Foreign direct investment (FDI) inflows into Nigeria declined by 19% to $250 million in Q1 2025, compared to $310 million in the previous quarter.
This is according to the Central Bank of Nigeria’s (CBN) latest Balance of Payments report.
The report read, “DI inflows declined slightly to US$0.25 billion in Q1 2025, from US$0.31 billion in Q4 2024.”
While the figure marks a quarter-on-quarter contraction, it represents a recovery from the net divestment of $310 million recorded in Q1 2024, signalling a fragile return of investor confidence in the country’s long-term prospects.
The decline in Q1 2025 reflects a broader slump in capital inflows, with portfolio investments suffering an even sharper reversal. Overall, the financial account came under pressure, weakening Nigeria’s external position despite a current account surplus and positive trade performance.
Capital flight deepens amid portfolio reversals
- The CBN report shows that Nigeria’s financial account balance fell to $7.58 billion in Q1 2025, slightly down from $7.82 billion in Q4 2024. The moderation was largely driven by a dramatic swing in portfolio investment liabilities—from a robust $5.61 billion inflow in Q4 2024 to a net outflow of $5.03 billion in the first quarter of 2025. This $10.6 billion reversal in portfolio investment signals an erosion of foreign investor appetite for short-term Nigerian instruments such as CBN bills and government securities.
- This trend was also evident in other categories of capital movement. “Other investment” liabilities, typically reflecting loans and deposits from non-residents, declined sharply from $13.89 billion to $4.32 billion. Direct investment assets—indicating Nigerians investing abroad—also reversed into a net outflow of $550 million, suggesting increased offshore diversification by domestic investors.
- The significant capital outflows highlight the effects of ongoing exchange rate volatility, persistent inflation, and lingering uncertainty over monetary and fiscal policy alignment—all of which have made Nigerian assets less attractive to global investors.
Trade surplus and export growth cushion the current account
- Despite capital flight, Nigeria’s current account maintained a surplus of $3.73 billion in Q1 2025, slightly down from $3.80 billion in Q4 2024 but higher than the $3.69 billion recorded a year earlier. The surplus was underpinned by a stronger goods trade balance, which grew to $4.16 billion from $2.62 billion in the previous quarter.
- Export earnings rose by 9.79% to $13.91 billion, driven by a rebound in gas exports—up 26.7% to $2.66 billion—and a 30.4% surge in non-oil and electricity exports, reflecting improved global demand and the competitive pricing advantage from the naira’s depreciation. Crude oil exports remained stable at $8.59 billion.
- Imports declined modestly to $9.75 billion, from $10.05 billion in Q4 2024, due to reduced inflows of petroleum products and non-oil goods. The contraction in imports, combined with stronger exports, helped widen the trade surplus and provide a buffer against external shocks.
- However, other components of the current account were less supportive. The services account posted a net deficit of $3.69 billion, up from $3.48 billion in the prior quarter, largely due to increased spending on travel and business services. Financial service inflows also fell significantly during the period.
External position weakens as reserves fall
The overall balance of payments position deteriorated in Q1 2025, swinging into a deficit of $2.77 billion, compared to a surplus of $1.10 billion in Q4 2024. The deficit, which reflects the gap between total inflows and outflows across current and capital accounts, was driven by the sharp decline in portfolio and other investment inflows.
The weakening of the external position translated into a drop in Nigeria’s external reserves, which fell to $37.82 billion by the end of March 2025 from $40.19 billion in December 2024. The net errors and omissions account, which captures unrecorded financial flows, stood at $3.85 billion, slightly lower than the $4.02 billion reported in Q4 2024.
The balance on the secondary income account, which includes remittances and foreign aid, fell 17.9% to $5.29 billion, following a decline in diaspora remittances from $5.08 billion to $4.93 billion. Foreign aid and grant inflows to the general government also dropped significantly by over 67%, possibly linked to geopolitical policy shifts, including executive orders restricting aid from some Western nations.
