Foreign capital inflows into Nigeria’s banking sector rose sharply to $7.0 billion in 2024, the highest annual figure recorded since 2019.
While the spike in inflows comes amid heightened recapitalisation efforts by Nigerian banks, following new capital requirements announced by the Central Bank of Nigeria (CBN) in 2024, Nairametrics observed that hot money accounts for 90% of capital importation into the country.
The latest capital importation report released by the National Bureau of Statistics (NBS) for Q1 2025 further shows that banking accounted for more than half of all capital imported into the country in the first quarter of the year, continuing a trend that began in the second half of 2023.
Capital importation into banking sector rose by 740.3% in one year
In year-on-year terms, capital importation into the banking sector rose by 740.3% from $832.64 million in 2023 to $7.0 billion in 2024.
The jump reverses a four-year trend of declining interest in the sector, which saw inflows fall to as low as $1.46 billion in 2021 and $2.09 billion in 2022.
Quarterly data for 2024 shows that the recovery gained strength toward the end of the year.
After recording $2.07 billion in Q1 2024, inflows slowed to $1.12 billion in Q2 and $579.48 million in Q3, before surging to $3.23 billion in Q4, which was the strongest single-quarter performance for the banking sector ever on record based on the available data from the NBS.
A broader look at the five-year trend shows that the 2024 recovery came after years of subdued capital importation. In 2019, the banking sector attracted $7.66 billion in foreign capital, the previous peak before COVID-19 disruptions.
By 2020, inflows dropped to $3.75 billion, followed by $1.46 billion in 2021, $2.09 billion in 2022, and a low of $832.64 million in 2023.
Out of the $12.32 billion total capital imported in 2024, the banking sector accounted for 56.8%, a significant increase from its 21.3% share in 2023 and 39.1% in 2022.
Capital importation into banking sector stays above $3 billion for second straight quarter
The strong momentum carried into 2025, as capital inflow into the banking sector reached $3.13 billion in Q1. This marks the second consecutive quarter where inflows exceeded $3 billion, coming on the heels of Q4 2024’s $3.23 billion.
Compared to Q1 2024, when the sector attracted $2.07 billion, inflows in Q1 2025 rose by 51.2%.
The quarter-on-quarter comparison shows a slight 3.2% decline from Q4 2024’s peak, indicating a potential levelling after a period of rapid capital mobilisation. Nonetheless, the $3.13 billion recorded in Q1 2025 remains significantly above the historical quarterly average over the years recorded by the NBS.
The banking sector dominated Nigeria’s capital importation landscape in Q1 2025, accounting for 55.4% of total inflows. Out of the $5.64 billion in total capital importation, banking alone brought in $3.13 billion, far outpacing other sectors. This was an increase from its 39.7% share in Q1 2024 and consistent with its 56.8% share for the whole of 2024.
What you should know
Naiametrics earlier reported that Nigeria recorded total capital inflows of $5.64 billion in Q1 2025, a 67% increase from the $3.38 billion posted in the previous quarter.
- However, capital importation data from the NBS reveals that over 90% of these inflows were driven by hot money short-term speculative funds seeking high returns.
- A closer look shows that $4.21 billion, or 74.6% of the total, was channelled into money market instruments, primarily OMO bills and Treasury Bills both short-term securities issued by the Central Bank of Nigeria to manage liquidity.
- These instruments have become increasingly attractive to foreign investors amid Nigeria’s elevated interest rate environment, forming the core of capital inflows aimed more at stabilising the naira than funding long-term economic activity.
