Nigeria’s significant decline in Foreign Direct Investment (FDI) is a pressing economic issue, reflecting deep-seated structural weaknesses and investor apprehensions.
The latest Capital Importation report released by the National Bureau of Statistics reveals that Foreign Direct Investments into Nigeria fell sharply by 70.06 per cent quarter on quarter to $126.29 million in the first quarter of 2025 from $421.88 million in the fourth quarter of 2024.
FDI showed a slight increase of 5.97 per cent year-on-year, compared to $119.18 million during the same time period in 2024.
The sharp decline in FDI was recorded despite a surge in total capital importation into the country. The overall capital importation rose to $5.64 billion in Q1 2025, a 10.86 per cent increase from $5.09 billion in Q4 2024 and a 67.12 per cent year-on-year rise from $3.38 billion in Q1 2024.
The data revealed that over 90 per cent of capital inflows in Q1 2025 were portfolio investments (short-term funds in government securities and stocks), while FDI accounted for only 2.24 per cent of total capital imports in Q1 2025.
According to experts, this highlights investors’ preference for quick returns rather than long-term investments in real sectors like manufacturing in the Nigerian economy.
Reacting to the development, the Lagos Chamber of Commerce and Industry (LCCI) said that while the surge in overall capital importation in Q1 2025 signifies renewed investor interest, the structure of inflows (tilting more towards portfolio investments) raises concern.
The LCCI stated that the outlook indicates investors remain cautious about making long-term commitments to Nigeria’s productive sector.
The chamber observed that the low inflow into critical sectors of the economy signifies persistent challenges related to forex scarcity, energy, and logistics costs.
“This imbalance reveals that investors remain cautious about making long-term commitments to Nigeria’s real sector,” LCCI stated in a statement signed by its director general, Dr Chinyere Almona.
“Particularly worrying is the continued decline in investment into manufacturing, which attracted only $129.92 million in Q1 2025, a 32 per cent drop from the same period in 2024. Weak inflows into this critical sector reflect persistent challenges around forex liquidity, energy costs, job losses, and operating uncertainties, all of which have driven several multinationals to scale back or exit,” it added.
LCCI called for robust structural reforms to create a more efficient oil and gas sector that supports cheaper energy and logistics costs and an efficient power sector to increase electricity supply.
The group stressed the need for authorities to strengthen incentives for FDI through the creation of stable tax and regulatory frameworks that reduce perceived risks.
Aside from foreign investors, the chamber also called for rebuilding domestic investor confidence, stressing that “local capital commitments often precede foreign inflows.”
Other measures highlighted by LCCI to drive an increase in FDI in Nigeria include ensuring predictable exchange rate management and monetary policies, investing more in the agricultural sector to tackle food inflation, especially in rural areas with acute cost pressures, and repositioning manufacturing and industry through targeted policies that attract capital into value-adding and job-creating sectors.
On inflation, LCCI said that though it is moderating on a year-on-year basis, food inflation remains high (at 22.74 per cent year-on-year) and therefore called for targeted interventions in real sectors that support more productive economic activities.
“The interventions should deal with energy cost, power supply, logistics, infrastructure deficits, business process bottlenecks around licensing and registration, access to credit, and FOREX liquidity through non-oil exports,” it stated.
The NBS report shows that FDI is highly concentrated geographically in Abuja (54.11 per cent) and Lagos (45.44 per cent).
Global and Regional Context
Nigeria’s FDI performance lags significantly behind its peers. In 2024, Egypt attracted $46.58 billion in FDI, while Ethiopia, Côte d’Ivoire, and Mozambique each drew over $3 billion. Nigeria’s $1.08 billion accounted for just 1 per cent of Africa’s total FDI ($97 billion).
Nigeria ranks 140th out of 180 on the Corruption Perception Index and 127th on the Index of Economic Freedom, underscoring governance challenges.
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Presidential candidate of the Labour Party in the 2023 election, Mr Peter Obi, said that despite efforts by the president, ministers and other government officials to attract FDI, poor leadership has made it difficult to attract sustainable foreign investment.
Obi warned that with a high proportion of capital inflows coming in the form of portfolio investments, “the impact on industrial growth or job creation is highly insignificant and elusive, given the ease with which such ‘hot money’ can exit the economy.”
He pointed out that “sustainable economic growth and development cannot be achieved through poor leadership and weak governance—problems that are clearly reflected in declining FDI and our poor performance in key governance indicators.”
Obi noted that in 2024, while global FDI flows declined, the inflows to Africa increased significantly by about 75 per cent to $97 billion when compared to 2023, with the United States and China being the main sources of this FDI.
Wole Ogundare, founder/CEO of Carthena Advisory, highlighted the link between good governance and economic growth. He stated that transparent and corruption-free governance attracts foreign investment, which boosts economic development.
He said, “Accountability in Nigeria’s governance is directly linked to economic growth and FDI boost. When governance is transparent and corruption is low, foreign investors are more likely to invest in the country, leading to economic development.”
He also underscored the negative impact of the rising debt stock on the economy.
Victor Ezeja is a passionate journalist, scholar and analyst of socioeconomic issues in Nigeria and Africa. He is skilled in energy reporting, business and economy, and holds a master's degree in mass communication.
