Nigeria recorded whole capital inflows of $5.64 billion in Q1 2025, a 67% enhance from the $3.38 billion posted within the earlier quarter.
Nevertheless, capital importation information from the Nationwide Bureau of Statistics (NBS) reveals that over 90% of those inflows have been pushed by scorching cash short-term speculative funds searching for excessive returns.
A better look exhibits that $4.21 billion, or 74.6% of the overall, was channelled into cash market devices, primarily OMO payments and Treasury Payments each short-term securities issued by the Central Bank of Nigeria to handle liquidity.
These devices have grow to be more and more engaging to international buyers amid Nigeria’s elevated rate of interest surroundings, forming the core of capital inflows aimed extra at stabilising the naira than funding long-term {economic} exercise.
The surge in cash market inflows comes on the again of the Central Bank of Nigeria’s hawkish financial coverage, which has seen benchmark rates of interest rise to file highs.
The CBN has used elevated rates of interest as a instrument to draw international portfolio buyers, enhance greenback provide, and stabilise the naira.
International buyers are allowed to take part within the cash market by the acquisition of OMO Payments, a robust instrument the CBN has deployed to draw FX inflows with out immediately elevating public debt.
With yields on OMO payments and Treasury Payments reaching as excessive as 18–25%, international buyers are responding aggressively, pushing capital importation to its highest stage since Q1 2020.
The breakdown of Q1 capital imports exhibits that portfolio investments alone accounted for $5.2 billion, or 92.2% of the overall inflows, reflecting Nigeria’s continued reliance on short-term capital to handle its exterior imbalances.
Against this, International Direct Funding (FDI) stood at solely $126.29 million, representing simply 2.2% of whole capital imports.
The majority of FDI got here by fairness investments in Nigerian corporations, indicating marginal curiosity from long-term buyers.
As well as, Nigeria attracted $311.17 million in international loans, labeled beneath Different Funding.
The naira has recorded relative stability in latest weeks, buying and selling beneath N1,550/$ within the parallel market, a major appreciation from its lows earlier within the 12 months.
Analysts consider that the elevated influx of international portfolio capital, pushed by excessive yields on CBN securities, has helped enhance greenback liquidity and ease alternate fee stress.
Nevertheless, there are issues in regards to the sustainability of this mannequin. Portfolio flows, particularly into cash market devices, are usually risky and topic to fast reversals if international situations change or coverage credibility falters.
Whereas Nigeria has succeeded in attracting capital inflows to help the naira, the construction of those inflows suggests a heavy dependence on scorching cash, moderately than productive capital.
The CBN’s use of high-yielding devices has to this point labored in stabilising the international alternate market, however the nation stays weak to exterior shocks and capital flight.
For long-term stability, analysts have typically argued that Nigeria must rebuild investor confidence, enhance the benefit of doing enterprise, and appeal to extra sustainable capital, particularly FDI that helps progress, jobs, and innovation.
