State Department says economic reforms have improved stability, but regulatory uncertainty and weak infrastructure continue to discourage long-term foreign investment……
The United States Department of State has warned American investors about persistent security threats, corruption, port congestion and regulatory uncertainty in Nigeria, saying the challenges continue to undermine the country’s investment climate despite recent signs of economic stabilisation.
In its 2026 Investment Climate Statements on Nigeria, the department said the business environment was still adjusting to the effects of structural reforms introduced by President Bola Tinubu’s administration, including the removal of petrol subsidies and the liberalisation of the foreign exchange market.
According to the report, the reforms initially triggered considerable economic volatility, although some indicators in early 2026 pointed to improving stability.
It, however, cautioned that insecurity, bureaucratic hurdles and the social impact of the reforms remained significant concerns for businesses considering investments in the country.
“The security environment is a primary variable which gives pause to potential investors,” the report said.
The department noted that attacks on oil infrastructure in the Niger Delta had declined, but oil theft and illegal bunkering continued to pose risks to the sector.
It also warned that the expansion of terrorist and armed bandit groups in northern Nigeria was worsening the operating environment for businesses, particularly those in agriculture and mining.
The report further raised concerns about how foreign executives could be treated during regulatory disputes, citing the nearly eight-month detention of Tigran Gambaryan, an American citizen and Binance executive, in Nigeria in 2024.
It said the use of detention and restrictions on leaving the country during business-related disputes could heighten concerns among foreign executives about regulatory risks.
According to the department, such incidents could influence how international companies assess Nigeria before committing capital to the country.
Port congestion adds to business costs
The report identified inefficiencies at Nigeria’s seaports as another major obstacle for investors, particularly companies that rely on the movement of imported raw materials and exported goods.
Describing port delays as a hidden cost of doing business, the department said prolonged cargo clearance times continued to affect trade and increase operating expenses.
While acknowledging the growing role of Lekki Deep Seaport, which handled $9.6 billion in trade in 2025 and operated at about 50 per cent capacity, the report said older facilities at Apapa and Tin Can Island remained burdened by lengthy clearance procedures.
Cargo dwell times at the traditional ports often exceed 20 days, partly because of manual inspections and administrative bottlenecks, it added.
To address the problem, the Nigerian government launched the first phase of the National Single Window platform on March 27, 2026.
The digital initiative is designed to bring agencies involved in international trade, including the Nigeria Customs Service, the National Agency for Food and Drug Administration and Control, and the Standards Organisation of Nigeria, onto a common platform.
According to the report, the system aims to reduce cargo dwell times to fewer than seven days and eliminate 80 per cent of manual paperwork by the end of 2026.
Foreign investment inflows dominated by portfolio funds
Despite the challenges, the US department acknowledged an increase in capital inflows into Nigeria but cautioned that the figures did not necessarily indicate a comparable rise in long-term investment in factories, infrastructure and other productive assets.
The report said Nigeria’s capital importation reached $21 billion in October 2025, marking a substantial increase from 2024.
However, it noted that 92 per cent of the inflows came from foreign portfolio investments, which typically seek returns from financial assets and can be withdrawn more quickly than investments in physical infrastructure.
“However, 92 percent was made up of foreign portfolio investment (‘hot money’) seeking high interest rates, while actual foreign direct investment (FDI) in physical infrastructure remained modest,” the report said.
The department noted that Nigeria generally permits full foreign ownership in most sectors, although some industries remain subject to restrictions and licensing requirements.
It also highlighted the Nigerian Investment Promotion Commission’s One-Stop Investment Centre, which coordinates 27 government agencies to help investors navigate regulatory and administrative procedures.
US foreign direct investment in Nigeria stood at $7.9 billion at the end of 2024, representing a 25 per cent increase from the previous year, according to the report.
Bilateral trade between Nigeria and the United States also reached $14.8 billion in 2025.
Reforms improve indicators but increase pressure on households
The report acknowledged that the Tinubu administration’s economic reforms had helped improve some macroeconomic indicators but said the adjustment had come at a considerable cost to households.
“The fiscal correction came at a high social cost,” it said.
The department noted that the removal of petrol subsidies had caused pump prices to rise sharply, with petrol prices increasing fivefold from their 2023 levels.
Citing an April 2026 World Bank report, it said Nigeria’s national poverty rate was estimated at 63 per cent in 2025, highlighting the continuing pressure on living standards.
Nigeria’s economic growth improved from 3.3 per cent in 2023 to 4.1 per cent in 2024 before easing slightly to four per cent in 2025, the report stated.
It also cited Central Bank of Nigeria data showing that foreign exchange reserves reached $50.45 billion in February 2026, their highest level in 13 years.
On inflation, the department said headline inflation peaked at 34.8 per cent in late 2024 before declining to 15.15 per cent in December 2025 following the rebasing of the Consumer Price Index and subsequent methodological changes.
Food inflation stood at 10.84 per cent in December 2025 under the rebased index, according to the report.
Corruption and unpredictable regulations remain concerns
Beyond security and infrastructure, the US department identified corruption as a persistent structural challenge affecting investment and trade in Nigeria.
“Corruption remains a systemic barrier, including at seaports where customs delays impede trade,” the report said.
It also described Nigeria’s trade regime as somewhat protectionist, citing high tariffs and import restrictions introduced to shield domestic industries from foreign competition.
The report noted that some businesses must commit to local production to obtain permits or quotas allowing them to import the same products.
Although the government has introduced measures to make the regulatory environment more predictable, the department said implementation remained inconsistent.
“Nigeria’s regulatory environment has transitioned toward a ‘structural reset’ designed to improve predictability, though implementation remains uneven,” it said.
The report also pointed to the transition from the Pioneer Status Incentive scheme to the Economic Development Tax Incentive, which took effect in January 2026, as an area requiring administrative adjustments for foreign businesses.
It said the effectiveness of Nigeria’s reform agenda would depend partly on consistent implementation, improved regulatory predictability and the government’s ability to address the structural barriers discouraging long-term investment.
