In the past few days Nigeria’s news media have been inundated with a story saying that capital importation into Nigeria in the first quarter of 2026 stood at $10.37 billion, a surge of about 84 percent compared to the same period last year. Capital importation is money (foreign exchange, FX) or assets flowing into a country from abroad for investment or business purposes. Capital importation into Nigeria stood at $5.64 billion in the first quarter 2025; and rose to $6.44 billion in the last quarter 2025, according to the National Bureau of Statistics (NBS).
The casual impression of these figures is that Nigeria has suddenly become attractive to foreign investors; hence the quantum leap in FX inflow during the period under review. However, a decomposition of the capital importation exposes the dangers inherent in the ‘ballooning’ figures. Specifically, when the entire capital is broken down into Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI) and ‘Other’ investments, a worrisome trend emerges.
In Nigeria’s $10.37 billion for first quarter 2026 being lavishly hyped, Foreign Portfolio Investment (FPI) accounted for a whopping $9.86 billion or 95.09 percent, while FDI comprised only a minuscule 1.30 percent or $235 million. FPI via money market instruments sales took the lion’s share of $6.50 billion; bonds $3.23 billion; equities/stocks $131.81 million; and ‘Other’ investments $374.48 million or 3.61 percent.
The preponderance of the FPI in these data means that foreign investors are buying so much of Nigeria’s stocks, bonds, treasury bills (all short-term instruments, with no controls). On the other hand, the infinitesimal FDI figure means that foreigners are unwilling or reluctant to directly buy or build businesses (long-term ventures, with a lot of controls) here in Nigeria.
FPI, which is widely regarded as “hot money”, is highly prone to easy disappearance from any domain in response to headwinds from various locations across the globe. This accounts for why the Central Bank of Nigeria (CBN) has only been able to stabilise the Naira exchange rate in the FX market, and by extension, the macroeconomic milieu of the country. Beyond this, the monetary authorities have not been able to advance real development.
During the first quarter of 2026, Nigeria’s stock of external reserves showed some periodic depletions, essentially owing to some FPIs that left the country due to the war in the Middle East. This phenomenon known as “capital flight” meant that some investors pulled away their ‘paper investments’ from Nigeria: a flight to safety kind of move.
However, owing to the tight monetary stance of the CBN that has ensured a very high interest environment in Nigeria for upwards of three years, the monetary authorities’ financial assets are being patronized for their very attractive yields. The CBN through its Monetary Policy Committee (MPC) has consistently hiked the benchmark interest rate in the economy (the Monetary Policy Rate, MPR) up to a peak of 27.5 percent.
Through the hiked MPR and high Cash Reserve Ratio (CRR), the CBN claims to be fighting the high and soaring inflation rate in the Nigerian economy — which peaked at 34.85 percent in December 2024. Although the rate has declined markedly to about 15 percent in February 2026, headwinds arising from the lingering Middle East war have altered the trajectory — with the headline inflation rising above 16 percent as of April 2026.
All of these, especially the external headwinds, and local policy-induced outcomes, have presented the CBN with massive uncertainty and foggy economic outlook. Consequently, at its last MPC meeting, the monetary authority opted to maintain the tight monetary stance, by keeping the MPR at 26.5 percent, and the CRR at 45 percent, among others. All these remain pointers to attractive FPI inflow, and disincentive to FDIs.
The crucial role of FDI in real economic development cannot be overemphasised. It builds factories and creates jobs; and brings technology and skills (as foreign firms train local staff). Therefore, diminishing FDI implies a ‘shrinking’ economy: no new factories are being built, no appreciable expansion or new investments by existing businesses, and many businesses shutting down or reducing capacity utilisation, etc.
In point of fact, what the surge in FPI into Nigeria (and its underpinning policies) has been for the country was unrestrained exodus of many of the long-established businesses. Many of them not only got scorched by the fallouts of the federal government economic policies, but had to relocate outside the country to use Nigeria only as a market outpost.
Critical stakeholder-groups such as the Manufacturers Association of Nigeria (MAN), Lagos Chamber of Commerce and Industry (LCCI), Nigeria Employers Consultative Association (NECA), among others have lamented to no end, the negative impact of the CBN’s policies on their businesses. The high interest rates regime, underpinned by the high MPR, implied effective lending rates by commercial banks standing at between 30 to 35 percent.
This implied a double whammy for businesses: unavailability and unaffordability of credit facilities — leading to the asphyxiation of most Micro, Small and Medium-sized Enterprises (MSMEs) — and this reflecting in worsening unemployment and underemployment rates. While these businesses are being stifled, the government’s monetary and fiscal policies were inadvertently sustaining the high import-dependency of the country. The non-competitiveness of the business environment somehow made importation of finished goods more feasible and viable (even lucrative) than actual local production.
The country’s grossly dilapidated infrastructure has always been a huge constraint to FDI inflow. The epileptic power supply situation in Nigeria has become legendary; decaying seaport and airport facilities are equally repulsive to serious investors, both local and foreign. Also, the frustrating red tape and bureaucracy soaked in corruption — all combine to scare away discerning foreign investors.
It is also a no brainer to state that the lingering and worsening insecurity in Nigeria stands as a cogent reason for the FPI inflow surge into the country. The world is a global village; and every country is in competition with the rest of the world; and so, every discerning investor (FDI, especially) would opt for a domain that offers peace and safety. Lately, Nigeria has been ranking highly in the list of “Most Terrorised Nations” of the world — a huge disincentive to investment inflows.
All said, therefore, the surging FPI could only mean the partial confidence of foreign investors — who would want to share in the ‘benefits’ of Nigeria’s economic reforms, while staying away from the problems of the country. Truly, the investors are ‘voting’ with their investments!
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Marcel Okeke, a practising economist and consultant in Business Strategy & Sustainability based in Lagos, is a former Chief Economist at Zenith Bank Plc. He can be reached at: obioraokeke2000@yahoo.com; +2348033075697
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