Portfolio flows surge to $6.01bn on the back of Nigeria’s elevated yield differentials

National Bureau of Statistics (NBS) has said that the latest capital importation report for third quarter of 2025 indicates a marked improvement in foreign capital inflows into Nigeria, with total importation rising to $6.01 billion, the highest level recorded in six years.

According to Coronation Marchant Bank, this represents a substantial 380.16% y/y increase and a 17.46% q/q rebound following the modest contraction recorded in Q2 2025. The strong showing was primarily driven by heightened activity in the fixed income market.

Foreign Portfolio Investments (FPIs) remained the dominant component of capital inflows, accounting for 80.70% of total importation during the review period. Portfolio inflows surged 439.74% y/y to $4.85bn, a 15.57% q/q increase, supported by broad-based gains across both equity and bond markets.

The sustained attractiveness of Nigerian financial assets was underpinned by positive real yields, moderating inflation expectations, and relative currency stability.

Within the portfolio segment, money market instruments continued to account for the largest share (60.78%), although inflows declined 17.71% q/q as investors rebalanced toward longer-duration instruments. This shift reflects expectations of an eventual monetary policy easing cycle, prompting investors to lock in elevated yields in FGN bonds and selectively position in equities.

Consequently, bond inflows rose significantly, with their contribution to total portfolio investments increasing to 32.46% (from 11.18% in Q2 2025), reaching approximately $1.58bn , compared to just $69.87m in the corresponding period of 2024.

Foreign participation in the equities market also strengthened notably, with inflows rising 126% q/q to $328.10m, levels last observed in the pre-pandemic period. This improvement coincided with strong domestic market performance, as the NGX All-Share Index (ASI) recorded gains of 44.80% y/y and 18.95% q/q, thereby increasing equities’ contribution to total portfolio inflows to 6.76% (from 3.46% in Q2 2025).

The equity inflow recovery signals renewed foreign investor confidence in Nigeria’s capital market, supported by banking sector profitability, FX reforms, and improved earnings outlook.
Foreign portfolio investments in the local equities market improved strongly by 126% q/q to $328.10m this was last seen in pre-COVID era, this signal renewed foreign investors’ confidence in the Nigerian capital market.

Data from NGX shows that NGX All Share Index (ASI) posted a growth of 44.80% y/y and 18.95% q/q, translating to increased contribution
of this asset class to of total portfolio investments. (6.76% in Q3‘25 vs. 3.46% in Q2 ’25).

Foreign Direct Investment (FDI) also showed encouraging signs of recovery, rising to $296.25m, representing 107.64% q/q and 185.34% y/y growth.

As a result, FDI contribution to total capital importation increased to 4.93% (from 2.79% in Q2 2025), suggesting a gradual restoration of longer-term investor confidence amid ongoing structural reforms and
improving macroeconomic landscape.

From a sectoral perspective, the banking sector attracted the largest inflows at $3.14bn reflecting a significant 442.33% y/y increase, although lower on q/q basis by -7.78%.

The strong banking sector inflows likely reflect foreign participation in capital raising activities, and balance sheet expansion. The financing sector followed closely, accounting for $1.86bn (30.85% of total inflows).

The manufacturing sector recorded inflows of $261.35m (4.35% of total), increasing 261.74% q/q and 38.12% y/y, supported primarily by exchange rate appreciation and improved FX liquidity, as the Naira strengthened by 3.68% against the US dollar during the quarter. Similarly, the telecommunications sector experienced a sharp rise in inflows to $208.51m from $14.74m in the previous quarter, reflecting renewed capital expenditure

By source of origin, the United Kingdom remained the largest contributor, accounting for 48.80% of total inflows ($2.94bn). Other significant sources included the United States (15.80%), South Africa (12.87%), Mauritius (7.51%), and the Netherlands (4.70%), highlighting continued concentration of inflows from key financial centers and investment hubs.

Nigeria’s yield environment remains compelling, with the MPR at 27.00% significantly above policy rates in advanced economies U.S. (3.50% – 3.75%), Euro Area (2.15%), and U.K. (3.75%) and key African countries such as South Africa (6.75%), Kenya (8.75%) and Ghana (15.5%).

Overall, capital importation inflow is expected to remain supported by strong portfolio inflows, underpinned by Nigeria’s elevated yields and wide interest rate differentials. However, flows remain sensitive to global financial conditions, with potential reversal risks in the event of heightened external uncertainty or currency volatility.