CPPE Warns Over $6.01bn Inflows as Portfolio Funds Dominate
MOTOLANI OSENI
The Centre for the Promotion of Private Enterprise has cautioned that Nigeria’s current capital flow structure exposes the economy to significant vulnerabilities, despite a sharp rebound in headline inflow figures.
In a policy brief seen on Sunday, the think tank said the surge in capital importation reflects improving investor sentiment following macroeconomic reforms, but warned that the composition of the inflows raises concerns about sustainability.
Latest data from the National Bureau of Statistics show that total capital inflows climbed to $6.01 billion in the third quarter of 2025, representing a 380 per cent year-on-year increase and a 17 per cent rise quarter-on-quarter.
The rebound follows foreign exchange market liberalisation, tighter monetary policy and improved liquidity conditions in the domestic financial system.
While acknowledging that the recovery signals growing policy credibility, CPPE said the underlying structure of inflows reveals fragilities that could undermine long-term economic transformation.
“However, while the headline numbers are encouraging, a deeper examination of the structure and distribution of inflows reveals underlying vulnerabilities that must be addressed to ensure durability and long-term economic transformation,” the group stated.
It warned of potential sudden reversals of portfolio investments that could destabilise exchange rates and external reserves, persistently weak foreign direct investment reflecting unresolved structural bottlenecks in power, infrastructure and regulatory predictability, as well as exposure to global financial tightening and geopolitical risks.
According to the think tank, portfolio investments accounted for over 80 per cent of total inflows in Q3 2025, while foreign direct investment contributed less than 5 per cent, underscoring a heavy reliance on short-term capital.
CPPE noted that portfolio flows, though helpful in boosting liquidity and stabilising markets in the short term, are inherently volatile and sensitive to global interest rate movements and shifts in investor confidence. In contrast, sustainable growth, employment generation and export expansion depend largely on long-term investments tied to production, infrastructure and technology transfer.
The sectoral breakdown of the data further highlights the imbalance. The banking sector attracted $3.14 billion, representing 52.25 per cent of total inflows, while the financing sector received $1.86 billion, or 30.85 per cent. Production and manufacturing accounted for just $261.35 million, equivalent to 4.35 per cent.
The group argued that the concentration of capital in financial intermediation rather than productive industries signals a cyclical financial recovery rather than a structural shift in the economy.
“Rising capital importation is not yet translating into meaningful expansion of productive capacity. Without stronger capital flows into industry, agro-processing, logistics, energy and export-oriented manufacturing, the broader economy will see limited gains in employment, productivity and inclusive growth.
“Financial deepening without real-sector expansion risks creating a liquidity-driven recovery that does not fundamentally alter Nigeria’s productive base,” CPPE stated.
With portfolio-driven inflows dominating the rebound, the think tank urged accelerated structural reforms to attract stable, long-term foreign direct investment capable of strengthening the country’s productive capacity and insulating the economy from external shocks.
