The Centre for the Promotion of Private Enterprise (CPPE) has described Nigeria’s sharp rebound in capital importation in the third quarter of 2025 as an encouraging sign of improving investor confidence.
The Centre, however, cautioned that structural weaknesses in the composition of inflows could undermine long-term economic stability.
In a statement signed by its Chief Executive Officer, Dr. Muda Yusuf, the CPPE noted that total capital inflows rose to $6.01 billion in Q3 2025, representing a 380 per cent year-on-year increase and a 17 per cent quarter-on-quarter growth.
The organisation attributed the surge to recent macroeconomic reforms, particularly foreign-exchange market liberalisation, tighter monetary policy, and improved liquidity in the domestic financial system.
According to the CPPE, these measures are beginning to positively influence investor behaviour and restore confidence in the economy.
However, the think tank warned that a closer examination of the data reveals significant structural risks.
Portfolio Investments Dominate
The CPPE observed that more than 80 per cent of the capital inflows recorded during the quarter were portfolio investments, while foreign direct investment (FDI) accounted for less than five per cent.
It noted that although portfolio flows provide short-term liquidity support and help stabilise financial markets, they are highly sensitive to global interest rates, risk sentiment and domestic policy credibility. As a result, such inflows are prone to sudden reversals.
The group stressed that sustainable growth, job creation and export expansion depend largely on long-term FDI targeted at production, infrastructure, manufacturing and technology transfer, rather than short-term financial flows.
Limited Impact on the Real Sector
Sectoral analysis, according to the CPPE, indicates that most of the inflows were directed to the banking and financial services sectors, with only marginal allocations to manufacturing, infrastructure and other productive segments of the economy.
The organisation said this pattern underscores a structural weakness in the economy, as rising capital importation has yet to translate into significant expansion of productive capacity.
It warned that without stronger capital flows into industry, agro-processing, logistics, energy and export-oriented manufacturing, the broader economy may record limited gains in employment and productivity.
Geographic and Institutional Concentration
The CPPE also raised concerns over the concentration of inflows from a few countries, notably the United Kingdom, the United States and South Africa, warning that such dependence increases exposure to policy shifts, global monetary tightening cycles and geopolitical uncertainties.
In addition, it noted that a substantial portion of the inflows was intermediated through a limited number of banks, including Standard Chartered, Stanbic IBTC and Citibank Nigeria, creating concentration and transmission risks in the event of changes in global liquidity conditions or correspondent banking arrangements.
Policy Recommendations
To strengthen the durability of capital inflows, the CPPE urged the government to move beyond macroeconomic stabilisation towards deeper structural reforms that enhance competitiveness.
It emphasised the need for reliable electricity supply, efficient transport and logistics systems, predictable regulatory frameworks and stronger contract enforcement mechanisms to attract long-term productive investment.
The organisation also called for deliberate incentives to channel capital into export-oriented manufacturing, agro-processing, mineral beneficiation, industrial parks and infrastructure development.
Furthermore, it recommended diversifying capital sources by engaging Gulf sovereign wealth funds, Asian institutional investors and leveraging intra-African investment flows under the African Continental Free Trade Area framework.
The CPPE stressed that increased inflows into the banking system must translate into long-term credit for infrastructure, small and medium enterprises and manufacturing firms to ensure real-sector transformation.
Outlook
While acknowledging that Nigeria currently offers attractive yields in fixed-income and money-market instruments due to tight monetary policy and improved foreign-exchange liquidity, the CPPE advised investors to remain cautious about global risk repricing and policy-continuity risks.
It concluded that although the Q3 2025 rebound is a positive signal, converting short-term capital inflows into sustained, investment-led transformation remains the central challenge for policymakers.
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