Foreign investment down 70% to $126.29m, only a fraction of total capital imported invested in economic growth sectors
By Jeph Ajobaju, Chief Copy Editor
Foreign direct investment (FDI) in Nigeria decreased to $126.29 million in the first quarter of the year (Q1 2025), or by 70.06 per cent quarter-on-quarter (QoQ) compared to Q4 2024 and deeper against $421.88 million in Q1 2024, according to the National Bureau of Statistics (NBS).
A total $5.46 billion capital was imported in Q1 2025, but 90 per cent of it went to short-term money market instruments, primarily Open Market Operation bills and Treasury Bills, and 10 per cent to sectors that drive economic growth.
The reason being that decades-long business bottlenecks persist, and promises of ease of doing business made by Bola Tinubu during his campaign for President in 2023 remain largely undelivered.
The latest Capital Importation report released by the NBS shows that the FDI decline occurred despite an overall increase in capital importation to the tune of $5.64 billion, against $5.09 billion in Q4 2024 and $3.38 billion in Q1 2024.
FDI, however, posted a modest 5.97 per cent growth versus $119.18 million year-on- year (YoY).
Capital imported in Q1 2025 totalled 2.24 per cent, down from 8.29 per cent in Q4 2024 and 3.53 percent in Q1 2024.
The NBS figures crystalise the disparity between capital inflows and actual investment in sectors that drive economic growth.
The bulk – $4.21 billion or 74.6 per cent of $5.46 billion capital imported in Q1 2025 – was invested in money market instruments, primarily Open Market Operation bills and Treasury Bills.
Short-term money market instruments – such as government bonds and treasury bills – while important for managing liquidity and stabilising naira, they do not contribute meaningfully to industrial growth, employment generation or infrastructure development.
This raises new concerns about the sustainability of Nigeria’s current investment profile that relies heavily on speculative flows that can exit the economy with little warning.
FDI, generally a vote of confidence in the host country’s long-term prospects, is crowded out by short-term capital chasing quick returns in Nigeria’s high-yield debt market.
Equity investments accounted for $124.31 million in Q1 2025, a 70.36 per cent drop from $419.41 million in Q4 2024.
The remaining $1.98 million came from other capital components, which declined 20.02 per cent QoQ but soared YoY due to a negligible base of $0.01 million in Q1 2024.
In NBS capital importation data, manufacturing sector attracted $129.92 million in Q1 2025, down from $191.92 million in Q1 2024. The sector’s share of total capital importation fell from 5.68 per cent in Q1 2024 to 2.30 per cent in Q1 2025.
The manufacturing sector’s capacity to attract foreign investment remains weak. The 2023-2024 window saw multinationals exit Nigeria in droves for its harsh operating environment exacerbated by economic reforms introduced by Tinubu.
As the reforms weaken purchasing power and slow consumption, manufacturers invest less.
Centre for Promotion of Private Enterprise (CPPE) Director Muda Yusuf noted that manufacturing suffered two major shocks, foreign exchange (forex) and energy prices, that would take some time to soften before there is a way that will incentivise more investors.
He told The PUNCH: “There is also a possibility of those investors still feeling that the risk of investing in the real sector is still on the high side, because macroeconomic stability has only recently and gradually returned to normal.
“We are seeing more stability now, and maybe present decisions may influence investments in the next quarter, because decisions to invest or not to invest in foreign direct investment are generally a very slow and painstaking decision.”
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