Foreign capital inflows into Nigeria rose sharply in January 2025 to their highest level in more than two years.
The surge followed a sustained series of benchmark interest rate hikes by the Central Bank of Nigeria aimed at restoring investor confidence and attracting foreign funds.
According to the latest data released by the apex bank, Nigeria recorded $2.06 billion in total capital inflows in January, compared to $0.33 billion in the same month of 2024.
This represents a 524.24 percent increase year-on-year growth, while on a monthly basis, inflows rose 32.12 percent from $1.57 billion in December 2024.
With benchmark rates raised to 27.5 percent from a cumulative 875 basis points hike over the past year and a half, foreign investors are responding to the improved yield environment.
Portfolio investments dominated the composition of inflows, accounting for 89.60 percent of total capital. In contrast, foreign direct investment declined to $0.07 billion from $0.12 billion in December 2024.
The Central Bank noted that infrastructure gaps and persistent insecurity continue to weigh on long-term investor sentiment.
Other investments also dropped to $0.14 billion from $0.22 billion in the prior month, indicating a cautious stance by lenders amid external risks.
The banking sector attracted the largest share of foreign inflows with 45.22 percent, followed closely by the financing sector at 44.32 percent.
The telecommunications sector received 3.86 percent while the manufacturing and trade sectors recorded 3.01 and 1.43 percent, respectively.
In terms of origin, the United Kingdom remained the leading source of foreign capital and contributed 65.65 percent of total inflows.
This was followed by the United States with 8.15 percent, South Africa with 7.66 percent and the United Arab Emirates with 7.18 percent.
Mauritius and Belgium contributed 2.87 and 2.28 percent, respectively.
By destination, the Federal Capital Territory accounted for 62.88 percent of the total while Lagos received 36.59 percent. Other states such as Ogun and Kano received marginal shares of 0.04 and 0.01 percent, respectively.
Despite the record-breaking inflow, capital outflows rose to $1.20 billion in January compared to $1.06 billion in December.
The increase was driven by higher loan repayments which rose 27.45 percent to $0.65 billion and capital reversals which rose 3.85 percent to $0.54 billion. Dividend repatriation fell to $0.01 billion, representing a 66.67 percent decline.
The Central Bank’s monetary tightening under Governor Olayemi Cardoso continues to support foreign investor participation.
However, global risks including declining oil prices and ongoing trade tensions, particularly in the United States, may pose challenges to the stability of capital flows.
Analysts expect that maintaining stable macroeconomic policies will be essential to sustaining the momentum in foreign portfolio investments, while efforts to improve infrastructure and security could support long-term capital inflow through direct investment channels.
