Analysts: How to sustain $5.6bn capital importation

Analysts and economic experts have said Nigeria can sustain and improve on the $5bn capital importation by sustaining reforms attracting domestic and global investors. Daily Trust reports that capital inflows to Nigeria stood at $5.6 billion in the first quarter of 2025, according to data from the National Bureau of Statistics (NBS). The International Monetary […]

Analysts and economic experts have said Nigeria can sustain and improve on the $5bn capital importation by sustaining reforms attracting domestic and global investors.

Daily Trust reports that capital inflows to Nigeria stood at $5.6 billion in the first quarter of 2025, according to data from the National Bureau of Statistics (NBS).

The International Monetary Fund (IMF) says the quantum of investments into the domestic economy are determined by a mix of economic, institutional, and market-related factors.

For Nigeria, market size, growth potential, high level of macroeconomic stability and financial sector reforms instituted by the Central Bank of Nigeria (CBN) that enable foreign investors to repatriate profits to home country remain big incentives for investors.

CBN’s policies, including the currency reforms, led to investment inflows from abroad and reduced interventions in the domestic forex market.

The unification of exchange rates and the clearing of over $7 billion FX backlog raised the country’s investment outlook, with multilateral organizations, like the World Bank describing it as bold intervention to improve the economy’s sustainability in the long run.

Also, Nigeria’s sovereign risk spread has fallen to the lowest level since January 2020, erasing the premium accumulated during the pandemic and subsequent strain on its economy. All these are deliberate efforts to woo investors and sustain capital inflows to the economy.

According to the International Monetary Fund (IMF), Foreign Direct Investment (FDI) inflows to states are determined by a mix of economic, institutional, and market-related factors.

Key determinants include the host country’s market size and growth potential, the quality of its infrastructure and business climate, and its level of macroeconomic stability and political stability. Trade openness, factor costs (such as labor and wages), and effective government regulations also play a significant role.

In International Monetary Fund (IMF) Working Paper,  by Ewe-Ghee Lim, titled: “Determinant of and the Relation Between, Foreign Direct Investment and Growth” detailed that FDI determinants generally come in two forms: investor surveys and econometric or in-depth case studies.

“We reviewed two large investor surveys first. The first is a recent survey of CEOs, CFOs, and other top corporate executives of the Global 1000 companies. The survey cites large market size, political and macroeconomic stability, GDP growth, regulatory environment, and the ability to repatriate profits as the five most important factors affecting FDI,” he said.

He said that heavy manufacturers remain mostly interested in the large emerging markets, commitment to privatisation.

The IMF also discovered that the most important determinants of FDIs inflows were the size of the market, the cost of labor and FDI policies.

Also to be considered are the investors viewed restrictions on repatriation of earnings, local content and local ownership requirements as serious setback to FDI.

“In general, the technology-intensive sectors such as general machinery and electronics were the most sensitive to restrictive FDI policies. Interestingly, fiscal and tax incentives were viewed as having little or no effect on FDI decisions. Such incentives policies were viewed as perhaps indicative of a positive political attitude towards investment, but also unstable because they could just as easily be reversed,” the report said.

 

FX inflows

The $5.6 billion inflows in the first quarter of 2025 represent  67.12 per cent jump  from $3.4 billion recorded in the same period of last year.

The latest “Nigeria Capital Importation Q1 2025” report released represents 10.86 per cent surge from the $5.1 billion reported in fourth quarter of 2024.

“In Q1 2025, total capital importation into Nigeria stood at US$5.6billion, higher than $3.37 billion 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 report stated.

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

The report stated, “The Banking sector recorded the highest inflow with $3.1 billion, representing 55.44 per cent of total capital imported in Q1 2025, followed by the Financing sector, valued at $2.09 billion (37.18 per cent), and Production/Manufacturing sector with $129.92 million (2.30 per cent).”

The report further noted that capital importation during the reference period originated largely from the United Kingdom with $3681.96 million, showing 65.26 per cent of the total capital imported.

Analysts at Afrinvest explained that capital importation captures financial and physical capital entering a country from offshore sources, based on banking sector and Customs records. These inflows expand the capital stock available to drive economic growth and often serve as a litmus test of an economy’s health and international investment competitiveness.

They explained that on the surface, the rise in quarterly capital importation to a five-year high might suggest renewed foreign investor optimism in the domestic economy.

“In our view, this spike was driven by opportunistic investments in the money market, where Treasury Bills, Bonds, and OMO bills offered rates above 20 per cent in the period. However, such flows are highly sensitive to shifts in domestic monetary policy, global risk sentiment, and macroeconomic shocks, and flows momentum could wane when the CBN pivots to a more accommodative rate stance,” they said.

“Meanwhile, the share of FDI – a cheaper and more impactful capital on long-term economic growth – continues to diminish. This trend is reflective of low confidence in the long-term prospects of the economy amid the legacy issues of insecurity, weak institutions and enforcement of law, bureaucratic inefficiencies, and a high corruption perception”.

Continuing, they stated that weak traction into non-financial sectors such as Manufacturing, ICT, Construction, Oil & Gas, and Transporation, paints a less compelling picture of the overall surge in capital inflows in Q1. We note that while the uptick may support currency stability and short-term growth spurts, the underlying quality of these inflows mirrors previous episodes of hot-money dependence that heightened vulnerability to external shocks.

“Lastly, the concentration of investments in Lagos and Abuja (only 0.4% of the $5.6bn inflows were directed elsewhere) spotlights the deep competitiveness gaps across sub-nationals. Hence, subnational governments need to strengthen their business environments and improve overall investment attractiveness,” they said.

“Nigeria appears to be back in business as long-awaited economic reforms take shape,” said Emre Akcakmak, portfolio manager at East Capital. Key measures include improved currency liquidity, leeway for investors to repatriate their profit, and the 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.

 

Recapitalisation support to boost capital importation

CBN Governor, Olayemi Cardoso had stated that the current bank capitalisation is insufficient to support such a large economic scale.

Cardoso asked: “Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $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”.

The Policy Advisory Council report on the national economy, had set an ambitious goal of achieving a GDP of $1 trillion, with clearly defined priority areas and strategies.

Aliyu Ilias, developmental economist, noted that several sectors have previously remained uncaptured in official data, particularly entertainment. “By rebasing our GDP now, included those areas properly. This new visibility will make Nigeria appear much stronger to foreign investors, which will naturally help us attract more capital,” he said.

He explained that the exercise will also reveal untapped economic potential and guide 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,” he added, “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.”

Ilias explained that while this statistical adjustment does not instantly generate new revenue, it creates a more reliable framework for fiscal planning, investment strategies, and development interventions.

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

 

…CBN targets $1bn diaspora reserve by 2026

The Central Bank of Nigeria (CBN) says it is aiming to achieve a diaspora reserve of $1 billion by 2026.

Olayemi Cardoso, governor of CBN, spoke at the 18th annual banking and finance conference organised by the Chartered Institute of Bankers of Nigeria (CIBN) in Abuja on Tuesday with the theme ‘The New Economic Playbook: The Intersection of Banking, Policy and Technology’.

Cardoso said the diaspora reserve currently stood at $600 million.

He said the CBN has prepared the framework and done everything required to enable them meet the target by 2026.

“It is now over to the banks to make this happen and I want to commend all the banks that are driving this including Zenith, Access, Fidelity, all of them because they are many.

“I am taking a special interest in this thing and I want that to continue because it speaks volume and makes a huge difference on how our people in the diaspora see us.” he said.

In December 2024, CBN said diaspora remittances through international money transfer operators (IMTOs) reached $4.22 billion between January and October 2024 – up by 61 percent compared to the previous year.

On May 13, the apex bank in collaboration with the Nigeria Inter-Bank Settlement System (NIBSS), launched the non-resident bank verification number (NRBVN) platform to ease access to financial services for Nigerians in the diaspora.