Nigeria’s foreign portfolio inflows record $10.37bn in Q1 2026, amid weak foreign direct investments

Coronation Research has said that Data from the National Bureau of Statistics (NBS), show that Nigeria’s total capital importation has surged by 83.8% year-on-year to a record $10.37 billion in Q1 2026, driven overwhelmingly by foreign portfolio investment (FPI).

The inflow profile shows sustained foreign investor interest in Nigeria’s high-yield fixed-income and money market instruments, supported by the elevated interest rates reflecting Central Bank of Nigeria’s (CBN) restrictive monetary stance.

Nonetheless, the concentration of inflows remains a key vulnerability, with FPI accounting for 95.1% of total capital importation, while foreign direct investment (FDI) contributed only 1.3%, underscoring the fragile and reversible nature of the current capital flow cycle.

Portfolio inflows rose to $9.86 billion in Q1 2026, representing 95.1% of total capital importation,
up from 92.3% a year earlier.

The increase was largely driven by continued attractive carry trade opportunities arising from the CBN’s 27.5% Monetary Policy Rate (MPR) and elevated yields across OMO bills and Treasury instruments.

Within the portfolio segment, money market instruments remained the dominant destination, accounting for 65.9% of total FPI inflows, reflecting continued investor preference for short-duration securities.

Meanwhile, bond inflows expanded significantly to $3.23 billion from $877.4 million in Q1 2025, increasing their share of portfolio investment to 32.7% from 16.9%, as investors positioned ahead of an anticipated monetary policy easing cycle.

Foreign participation in the equities market also improved on an annual basis, with inflows rising 12.3% to US$131.8 million.

However, quarter-on-quarter equity inflows declined by 69.6%, highlighting cautious risk sentiment toward frontier market assets. In contrast, FDI inflows remained weak despite a modest 7.0% year-on-year increase.

FDI stood at $135.1 million in Q1 2026, representing only 1.3% of total capital importation, down sharply from 5.6% in Q4 2025 and the lowest share recorded in recent quarters. Compared with US$357.8 million in Q4 2025, FDI declined by approximately 62.3% sequentially, reinforcing concerns about the limited attraction of long-term foreign investments.

The persistent weakness in FDI inflows reflects enduring structural constraints, including infrastructure deficiencies, security challenges, regulatory uncertainty, policy inconsistencies and concerns surrounding the broader business environment.

Sectoral distribution data indicates that the banking sector accounted for the largest share of recorded capital importation with inflows of $7.55 billion, equivalent to 72.8% of total inflows.

However, this largely reflects the sector’s role as the principal conduit for foreign portfolio investments into Nigerian financial assets, particularly fixed-income instruments such as Treasury Bills, OMO securities, and FGN bonds, rather than direct investment in banking sector activities.

The financing sector accounted for $2.43 billion (23.4%) of total inflows, while the production and manufacturing sector attracted only $152.3 million (1.5%).

The distribution highlights Nigeria’s continued reliance on portfolio-driven capital inflows, with limited foreign capital reaching productive sectors capable of supporting long-term economic expansion and industrial development.

By source, the United Kingdom remained the largest contributor, accounting for US$5.08 billion or 49.0% of total capital importation, reflecting the role of UK-based asset managers and investment vehicles in channeling portfolio flows into frontier markets like Nigeria.

The United States ranked second with US$3.18 billion (30.7%), followed by South Africa with US$983.8 million (9.5%).

Collectively, these three countries accounted for approximately 89.2% of total inflows, highlighting a high degree of concentration risk and exposing Nigeria to shifts in global risk sentiment, particularly changes in US monetary policy and broader emerging market capital flow dynamics.

Looking ahead, we maintain a cautiously constructive outlook for capital importation through Q2-Q3 2026, supported by sustained monetary policy tightness, a favourable carry environment, and improved investor confidence following Nigeria’s sovereign rating upgrade.

However, the continued weakness in FDI remains a structural constraint on Nigeria’s long-term growth prospects.

In the absence of stronger foreign investments into real sectors such as manufacturing, technology, infrastructure, and energy, the current capital importation profile will remain heavily dependent on short-term portfolio flows, limiting its capacity to drive sustainable economic growth, employment creation, and broader economic transformation.