Nigeria attracted $8 billion in private capital across 63 transactions in the second quarter of the year.
The inflow accounted for 90 per cent of West Africa’s total disclosed deal value.
A new report, however, warned that the strong inflow is masking a widening funding gap for mid-sized businesses.
The report, titled The Paradox of Plenty: Decoding Nigeria’s $8 Billion Private Capital Mirage, was published on July 18 by the Alliance for Economic Research and Ethics.
It noted that Nigeria has emerged as the leading destination for private capital in West Africa, driven by its large population, expanding financial services sector and recent fiscal reforms.
However, it said the country’s investment landscape is becoming increasingly concentrated in large industrial projects and small speculative investments, leaving growth-stage companies with limited access to funding.
The report said Nigeria’s population of about 220 million continues to attract investors because of its large consumer market.
It added that major transactions, including the $600 million Africa Finance Corporation (AFC) loan to Dangote Greenview Fertiliser, reflected the country’s ability to attract large-scale investments.
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It also noted that the financial services sector remained a key driver of investment activity, with payments infrastructure attracting $3 billion, representing 28 per cent of total disclosed deal value during the quarter.
The report attributed part of the investment momentum to the Federal Government’s fiscal reforms, saying the removal of the annual $7.5 billion fuel subsidy had increased Federation Account Allocation Committee (FAAC) disbursements by 60 per cent and improved Nigeria’s sovereign credit profile.
Despite the strong headline figures, the Alliance warned that the market was becoming increasingly unbalanced.
“The data reveals a troubling ‘Middle Market Squeeze.’ Deals ranging between $2.5 million and $75 million have plummeted from 54% to a mere 37% of disclosed transactions. This contraction is not a statistical anomaly; it is a symptom of capital flight to safety,” the Alliance warned.
It said investors were increasingly concentrating on either small speculative investments or large institutional deals, leaving growth-stage companies struggling to secure funding because of currency risks and the absence of adequate hedging instruments.
The report also raised concerns over declining exit opportunities for investors.
“More alarming still is the collapse of exit liquidity. With only seven exits recorded in Q2 2026—down drastically from 32 in Q4 2025—we are staring at a potential liquidity crisis. When investors cannot exit, distributions to Limited Partners (LPs) freeze. This chokes off subsequent fundraising for General Partners (GPs), creating a vicious cycle that ultimately starves the market of fresh deployment,” it said.
To address the challenges, the Alliance called for urgent policy measures to deepen Nigeria’s capital market and improve access to financing for mid-sized businesses.
It urged the Securities and Exchange Commission (SEC) to establish a regulated secondary market platform to support partial exits and simplify listing requirements on the Nigerian Exchange Limited (NGX) for technology companies through a specialised growth board.
The report also recommended that the Central Bank of Nigeria (CBN) and the Bank of Industry (BOI) establish a $500 million Fund-of-Funds to co-invest with private investors in deals valued between $5 million and $50 million.
It added that naira-denominated private debt funds backed by CBN guarantees would help reduce foreign exchange risks facing investors.
The Alliance further called for investment tax incentives for agro-processing, renewable energy manufacturing and health technology logistics to diversify private capital beyond financial technology.
It also recommended changes to the National Pension Commission’s (PenCom) investment guidelines to allow pension funds to invest up to five per cent of their assets in private equity and venture capital, saying this would unlock significant domestic capital and reduce reliance on foreign investment.
The report added that while Nigeria’s second-quarter performance demonstrated the country’s strong investment potential, sustained economic growth would depend on expanding access to capital for the middle market rather than concentrating investment in only large industrial projects and small speculative ventures.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X