Foreign Direct Investment (FDI) into Nigeria fell sharply by 70.06 per cent in the first quarter of 2025, dropping to $126.29 million from $421.88 million in the last quarter of 2024, according to the latest Capital Importation report from the National Bureau of Statistics (NBS).
This steep quarterly decline in FDI occurred despite a broader increase in total capital importation, underscoring a persistent shift by foreign investors toward short-term, high-yield financial instruments rather than long-term commitments to productive sectors of the economy.
On a year-on-year basis, FDI posted a marginal increase of 5.97 per cent compared to $119.18 million recorded in Q1 2024. However, this small uptick has done little to alter the prevailing trend of weakening interest in Nigeria’s long-term investment potential. In Q1 2025, FDI accounted for only 2.24 per cent of total capital inflows, down from 8.29 per cent in the preceding quarter and below the 3.53 per cent recorded a year earlier.
Overall, capital importation rose to $5.64 billion in Q1 2025 from $5.09 billion in Q4 2024, and significantly higher than the $3.38 billion recorded in Q1 2024. While the headline growth in inflows might suggest renewed investor confidence, a deeper look reveals that more than 90 per cent of these funds were placed in short-term money market instruments such as government bonds, Open Market Operation (OMO) bills, and treasury bills—assets that do not directly boost industrial growth, job creation, or infrastructure development.
Industry analysts warn that this heavy reliance on speculative, easily reversible capital flows leaves Nigeria vulnerable to sudden capital flight, which could destabilise the economy. In contrast, FDI generally regarded as a sign of confidence in a country’s long-term prospects has been crowded out by short-term investments chasing quick returns in Nigeria’s high-yield debt market.
Breaking down the FDI numbers, equity investments made up $124.31 million of the total in Q1 2025, representing a 70.36 per cent fall from $419.41 million in the previous quarter. The remaining $1.98 million came from other capital components, which declined 20.02 per cent quarter-on-quarter but surged year-on-year from a negligible $0.01 million base in Q1 2024.
The NBS data also reveal that money market instruments attracted about $4.21 billion roughly 74.6 per cent of the total capital imported in Q1 2025. The PUNCH notes that while this category of investment can help manage liquidity and support the naira, it contributes little to building productive capacity in sectors that drive sustainable economic growth.
The pattern of rising capital inflows dominated by short-term instruments raises concerns about the sustainability of Nigeria’s investment profile. Without a shift toward FDI and equity investments in productive industries, the country risks continued underinvestment in infrastructure, manufacturing, and technology sectors essential for creating jobs and reducing economic vulnerability.
For policymakers, the challenge remains how to attract and retain long-term investors while maintaining macroeconomic stability and addressing the structural issues that make speculative investments more appealing than productive ones.
