Nigeria’s FDI Plummets 70% in Q1 2025 as Foreign Investors Flock to Short-Term ‘Hot Money’ Opportunities
Foreign Direct Investment (FDI) into Nigeria dropped sharply by 70.06% in the first quarter of 2025, falling to $126.29 million from $421.88 million in Q4 2024, according to the National Bureau of Statistics (NBS). This significant decline comes despite a broader increase in total capital importation, which rose to $5.64 billion. The trend highlights a growing shift among foreign investors toward short-term, high-yield financial instruments—popularly known as “hot money”—over longer-term, productive investments in the country.
Although FDI recorded a slight year-on-year growth of 5.97% from $119.18 million in Q1 2024, its share in the overall capital importation mix has continued to dwindle. In Q1 2025, FDI accounted for just 2.24% of total capital inflows, a steep drop from 8.29% in the previous quarter and lower than the 3.53% recorded in Q1 2024. This stark contrast reveals that while capital importation is increasing, it is primarily driven by short-term portfolio investments rather than sustained economic commitments.
The dominance of portfolio investments underscores a worrying trend for Nigeria’s economic structure. Over 90% of the capital inflows were directed toward short-term money market instruments like treasury bills and government bonds. Unlike FDI—which typically supports infrastructure, industrial development, and job creation—these hot money flows are highly volatile and can exit rapidly in response to economic or political instability, posing risks to economic sustainability.
Paragraph 4: Breakdown of FDI Components
The FDI breakdown reveals that equity investments formed the bulk of the inflows, amounting to $124.31 million in Q1 2025. This marks a 70.36% decline from the $419.41 million recorded in Q4 2024. The remaining $1.98 million came under the “other capital” category, which experienced a 20.02% drop quarter-on-quarter, though it showed a significant increase from just $0.01 million in Q1 2024 due to the low base effect.
The data paints a clear picture of the challenges Nigeria faces in attracting stable, long-term foreign investments. While the increase in total capital inflows may offer temporary fiscal relief, the growing reliance on hot money could undermine long-term economic growth and resilience. Analysts warn that without structural reforms to improve investor confidence, attract strategic FDI, and foster economic diversification, Nigeria risks becoming overly dependent on fleeting capital that does little to build lasting economic value.