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By Merit Ibe
The Centre for the Promotion of Private Enterprise (CPPE) has said Nigeria’s $6.01 billion capital importation in the third quarter of 2025 signals a gradual restoration of investor confidence, following recent macroeconomic reforms.
In its reaction to the latest capital importation data, the centre described the rebound as encouraging but cautioned that structural vulnerabilities persist. It noted that while total inflows rose by 380 percent year-on-year and 17 percent quarter-on-quarter, the composition of the inflows raises concerns.
According to CPPE, more than 80 percent of the inflows in Q3 2025 were portfolio investments, while foreign direct investment (FDI) accounted for less than five percent. The centre explained that although portfolio investments provide short-term liquidity support and help stabilise financial markets, they are highly sensitive to global interest-rate movements and investor sentiment, making them prone to sudden reversals.
It attributed the resurgence in inflows to foreign-exchange market liberalisation, tighter monetary policy, and improved liquidity conditions in the domestic financial system. These measures, CPPE said, are beginning to positively influence investor behaviour. However, the centre stressed that sustainable economic growth, employment generation, export expansion, and macroeconomic resilience depend largely on stable, long-term FDI tied to production, infrastructure, manufacturing, and technology transfer.
Sectoral analysis, CPPE noted, shows that the bulk of capital inflows went into the banking and financial sectors, with limited allocation to manufacturing, infrastructure, and other productive activities. It warned that financial deepening without corresponding real-sector expansion could result in a liquidity-driven recovery that fails to transform Nigeria’s productive base.
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The centre also highlighted geographic and institutional concentration risks. It observed that most inflows originated from a few countries, including the United Kingdom, the United States, and South Africa, exposing Nigeria to external monetary tightening cycles and geopolitical uncertainties. Additionally, a significant portion of the inflows was intermediated through a small group of banks, raising concerns about transmission risks.
CPPE identified key risks to include sudden portfolio reversals, persistently weak FDI due to structural constraints such as power shortages and regulatory unpredictability, and exposure to global financial volatility.
To ensure durability, the centre urged policymakers to convert the current liquidity-driven recovery into investment-led transformation. It called for deeper structural reforms focused on reliable electricity supply, improved transport and logistics, regulatory certainty, and stronger contract enforcement.
The centre also advocated deliberate incentives to channel capital into export-oriented manufacturing, agro-processing, mineral beneficiation, industrial parks, and infrastructure. It further recommended diversifying capital sources by engaging Gulf sovereign wealth funds, Asian institutional investors, and leveraging opportunities under the African Continental Free Trade Area framework.
While noting that Nigeria currently offers attractive yields in fixed-income and money-market instruments due to tight monetary policy and improved FX liquidity, CPPE advised investors to remain cautious of global risk repricing and policy-continuity risks.
In the medium to long term, the centre said subdued FDI levels present early-entry opportunities in reform-sensitive sectors such as power and energy infrastructure, logistics, agro-processing, digital financial services, and export-oriented manufacturing, adding that sustained macroeconomic stability will be crucial in converting financial inflows into long-term economic gains.
