Market News

By Felix Oloyede

Foreign investors have continued to display renewed interest in Nigeria, with the banking sector attracting 55.44 per cent of the total capital imported in the first quarter of 2025, FELIX OLOYEDE writes

The banking sector was the driver of the $5.6bn capital inflows the country attracted in the first three months of this year, according to the latest data from the National Bureau of Statistics. The sector brought in $3.1bn, accounting for 55.44 per cent of the country’s total capital importation during this period. This made the banking sector the toast of foreign investors.

The capital imported into the country in Q1 2025 was $5.64bn, reflecting a 67.12 per cent increase compared to the $3.38bn recorded during the same period in 2024. This was despite the manufacturing sector losing $62m in capital importation during this period.

Foreign investors’ attraction to the sector was not accidental; it was on the back of the various banking reforms initiated by the Central Bank of Nigeria, which have ensured stability in the country’s financial sector. This has, in turn, bolstered investors’ confidence in the sector.

When the new leadership of the apex bank took office in October 2023, it prioritised reforms aimed at rebuilding Nigeria’s economic buffers and enhancing resilience. The CBN’s policies, which included currency reforms, attracted investment inflows from abroad and minimised the need for interventions in the domestic foreign exchange market.

The unification of foreign exchange windows and the clearing of over $7bn in forex backlog have notably bolstered investor sentiment, with the World Bank hailing these moves as bold steps toward enhancing the economy’s long-term sustainability.

Further reinforcing this momentum, Nigeria’s sovereign risk spread recently contracted to its lowest level since January 2020, effectively wiping out the pandemic-era risk premium. Together, these deliberate reforms are clearly strategic efforts designed to woo investors and maintain strong capital inflows into the economy.

The latest report on Nigeria’s capital importation for Q1 2025 shows a 10.86 per cent increase from the $5.1bn reported in the fourth quarter of 2024.

“In Q1 2025, total capital importation into Nigeria stood at US$5,642.07 m, higher than $3.37bn recorded in Q1 2024, indicating an increase of 67.12 per cent. In comparison to the preceding quarter, capital importation increased by 10.86 per cent from $5.08 billion in Q4 2024,” the NBS report indicated.

The NBS also stated that portfolio investment ranked top with $5.2bn, accounting for 92.25 per cent, followed by other investment with $311.17m, accounting for 5.52 per cent.

The report noted, “Foreign Direct Investment recorded the least with $126.29m accounting for 2.24 per cent of total capital importation in Q1 2025.”

According to the NBS, the banking sector took the lead with the highest inflows in Q1 2025.

It added, “The banking sector recorded the highest inflow with $3.1bn, representing 55.44 per cent of total capital imported in Q1 2025, followed by the Financing sector, valued at $2.09bn (37.18 per cent), and production/manufacturing sector with $129.92m (2.30 per cent).”

The report highlighted that during the reference period, capital importation was predominantly sourced from the United Kingdom, amounting to $3.68bn, which accounted for 65.26 per cent of the total capital imported.

In an email to investors, Ike Chioke, the Managing Director of Afrinvest West Africa Limited, explained that portfolio investments comprised 92.2 per cent of the total capital, showing an increase of 30.1 per cent quarter-on-quarter and 150.8 per cent year-on-year, totalling $5.2bn.

A significant portion of these foreign portfolio investment flows was directed towards money market instruments, which saw a remarkable rise of 162.2 per cent year-on-year to reach $4.2bn. Bonds and equities also experienced growth, with bonds increasing by 108.5 per cent to attract $877.4m and equities rising by 137.7 per cent to reach $117.3m.

Nigeria’s ambition to achieve a $1 trillion economy by 2030 will receive substantial support from the banking sector.

Nigeria’s statistician-general, Adeyemi Adeniran, while enunciating how the economy fared in the rebased Gross Domestic Product report, mentioned, “In nominal terms, the rebased GDP for 2019 stood at N205.09tn N213.63tn in 2020, N243.30tn in 2021, N274.23tn in 2022, N314.02tn in 2023, and N372.82tn in 2024.”

The NBS reported that in 2019, the rebased nominal GDP at basic prices increased by 41.7 per cent compared to the nominal GDP of 2019 based on the previous base year (2010). The increases for the following years were 39 per cent in 2020, 38.7 per cent in 2021, 36.1 per cent in 2022, 34.6 per cent in 2023, and 35.4 per cent in 2024.

“The results show that the structure of the Nigerian economy has changed significantly with a rise in the share of agriculture and services sectors and a fall in the share of the industries sector in nominal terms, indicating a shift in the structure of the Nigerian economy than earlier reported,” the NBS said.

Adeniran further explained that rebasing allows the country to accurately represent the realities of its economy. “It’s not just about a bigger number but about accurate, timely data that supports smarter policy and economic planning,” he said.

A robustly recapitalised banking sector is essential to driving domestic economic growth. In light of this, Central Bank Governor Olayemi Cardoso urged banks to brace for a fresh round of recapitalisation, aimed at equipping them with the financial strength needed to support the Federal Government’s ambition of reaching a $1tn GDP by 2030.

According to Cardoso, President Bola Ahmed Tinubu’s economic plan aims to reach a $1tn GDP by 2030, emphasising that the current bank capitalisation is insufficient to support such a large economic scale.

“Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1 1tr economy in the near future? In my opinion, the answer is “No!” unless we take action. That action was the ongoing recapitalisation of banks, meant to prepare them for expansion and attract big ticket transactions to support economic growth,” he emphasised.

The Policy Advisory Council’s report on the national economy outlined an ambitious target of achieving a $1tn GDP, supported by well-defined priority areas and strategic initiatives.

Economic analyst Adeniran highlighted that the integration of new and emerging sectors, updates to consumption baskets, and improvements in data collection methodologies have contributed to a more accurate and comprehensive representation of national output.

Developmental economist Aliyu Ilias noted that several industries—particularly entertainment—had previously been excluded from official statistics.

“By rebasing our GDP, we’ve now properly accounted for these sectors. This enhanced visibility will present Nigeria as a more formidable economy to foreign investors, naturally boosting our ability to attract capital,” he said.

He added that the rebasing exercise will also uncover untapped economic potential and serve as a valuable tool for guiding government resource allocation.

“It will show where we are strongest structurally, such as in mining or other emerging sectors. That insight will help the government focus its efforts more strategically.

“Finally, it will support economic policy formulation, helping us align our strategy with the reality on the ground. We will know exactly where to put more effort,” he highlighted.

Ilias explained that although the statistical adjustment did not immediately generate new revenue, it established a more dependable framework for fiscal planning, investment strategies, and development interventions.

By aligning economic data with current realities, the government and private sector can more effectively target policies that spur job creation, boost productivity, and underpin sustainable growth.

According to BudgIT’s Director, Seun Onigbinde, the success of recent GDP rebasing depends on fostering public trust in the institutions overseeing the process. He emphasised that previous rebasing exercises vividly illustrated how public policy—such as telecommunications deregulation and banking sector recapitalisation—enhanced the services and ICT sectors’ contributions to the economy. “Rebasing of the GDP must reflect changes in the economy, which are a product of public policies over time,” he added.

Rebasing is essential for domestic policy. It enables the government to better evaluate tax collection efficiency, measure sectoral contributions, and design social programs that are data-driven and results-oriented.

Sponsored Stories

The country director for BudgIT, Gabriel Okeowo, said, “Rebasing allows planners to be more intentional about solving Nigeria’s biggest problems: poverty, infrastructure gaps, and job creation.”

Economist Nelson Adedeji noted that despite the increase in GDP size, the rebasing is not a silver bullet.

 “We must acknowledge that genuine economic growth extends beyond statistical adjustments. For ordinary Nigerians to experience meaningful improvement in living standards, the President Bola Tinubu administration must complement GDP rebasing with substantive policies addressing infrastructure deficits, security challenges, agricultural productivity, manufacturing capacity, and the overall ease of doing business,” he stated.

As global trade tensions under U.S. President Donald Trump roiled emerging markets, Nigeria emerged as a quiet contender—drawing foreign capital buoyed by currency reforms and targeted economic measures aimed at revitalising Africa’s most populous economy.

“Nigeria appears to be back in business as long-awaited economic reforms take shape,” said a portfolio manager at East Capital, Emre Akcakmak.

Key measures include enhanced currency liquidity, allowing investors to repatriate their profits, and maintaining a stable naira.

“We feel the Central Bank of Nigeria will continue to stem any sharp appreciation of the naira to limit profit taking from the fast money community,” Akcakmak said.

“Portfolio inflows have likely been supported by improved confidence amid key structural reforms, better FX market functioning and moderating dollar-naira volatility, as well as the still-robust nominal yield buffer,” the Head of Africa strategy at Standard Chartered Plc, Samir Gadio, told Bloomberg.

“Besides, Nigeria’s local market is seen as less correlated with global risk conditions than more liquid EM peers,” he said.

Nigeria’s economy and businesses will have many reasons to celebrate in 2025, as the effects of the economic reforms in the forex market, currency exchange, and substantial budget allocations will start to show benefits for them.

Nigeria’s economy was forecasting a recovery from the most difficult phase of the reform adjustment process in 2025, predicted the Managing Director of Financial Derivatives Company Limited, Bismarck Rewane.

Rewane projected that the economy would start to recover from the hardest phase of its reform adjustments this year. He emphasised the importance of implementing strategic policies and institutional reforms.

He noted that while the fundamentals of Nigeria’s exchange rate indicate that the naira should be stronger, achieving stability depends on a well-managed and efficient foreign exchange system.

He emphasised that the primary challenge lies not in the reforms themselves, but in their management. He pointed out that poorly sequenced policy changes and inadequate structural reforms are significant obstacles to achieving stability.

He emphasised the vital importance of investment in fostering economic growth. “Revenue alone isn’t sufficient,” Rewane explained. “Investment is crucial, but it will be shaped by confidence, transparency, and appropriate policies.”

He also highlighted ongoing challenges, such as inefficiencies in power supply and a lack of transparency in the oil and gas sector, which need immediate attention through structural reforms. Rewane mentioned that 2025 is expected to be less hard, less painful, and less difficult than the previous year. He emphasised that the challenges faced in 2024 do not necessarily mean that these difficulties will continue into this year.

As Nigeria’s banking sector cements its role as the primary magnet for foreign capital—drawing 55 per cent of Q1 2025 inflows amid sweeping reforms—the path forward is clear. To sustain this momentum and realise the $1tn economy vision, policymakers must deepen structural reforms and reinforce financial sector resilience. By redoubling efforts on bank recapitalisation, enhancing transparency, and targeting strategic investments, Nigeria can not only attract continued investor confidence—but convert it into inclusive, long-term prosperity for all.