Market News

By Arinze Nwafor

Foreign investment into Nigeria’s production and manufacturing sector in the first nine months of 2025 dropped 54.11 per cent, despite a 131.96 per cent surge in overall capital importation, The PUNCH has found.

The productive sector attracted $463.52m between January and September 2025, down sharply from $1.01bn recorded in the corresponding period of 2024, according to figures from the National Bureau of Statistics.

A breakdown of the capital data showed that the manufacturing sector received $129.92m in Q1 2025, $72.25m in Q2, and $261.35m in Q3. This contrasted with $191.92m in Q1 2024, a significant spike of $624.71m in Q2 2024, and $189.22m in Q3 2024.

The 54.11 per cent year-on-year decline in manufacturing inflows came even as total capital importation into Nigeria rose from $7.23bn in the first nine months of 2024 to $16.78bn in the same period of 2025.

Quarterly breakdown showed that total capital inflows stood at $5.64bn in Q1 2025, $5.12bn in Q2, and $6.01bn in Q3, bringing the nine-month total to $16.78bn. In contrast, Nigeria recorded $3.38bn in Q1 2024, $2.60bn in Q2, and $1.25bn in Q3, totalling $7.23bn.

In Q3 2025 alone, capital importation surged by 380.16 per cent to $6.01bn from $1.25bn in Q3 2024, and increased by 17.46 per cent from $5.12bn in Q2 2025.

A closer look at the composition of inflows showed that Portfolio Investment dominated with $4.85bn, accounting for 80.70 per cent of total capital imported in Q3 2025.

Other Investment accounted for $864.57m or 14.37 per cent, while Foreign Direct Investment trailed with $296.25m, representing just 4.93 per cent.

Sectoral analysis revealed that the banking sector attracted $3.14bn or 52.25 per cent of total inflows in Q3 2025, followed by financing with $1.86bn or 30.85 per cent. Production and manufacturing accounted for only $261.35m, representing 4.35 per cent.

Stakeholders welcome the general improvement in capital inflows but worry about the continued weak inflows into the productive and manufacturing sectors. In separate phone interviews with The PUNCH, they warned that global investors remain risk-averse to Nigeria’s real sector.

President of the Lagos Chamber of Commerce and Industry, Leye Kupoluyi, said the figures indicated the country’s recovery is driven mainly by short-term financial flows, rather than by long-term productive investment.

He said, “While total capital inflows surged to $6.01bn in Q3 2025, a dramatic rebound from $1.25bn in Q3 2024, capital imported into the production and manufacturing sector declined by 54.11 per cent year-on-year to $463.52m from $1.01bn. This contrast highlights a recovery driven mainly by short-term financial flows, rather than by long-term productive investment, and it carries both encouraging and troubling implications.”

Kupoluyi noted that investors responded positively to monetary reforms and attractive yields in money market instruments and bonds, but remained wary of the real sector.

“Nigeria’s success in attracting large portfolio inflows reflects growing confidence in monetary management, easing inflation, and relatively improved exchange rate transparency. Investors are responding positively to attractive yields in money market instruments and bonds, which have strengthened external liquidity and supported macroeconomic stabilisation,” LCCI’s president added.

Moreso, he observed that structural weaknesses continued to deter long-term factory investments. “The manufacturing sector is not benefiting from this renewed confidence because its operating environment remains structurally weak,” he remarked. “High production costs driven by unreliable electricity, dependence on self-generated power, logistics inefficiencies, and volatile input prices continue to erode profit margins.”

Kupoluyi added that foreign manufacturers face persistent challenges around access to foreign exchange for raw materials, policy unpredictability, and regulatory complexity. “Globally, investors are also more risk-averse, preferring liquid financial assets over long-term factory investments,” Kupoluyi stated.

Many stakeholders agree that the dominance of portfolio inflows signalled investor preference for short-term returns over industrial commitments.

“Foreign investors are clearly signalling confidence in Nigeria’s financial and banking system. The dominance of portfolio inflows—over 80 per cent of total capital imported—suggests trust in the country’s ability to manage short-term capital, service obligations, and maintain market liquidity. At the same time, investors are passing a more cautious judgment on Nigeria’s real sector,” Kupoluyi warned.

The Manufacturers Association of Nigeria has decried these challenges. It has resulted in MAN pushing for heightened focus on the real sector without any loss to the financial sector. Recent research from MAN connected the decrease in FDI inflows to the historical decline in the local viability of the manufacturing sector.

According to the MAN 2025 Think Tank, “The sector’s contribution to the economy has declined woefully from 29.9 per cent in 1981 to a mere 8.2 per cent in 2024, while its real growth has witnessed a staggering decline from 14.7 per cent in 2014 to a paltry 1.2 per cent in 2024.”

The group also raised the alarm that the situation will only worsen with 767 manufacturing companies shutting down as of 2023, and about 18,000 job losses were recorded in the sector in 2024.

Similarly, the National Vice President of the National Association of Small-Scale Industrialists, Segun Kuti-George, blamed the sharp decline in manufacturing inflows on infrastructure deficits estimated at $13tn.

“The reason for the massive drop in the capital import for production and manufacturing is not far-fetched at all. It is due largely to the infrastructural deficits that we have as a country, which stood at about 13 trillion dollars as at the last count,” Kuti-George noted.

He cited power shortages and weak transport networks as major constraints, stating, “We have issues around power and logistics, transportation — and I am talking about good roads, rail, air transportation, especially road and rail — that will convey raw materials from the point of purchase to where they are going to be translated into finished goods.

“I know it is common knowledge that over 50 per cent of agricultural harvests don’t make it to the market. They get rotten because of the lack of roads to transport them to the market. So no one, under such circumstances, will want to bring their resources here.”

He added that investors preferred trading and financial assets to long-term manufacturing commitments. “You will observe from the statistics of over six trillion being brought into the country. People are bringing in capital, but they are not investing it in manufacturing. What that means is that people will prefer to trade with their money or maybe invest in properties or other forms of productive ventures,” Kuti-George said.

The analysts warned that the surge in portfolio inflows provided macroeconomic relief and strengthened external balances, but Nigeria risked building an economy stabilised by volatile financial flows without deepening its industrial base.

On Tuesday, the Federal Government launched the Nigeria Industrial Policy 2025, which the Minister of State for Industry, John Enoh, described as containing a “robust incentive framework: fiscal, monetary, export, and industrial measures; that reduces the cost of doing business, spurs investment, and fosters innovation.”

The government has stated that in the course of implementing the new policy, it aims to increase the manufacturing contribution to Nigeria’s GDP to 15 per cent by 2030 and 25 per cent by 2035.