Foreign Direct Investment (FDI) into Nigeria declined by 70.06% quarter-on-quarter to $126.29 million in Q1 2025, down from $421.88 million in Q4 2024, according to the latest Capital Importation report released by the National Bureau of Statistics (NBS).
The plunge in FDI comes despite an overall increase in capital importation, signalling a growing preference among foreign investors for short-term, high-yield investments commonly referred to as “hot money” over long-term commitments in the Nigerian economy.
On a year-on-year basis, however, FDI recorded a marginal growth of 5.97% compared to $119.18 million in Q1 2024.
But this improvement pales in comparison to the momentum seen in other forms of capital inflows, particularly portfolio investments, which have dominated Nigeria’s capital importation landscape.
The share of FDI in total capital importation has dropped to just 2.24% in Q1 2025. This is a steep decline from 8.29% in the previous quarter and even lower than the 3.53% recorded in Q1 2024. In contrast, total capital importation rose to $5.64 billion in Q1 2025, from $5.09 billion in Q4 2024 and $3.38 billion in Q1 2024.
The data shows the growing disconnect between rising capital inflows and actual productive investment in the Nigerian economy.
While the surge in total capital importation may seem positive on the surface, a closer look reveals that over 90% of these inflows were channelled into short-term money market instruments—such as government bonds and treasury bills—rather than long-term equity or direct investment.
This trend raises concerns about the sustainability and economic impact of Nigeria’s current capital inflow structure. FDI, which typically signifies a vote of confidence in the host economy through infrastructure development, factory construction, and job creation, is now being dwarfed by volatile inflows that can easily exit at the slightest macroeconomic shock.
A breakdown of the FDI figure reveals that equity investments accounted for $124.31 million in Q1 2025, down by 70.36% from the $419.41 million recorded in Q4 2024.
The remainder came from “other capital,” which totalled $1.98 million a 20.02% decline quarter-on-quarter, although it surged year-on-year due to a very low base of just $0.01 million in Q1 2024.
Naijaonpoint earlier reported that Nigeria recorded total capital inflows of $5.64 billion in Q1 2025, a 67% increase from the $3.38 billion posted in the previous quarter.
The surge in money market inflows comes on the back of the Central Bank of Nigeria’s hawkish monetary policy, which has seen benchmark interest rates rise to record highs.