Abuja, Nigeria – The Centre for the Promotion of Private Enterprise has warned that Nigeria’s current capital flow structure exposes the economy to multiple risks despite impressive headline growth figures showing a surge in total inflows.
Okay News reports that CPPE issued the warning in a policy brief seen on Sunday, February 22, following the latest National Bureau of Statistics report. Total capital inflows rose to $6.01 billion in Q3 2025, marking a 380 percent year-on-year surge and a 17 percent quarter-on-quarter increase. The rebound reflects improving investor confidence after macroeconomic reforms, including foreign exchange market liberalisation and tighter monetary policy.
CPPE acknowledged that the rebound suggests policy stabilisation efforts are beginning to positively influence investor behaviour. However, it warned that a deeper examination of the structure and distribution of inflows reveals underlying vulnerabilities that must be addressed. The think tank noted that the current structure exposes the economy to sudden portfolio reversals, persistently weak FDI, external concentration risks, and financial-system transmission risks due to heavy reliance on limited intermediary institutions.
The surge in capital importation is overwhelmingly driven by portfolio investments, which accounted for more than 80 percent of total inflows in Q3 2025, while foreign direct investment contributed less than 5 percent. CPPE warned that portfolio flows are inherently volatile, reacting quickly to global interest rates and investor sentiment. In contrast, sustainable economic growth depends on long-term FDI tied to production, infrastructure, and technology transfer.
Sectoral data show that most inflows were directed to the banking and financial sectors, with limited allocation to manufacturing and other productive industries. The banking sector attracted $3.14 billion, representing 52.25 percent of total capital importation. The financing sector followed with $1.86 billion, while production and manufacturing accounted for only $261.35 million. CPPE argued that this pattern signals cyclical financial recovery rather than structural economic transformation.
Without stronger capital flows into industry, agro-processing, logistics, energy, and export-oriented manufacturing, the broader economy will see limited gains in employment and productivity. Financial deepening without real-sector expansion risks creating a liquidity-driven recovery that does not fundamentally alter Nigeria’s productive base. The dominance of the banking sector highlights sustained foreign investor interest in portfolio-driven transactions, but the think tank warned that without faster structural reforms, the rebound in capital flows may prove fragile. Sustainable growth requires shifting the composition of capital flows toward long-term productive investment.
