Foreign Direct Investment Recovers as Nigeria Draws $720m in Q3

Nigeria recorded a rebound in foreign direct investment in the third quarter, attracting about $720 million in capital inflows, signalling renewed investor interest amid ongoing macroeconomic and structural reforms. The improvement marks a positive shift after periods of subdued investment driven by policy uncertainty, foreign exchange constraints and global economic headwinds.

According to official data, the increase in FDI reflects growing confidence in Nigeria’s reform trajectory, particularly in the foreign exchange market, fiscal management and key productive sectors. Analysts note that while inflows remain below long-term potential, the Q3 performance suggests that investors are beginning to reassess opportunities in Africa’s largest economy.

Sectoral data indicate that oil and gas continued to attract a significant share of foreign direct investment, supported by regulatory clarity under the Petroleum Industry Act and improved transparency in sector governance. Investors were drawn to upstream assets, gas development projects and energy infrastructure, as Nigeria positions gas as a transition fuel and seeks to boost production and exports.

Beyond hydrocarbons, telecommunications, financial services and manufacturing also recorded increased investment interest. The expansion of digital services, rising demand for data and mobile connectivity, and ongoing financial sector reforms contributed to inflows into telecoms and fintech-related ventures. Investors are increasingly targeting scalable, technology-driven businesses that cater to Nigeria’s large and youthful population.

Manufacturing inflows were supported by efforts to strengthen local production and reduce import dependence. Although manufacturers continue to face challenges such as high energy costs and logistics constraints, some foreign investors are taking long-term positions, attracted by Nigeria’s market size and regional trade prospects under the African Continental Free Trade Area.

Government officials attribute the rebound in FDI to reforms aimed at improving transparency and restoring market confidence. Key among these is the move towards a more market-reflective exchange rate regime, which has reduced uncertainty around foreign exchange repatriation and pricing. Investors have long cited FX restrictions as a major deterrent, and recent adjustments appear to be easing those concerns.

The Central Bank’s tighter monetary stance and improved communication have also helped stabilise financial markets. Higher yields in domestic instruments, combined with clearer policy direction, have contributed to improved capital inflows, although portfolio investment remains more volatile than direct investment.

Analysts caution that while the $720 million inflow is encouraging, Nigeria still lags behind peer economies in attracting sustained FDI. Structural issues such as infrastructure deficits, regulatory bottlenecks and security concerns continue to weigh on investment decisions. Addressing these constraints, they argue, is critical to converting short-term rebounds into long-term trends.

Security challenges, particularly in parts of the oil-producing regions and along key transport corridors, remain a concern for investors. While authorities have intensified efforts to protect critical assets and improve stability, investors continue to factor security risks into project planning and cost assessments.

The rebound also comes against the backdrop of intense global competition for investment capital. With rising interest rates in advanced economies and geopolitical uncertainties, developing countries must offer compelling value propositions to attract long-term investors. Nigeria’s ability to do so, analysts say, depends on policy consistency and effective implementation of reforms.

Foreign direct investment is widely regarded as more stable and growth-enhancing than short-term capital flows, as it supports job creation, technology transfer and productivity improvements. Economists argue that increasing FDI is essential to Nigeria’s goal of diversifying its economy and reducing dependence on oil revenue.

The Q3 performance has raised expectations that sustained reforms could unlock larger inflows in subsequent quarters. Investors are reportedly monitoring developments in power sector reforms, port efficiency, tax administration and judicial processes, all of which influence the ease of doing business.

Some stakeholders have called for targeted incentives to attract FDI into priority sectors such as renewable energy, agro-processing and healthcare. They argue that focused policies, combined with infrastructure investment, could accelerate inflows and maximise developmental impact.

The role of state governments has also come under focus, with analysts noting that subnational reforms can significantly influence investment outcomes. States that improve regulatory efficiency, land administration and security are better positioned to attract foreign investors seeking local partnerships.

Despite the rebound, experts warn against overreliance on short-term gains. They stress that Nigeria must build a predictable and competitive investment environment to sustain momentum. Frequent policy reversals or regulatory uncertainty could quickly erode the gains recorded in Q3.

The improvement in FDI has implications for Nigeria’s external position. Increased direct investment supports foreign exchange inflows, eases pressure on reserves and strengthens balance of payments stability. Over time, this can enhance macroeconomic resilience and investor confidence.

Business groups have welcomed the rebound, describing it as a vote of confidence in ongoing reforms. However, they urge authorities to deepen engagement with investors and address operational challenges that affect project execution and profitability.

As Nigeria seeks to accelerate economic growth and job creation, foreign direct investment will remain a critical component of its development strategy. The Q3 inflow of $720 million suggests that reforms are beginning to gain traction, but stakeholders agree that sustained effort is required to translate renewed interest into long-term, transformative investment.

Looking ahead, analysts expect FDI performance to depend on global financial conditions, domestic policy consistency and progress in addressing structural bottlenecks. If reforms are sustained and investor concerns addressed, Nigeria could build on the Q3 rebound and strengthen its position as a leading investment destination in Africa.