investment means the country has yet to fully convert that interest into the long-term capital needed to build businesses, infrastructure and sustainable jobs.
