Nigeria’s Banking Sector Attracts $3.1bn as Capital Inflows Surge, Manufacturing Slumps

Capital importation into Nigeria jumped to $5.64 billion in the first quarter of 2025, marking a 67.12% increase from the same period last year, according to the National Bureau of Statistics (NBS). The banking sector accounted for $3.13 billion or 55.44% of the total inflows, showing strong foreign investor confidence in the financial services industry. The rise also reflects a 10.86% quarter-on-quarter growth, building on Q4 2024’s $5.09 billion.

Portfolio investment continued to dominate the inflow, contributing a whopping $5.20 billion (92.25%). Other investments came in at $311.17 million, while Foreign Direct Investment (FDI) remained low at $126.29 million. In contrast, the manufacturing sector saw a sharp decline in capital importation—down by 32.31% year-on-year to $129.92 million. Its share of total inflows also shrank from 5.68% in Q1 2024 to 2.30% in Q1 2025.

The United Kingdom led the origin of capital inflows with $3.68 billion (65.26%), followed by South Africa and Mauritius. Domestically, Abuja emerged as the top destination, receiving $3.05 billion, while Lagos followed with $2.56 billion. Other states such as Ogun, Oyo, and Kaduna attracted minimal investments, each below $10 million. Among banks, Standard Chartered led with $2.10 billion in inflows, followed by Stanbic IBTC and Citibank Nigeria.

Despite the overall rise in capital inflows, the manufacturing sector’s poor performance reflects continued investor caution. Economic reforms introduced by President Bola Tinubu, including FX policy shifts, have strained the sector. The Manufacturers Association of Nigeria (MAN) reported N2.14 trillion in unsold goods in 2024, and a 27.9% capital inflow decline in H1 2025, despite some improvement in inventory clearance and pricing.

Analysts like Dr. Muda Yusuf of the Centre for Promotion of Private Enterprise (CPPE) believe investor hesitation stems from lingering forex and energy shocks. However, Yusuf expressed optimism that macroeconomic stability could improve investment decisions in the coming quarters. Notably, some manufacturing subsectors performed well in Q1 2025—oil refining (+11.51%), pharmaceuticals (+5.33%), cement (+4.94%), and food & beverage (+3.48%)—offering a glimmer of hope for future recovery.

Source: punch