Nigeria’s banking sector has emerged as the leading driver of foreign capital inflows, attracting more than half of the total funds that entered the country in the first quarter of 2025, as sweeping reforms continue to boost investor confidence in Africa’s largest economy.
According to the National Bureau of Statistics (NBS), Nigeria recorded $5.64 billion in capital importation between January and March 2025, a sharp 67.1 per cent increase compared to the $3.38 billion posted in the same period of 2024. Of this, the banking sector alone pulled in $3.1 billion, representing 55.44 per cent of total inflows.
The strong showing places banks at the heart of Nigeria’s reform-led recovery, with analysts pointing to the Central Bank of Nigeria’s (CBN) policy shifts as the key catalyst for the renewed foreign investor appetite.
The NBS report revealed that while other sectors like manufacturing and production struggled, the financial sector—particularly banks—remained the main attraction for investors.
The financing sector followed with $2.09 billion, accounting for 37.18 per cent of inflows, while manufacturing attracted just $129.9 million, or 2.3 per cent.
Portfolio investments dominated capital inflows, contributing $5.2 billion (92.25 per cent), largely through money market instruments, bonds, and equities.
The United Kingdom was Nigeria’s top source of capital, accounting for $3.68 billion, or 65 per cent of total inflows.
Investment analysts say the dominance of portfolio flows highlights both opportunities and risks.
While it signals foreign confidence in Nigeria’s capital markets, it also underscores the country’s limited attraction for long-term Foreign Direct Investment (FDI), which contributed only $126.2 million (2.24 per cent) in Q1.
Since assuming office in October 2023, CBN Governor Olayemi Cardoso has prioritised reforms aimed at stabilising Nigeria’s financial system.
The unification of foreign exchange windows, clearance of over $7 billion forex backlogs, and efforts to improve currency liquidity have been widely praised by global institutions.
The World Bank described the measures as bold and necessary steps toward restoring investor trust.
These policies also helped Nigeria’s sovereign risk spread fall to its lowest level since January 2020, effectively reversing the pandemic-era premium.
Financial analyst Ike Chioke, CEO of Afrinvest West Africa, noted that portfolio inflows rose 150.8 per cent year-on-year, driven largely by money market instruments, which surged to $4.2 billion.
Bonds and equities also saw impressive growth of 108.5 per cent and 137.7 per cent respectively.
President Bola Tinubu’s administration has set a bold target of achieving a $1 trillion economy by 2030.
The CBN believes the banking sector will be central to achieving this milestone, but acknowledges that Nigerian banks will need fresh capital to support such expansion.
“Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1 trillion economy? The answer is no—unless we take action,” Governor Cardoso said recently, underscoring the CBN’s push for recapitalisation across the industry.
The proposed recapitalisation drive is expected to position Nigerian banks to finance large-scale projects, attract big-ticket transactions, and support critical sectors like infrastructure, energy, and manufacturing.
Economists note that while reforms are painful, Nigeria may be moving past the harshest phase of its adjustment period.
According to Bismarck Rewane, Managing Director of Financial Derivatives Company, 2025 will likely mark the beginning of a recovery as reforms gain traction.
“Investment is crucial, but it will be shaped by confidence, transparency, and appropriate policies,” he said, warning that inefficiencies in power supply and governance in the oil sector remain significant challenges.
Meanwhile, the recent rebasing of Nigeria’s GDP has painted a clearer picture of the economy’s structure.
Services and agriculture now account for larger shares of output, reflecting shifts in economic realities and providing a stronger base for policy planning.
Nigeria’s ability to sustain investor confidence will depend on how effectively it consolidates reforms, boosts FDI, and channels capital inflows into productive sectors.
Analysts agree that while banks are currently the toast of investors, broader structural reforms are needed to spread growth across manufacturing, technology, and energy.
As 2025 unfolds, the banking sector’s dominance in capital inflows may well serve as the cornerstone of Nigeria’s journey toward economic transformation—provided reforms remain consistent, transparent, and targeted.