Nigeria attracted more than $10bn in foreign capital in the first quarter of 2026, its strongest quarterly inflow in years, but the figures reveal a troubling reality: investors are returning to trade Nigerian assets, not to build Nigeria’s future.
Data released by the National Bureau of Statistics (NBS) show total capital importation reached $10.37bn during the quarter, up 84% from a year earlier and 61% higher than the previous quarter.
Yet beneath the headline growth lies a stark imbalance. While foreign portfolio investors poured money into bonds, treasury instruments, and other financial assets, foreign direct investment (FDI) – the type of capital associated with factories, infrastructure, technology transfer, and job creation – collapsed.
FDI fell by 62% quarter-on-quarter, dropping from $357.89mn in the fourth quarter of 2025 to just $135.08mn between January and March. As a share of total inflows, FDI accounted for only 1.3%.
The figures raise an uncomfortable question for Africa’s largest economy: have economic reforms restored confidence in Nigeria’s long-term growth story, or simply created opportunities for short-term financial gains?
Hot money returns, long-term capital stays cautious
The administration’s reform programme and efforts by the Central Bank of Nigeria (CBN) to improve foreign exchange liquidity have helped attract foreign investors back into financial markets after years of caution.
According to the NBS, portfolio investments accounted for $9.86bn, representing 95.09% of total capital imported during the quarter.
The banking sector was the largest beneficiary, attracting $7.55bn, or 72.79% of all inflows.
The strong performance coincided with the conclusion of Nigeria’s banking sector recapitalisation exercise at the end of March.
But analysts say the composition of the inflows matters far more than the headline number. “The drop in FDI highlights continued weakness in long-term investment flows into the Nigerian economy despite improving investor activity in the financial markets,” analysts at Lagos-based investment firm Commercio Partners said in a note.
For many investors, Nigeria’s high interest rates have become the main attraction. The CBN has maintained one of Africa’s tightest monetary policy regimes as it battles inflation, which peaked at 34.8% in December 2024.
The Monetary Policy Rate was raised to 27.5% before being reduced to 27% in September 2025 and further trimmed to 26.5% in February this year.
At the same time, the central bank has maintained elevated yields on short-term money market instruments, creating attractive opportunities for foreign investors seeking returns.
Analysts at Commercio Partners said the biggest signal from the latest capital importation figures was not merely the size of the inflows but where the money was going. Investors, they noted, were overwhelmingly buying money market instruments and bonds, underlining the continued appeal of Nigeria’s fixed-income market.
They added that with the CBN policy rate still at 26.5%, Nigerian yields remain compelling for foreign portfolio investors, particularly if volatility in the naira remains under control.
Security concerns cloud Nigeria’s investment outlook
While portfolio investors appear willing to take short-term positions, many multinational companies remain reluctant to commit capital that would require a permanent presence in the country.
Analysts argue that concerns over insecurity, infrastructure deficits and operating costs continue to weigh heavily on long-term investment decisions.
“The reasons for the decline in FDI are obvious, and it will continue to go down. FDI implies that the investor will be on the ground, but with the heightened insecurity, nobody wants to come and die in Nigeria,” economist
Marcel Okeke told Allen Dreyfus.
Nigeria has spent more than 15 years battling banditry, kidnappings for ransom and insurgent violence across several regions. In recent months, armed groups have continued to target communities and schools, while kidnappings along major highways remain a persistent concern.
The security challenge has become a major factor in boardroom decisions, particularly for companies considering large-scale manufacturing, infrastructure or industrial investments. Okeke said investors routinely compare competing destinations before committing capital.
“These are the things affecting FDI in Nigeria,” he said.
He added that chronic infrastructure shortcomings, particularly in electricity supply and transportation networks, further undermine the country’s attractiveness to long-term investors. For now, Nigeria appears to be benefiting from what many analysts describe as “fly-in, fly-out” capital.
“That is attracting investors to the financial sector. They do not want to come here and entangle themselves, so they fly in and fly out,” Okeke said.
The distinction is critical. Portfolio inflows can provide valuable foreign exchange liquidity and support financial markets, but they can also leave quickly when global conditions change. Direct investment, by contrast, is typically more stable and contributes more directly to employment, productivity, and economic transformation.
