CPPE: Nigeria’s $6.01bn Capital Importation Rebound Remains Structurally Fragile

The Centre for the Promotion of Private Enterprise (CPPE) has warned that Nigeria’s sharp rebound in capital importation, though positive, remains vulnerable due to its heavy reliance on short-term portfolio flows.

Reacting to the $6.01 billion recorded in the third quarter of 2025, the Centre described the development as “a welcome signal of improving investor sentiment,” but cautioned that “a deeper examination of the structure and distribution of inflows reveals underlying vulnerabilities that must be addressed to ensure durability and long-term economic transformation.”

Dr Muda Yusuf, Chief Executive Officer of the CPPE, noted that more than 80 per cent of total inflows during the quarter were portfolio investments, while foreign direct investment accounted for less than five per cent.

“This composition raises important concerns,” he stated. “Portfolio flows, by nature, are highly sensitive to global interest-rate movements, risk sentiment and policy credibility. They provide liquidity support in the short term, but they are volatile and prone to sudden reversals.”

He stressed that sustainable economic growth depends on long-term productive investment rather than short-term financial inflows.

“Sustainable economic growth, job creation and export expansion depend not on short-term capital but on stable, long-horizon FDI tied to production, infrastructure, manufacturing and technology transfer,” Yusuf said. “The current structure reflects cyclical financial recovery rather than structural economic transformation.”

The Centre also pointed to weak transmission of capital inflows to the real sector, noting that most funds were directed into banking and financial services, with marginal allocation to manufacturing and infrastructure.

“Financial deepening without real-sector expansion risks creating a liquidity-driven recovery that does not fundamentally alter Nigeria’s productive base,” the CPPE stated.

Beyond sectoral imbalances, the Centre highlighted geographic and institutional concentration risks, warning that heavy reliance on a limited number of source countries and intermediary banks could heighten exposure to global financial tightening and geopolitical uncertainty.

Unless structural reforms are accelerated, Yusuf cautioned that the rebound may prove fragile.

“The central task before policymakers is clear: move from liquidity-driven recovery to investment-led transformation,” he said. “Only by converting short-term capital inflows into long-term productive investment can Nigeria achieve sustainable growth, employment expansion and macroeconomic resilience.”

The CPPE urged the government to prioritise reforms in power supply, transport and logistics efficiency, regulatory predictability and contract enforcement, while deliberately incentivising capital flows into export-oriented manufacturing, agro-processing, energy and infrastructure development.

While acknowledging that tight monetary policy and improved foreign exchange liquidity have created attractive short-term yield opportunities, the Centre emphasised that the real measure of success will be the extent to which current inflows translate into durable, productivity-enhancing investments.