Nigeria’s Foreign Investment Surges to Two-Year High Amid High Yields and Rate Hikes
Foreign investment in Nigeria has surged to its highest level in over two years, largely driven by the Central Bank of Nigeria’s aggressive interest rate hikes aimed at attracting capital. Capital inflows rose sharply from $0.33 billion in January 2024 to $2.06 billion in January 2025 — a staggering 524 percent year-on-year increase. The CBN attributed the boost to attractive returns in Nigeria’s domestic financial markets. However, not all categories of investment shared in the growth, with Foreign Direct Investment (FDI) falling due to persistent macroeconomic uncertainty and insecurity.
The bulk of Nigeria’s capital inflows came from portfolio investors, who made up nearly 90 percent of total foreign investment. These investors are often motivated by high returns, and their interest spiked following multiple rate hikes under the leadership of CBN Governor Olayemi Cardoso. Since assuming office 18 months ago, Cardoso has implemented a cumulative 875 basis-point increase in benchmark interest rates, pushing them to 27.5 percent. Sectors like banking and financing attracted the most capital, with banking alone drawing over 45 percent of total inflows.
Despite the impressive inflow figures, global headwinds could challenge Nigeria’s investment momentum. The CBN warned that reciprocal tariffs from policies linked to former U.S. President Donald Trump and volatility in oil prices may trigger investor pullback, particularly in emerging markets like Nigeria. Nonetheless, analysts believe recent fiscal and monetary reforms have positioned the country on stronger economic footing. Capital inflows were strongest from the UK, followed by the U.S. and South Africa, with Abuja and Lagos emerging as top destinations for foreign capital.
At the same time, capital outflows also rose in January 2025, mainly due to increased loan repayments and capital reversals. Outflows climbed to $1.20 billion from $1.06 billion the previous month. Loan repayments alone accounted for over half of that figure. Interestingly, dividend repatriation dropped by two-thirds, likely reflecting changes in profit-taking strategies by investors. While inflows are on a promising upward trajectory, the increase in outflows highlights the complex nature of Nigeria’s capital movement and the balancing act required to sustain investor confidence.