Quick Summary:
- FDI dropped by 19% to $250M in Q1 2025.
- Portfolio investments reversed by over $10.6B.
- Reserves shrank to $37.82B, a steep decline.
- Current account surplus held steady at $3.73B due to stronger exports.
Foreign direct investment (FDI) inflows into Nigeria dropped by 19% to $250 million in Q1 2025, compared to $310 million in Q4 2024.
This is according to the Central Bank of Nigeria’s (CBN) latest Balance of Payments report, which noted that while the decline is notable, it marks a recovery from a net divestment of $310 million in Q1 2024.
“DI inflows declined slightly to US$0.25 billion in Q1 2025, from US$0.31 billion in Q4 2024,” the CBN stated.
The modest rebound indicates a tentative return of investor confidence but highlights ongoing economic fragility.
Portfolio Investments See Major Reversal
The broader picture of capital inflows in Q1 2025 was grim. Nigeria’s financial account balance slipped to $7.58 billion, down from $7.82 billion in the previous quarter.
Portfolio investments saw the sharpest swing—from a strong $5.61 billion inflow in Q4 2024 to a net outflow of $5.03 billion in Q1 2025. This $10.6 billion reversal underscores declining interest in short-term Nigerian assets such as government securities and CBN bills.
Other Investment and Domestic Capital Outflows Rising
The decline wasn’t limited to portfolio flows:
- “Other investment” liabilities, often representing external loans and deposits, dropped from $13.89 billion to $4.32 billion.
- Direct investment assets, which capture Nigerian investments abroad, turned into a net outflow of $550 million.
These movements suggest rising offshore diversification by local investors and shrinking foreign lending confidence in Nigeria.
Factors Driving Capital Flight
Several economic headwinds continue to erode investor confidence:
- Exchange rate volatility
- Persistently high inflation
- Uncertainty around fiscal and monetary policy coordination
These elements have made Nigerian financial instruments less attractive on the global stage.
Trade Surplus Helps Cushion the Blow
Despite capital outflows, Nigeria recorded a current account surplus of $3.73 billion in Q1 2025—slightly down from $3.80 billion in Q4 2024.
Export Growth Supports Surplus
- Total export earnings rose 9.79% to $13.91 billion.
- Gas exports increased by 26.7% to $2.66 billion.
- Non-oil and electricity exports surged by 30.4%, helped by global demand and naira depreciation.
- Crude oil exports remained stable at $8.59 billion.
Import Reduction Boosts Trade Balance
Imports declined to $9.75 billion from $10.05 billion, mostly due to lower importation of petroleum products and non-oil goods.
However, the services account showed a net deficit of $3.69 billion—driven by increased travel and business service expenses.
External Reserves and Aid Inflows Decline
Nigeria’s overall balance of payments fell into a deficit of $2.77 billion in Q1 2025, reversing the $1.10 billion surplus from Q4 2024.
This shift is largely tied to falling capital inflows and led to a drop in external reserves:
- Reserves fell from $40.19 billion in December 2024 to $37.82 billion by March 2025.
Additionally, the secondary income account (remittances and aid) fell 17.9% to $5.29 billion:
- Diaspora remittances dropped slightly from $5.08 billion to $4.93 billion.
- Foreign aid and grants to government plummeted by over 67%, likely due to shifts in global donor policies.