August 10, (THEWILL) — Prominent economists, financial analysts and industry experts have reacted to the recent Q1 2025 Capital Importation report by the National Bureau of Statistics (NBS), which showed a significant increase of investment inflow to the Nigerian economy – a development being celebrated by the authorities.
Nigeria recorded total capital inflows of $5.64 billion in Q1 2025, a 67 percent increase from the $3.38 billion posted in the previous quarter. Capital importation data from the NBS revealed a troubling fact: The preponderance of the inflows – over 90 percent – were driven by ‘hot money’ – short-term speculative funds seeking high returns.
A closer look shows that $4.21 billion, or 74.6 percent of the total, was channeled into money market instruments, primarily OMO bills and Treasury Bills, both short-term securities, issued by the Central Bank of Nigeria (CBN) to manage liquidity.
These instruments have become increasingly attractive to foreign investors and diasporan citizens amid Nigeria’s elevated interest rate environment. This forms the core of capital inflows, paradoxically aimed more at stabilising the naira than funding long-term economic activities.
Also, the surge in money market inflows comes on the back of the CBN’s hawkish monetary policy, which has seen benchmark interest rates rise to record highs, currently at 27.5 percent.
On the other hand, Foreign Direct Investment (FDI) into Nigeria declined by 70.06 percent quarter-on-quarter to $126.29 million in Q1 2025, down from $421.88 million in Q4 2024, according to the latest NBS report.
The plunge in FDI comes, despite an overall increase in capital importation, signalling a growing preference among foreign investors for short-term, high-yield investments commonly referred to as “hot money” over long-term commitments in the Nigerian economy. On a year-on-year basis, however, FDI recorded a marginal growth of 5.97 percent, compared to $119.18 million in Q1 2024.
A major factor that boosted the 2014 rebased figures was robust foreign direct investment. This is because FDI has the inherent capacity of creating the desired multiplier effects that expand the economy and drive growth. For instance, the historic FDI in the telecommunication sector in the early 2000, propelled the economy to an unusual peak.
The significant impact was evident in massive job creation, innovation, backward integration and the birth of viable sub-sectors. Bountiful tax revenues continue to accrue from the sector to the three tiers of government. This is why the current decline of FDI is a matter of concern to stakeholders.
Hogan Ekpo, Professor of Economics and Public Policy Emeritus at the University of Uyo, said the impression being promoted that the Nigerian economy is growing strong and in the right direction, is misleading. According to him, the economy is still largely dependent on oil which makes it more worrying because, “with a little shock in the international market, the whole thing will crumble.”
Speaking as a guest on the popular Arise Television News ‘Morning Show’ on Wednesday, August 6, 2025, Prof Ekpo lamented the non-producing status of the Nigerian economy which the authorities have continued to celebrate as an achievement.
He maintained that the economy is not being built on a productive base and that the boom in Foreign Portfolio Investment, largely driven by short-term investments in stocks and government securities — referred to as ‘Hot Money’, has no value-adding capacity in real terms of economic growth.
He also added that the increasing national debt stock makes the matter worse as the huge debt is being serviced with revenue that ought to have been deployed towards building viable infrastructure.
“A major problem with our economy is this obsession for revenue. We want to increase revenue for consumption – give to the political class, to waste and to service debts. You do not look at the other side – production.
“We celebrate external reserves. I was a member of the CBN Monetary Policy Committee. I can tell you that the reserves are provisional. It is temporary. If anything happens to the international oil market today, the whole thing will be wiped out because the economy is not producing.
“You must have a productive economy where your reserves are not dependent on the export of only crude oil; where the refineries and companies are producing, exporting and earning foreign exchange.”
Commenting on the current “stability of the naira”, Ekpo, Director General of the West African Institute for Financial and Economic Management (WAIFEM), said it is the fallout of the managed float adopted by the CBN. He argued that the local currency would collapse if the CBN pulled out of the managed float regime.
On the nation’s high debt stock, Ekpo warned that borrowing without tying it to a productive venture to yield returns and to service the facility, can be catastrophic. He warned that borrowing to service debts amounts to an unending cycle that would enslave our future generations.
“We must tie our borrowing to productive infrastructure that would yield the revenue to service and repay the loan”, Ekpo, former Vice Chancellor of University of Uyo, said.
In the same vein, Mr Tilewa Adebajo, CEO, CFG Advisory, expressed concern over the series of reforms adopted by the current Nigerian government amid rising debts which are not positively impacting on the lives of the people — to drive productivity. While he commends the reform initiatives, he argued that a sustainable productive base is necessary to achieve the long-term objectives of the reforms.
“Making matters worse, total government borrowing has hit the US$100 billion mark. Debt service costs have doubled from ₦8 trillion in 2024 to ₦16.3 trillion in the proposed 2025 budget, making debt servicing the largest expenditure item.
“This is unsustainable, especially as the amount surpasses the combined budgets for defence, security, infrastructure, education, and health, which total ₦14 trillion. The recent legislative approval of an additional US$21 billion in borrowing is a red flag,” the financial analyst and investment banking expert noted in his Half-Year Update on the Economy made available to THEWILL.
Adebajo noted that the oil and gas sector grew by 10.2 percent in 2024, with US$3 billion in investments. To sustain growth and optimize production, Nigeria must emulate the investment levels of US$22 billion seen in 2009 and 2014.
Ultimately, the success of this budget cycle and the broader reform effort depends on recalibrating expenditures as advised by the World Bank and IMF, and on implementing coordinated, sustainable economic policies.
“The same sincerity and commitment that delivered initial economic stability must now be applied to the unified and coherent execution of monetary, fiscal, trade, industry, and investment policies. This is the decisive factor. There is growing concern, however, that the government’s focus is shifting from economic reform to re-election and political considerations,” Adedayo stated in the update.
He added, “The economy has achieved stability with key economic indicators moving in the right trajectory after 26 months of reforms. However, reforms alone cannot put the economy on the path of sustainable growth. GDP growth declined from 3.8 percent in Q4 2024 to 3.1 percent in Q1 2025.
“Reform Fatigue has led to an Economic Quagmire as the government faces the reality that reforms alone cannot pull the economy out of stagflation to the path of sustainable growth.
“The outcome is an over 200 percent currency devaluation, debt in excess of US$100 billion and an economy deep in stagflation. Households and firms are bearing the brunt of the reforms, with low purchasing power, low productivity, high interest rates and unfavourable exchange rates.”
In his assessment of the current economic situation, Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprises, emphasised the need for a shift towards a more productive economy, he highlighted the importance of supporting the domestic processing companies to make essential items like bread and cooking oil more affordable to ordinary citizens. He also stressed that macroeconomic progress doesn’t always translate to tangible improvements in the lives of everyday Nigerians.
Recommending the way out, Yusuf stressed on the need to focus on growing production.
He advocates for direct support to companies involved in processing essential food items as a way to make these goods more accessible and affordable to the general public.
The entrepreneur development expert pointed out that the disconnect between overall economic growth (macroeconomic) and the lived experiences of citizens should be evaluated based on their impact on the daily lives of people.
Dr. Yusuf’s message centers on the idea that a thriving economy requires a focus on supporting production, making goods accessible, and ensuring that the benefits of economic growth reach the majority of the population. He emphasised on fixing the troubled power sector.
The finance minister, and coordinating minister for the economy, Wale Edun, has welcomed the Capital Importation figures, by the NBS, viewing them as a positive sign for sustained economic growth.
However, the data shows the growing disconnect between rising capital inflows and actual productive investment in the Nigerian economy. While the surge in total capital importation may seem positive on the surface, a closer look reveals that over 90 percent of these inflows were channeled into short-term money market instruments — such as government bonds and treasury bills — rather than long-term equity or direct investment.
Industry analysts believe that this trend raises concerns about the sustainability and economic impact of Nigeria’s current capital inflow structure. FDI, which typically signifies a vote of confidence in the host economy through infrastructure development, factory construction, and job creation, is now being dwarfed by volatile inflows that can easily exit at the slightest macroeconomic shock.
