By Emmanuel Nduka
Nigeria attracted $10.37 billion in foreign capital in the first quarter of 2026, but only 1.3 percent of the inflows went into foreign direct investment (FDI), highlighting the challenge of converting renewed foreign investor interest into long-term productive investment.
According to PricewaterhouseCoopers (PwC), total capital importation rose by 83.8 percent year-on-year in Q1 2026, driven largely by foreign portfolio investment (FPI), which accounted for the overwhelming majority of the funds that entered the country.
In its H2 2026 Nigeria Economic Outlook, PwC said FPI increased by 89.5 percent year-on-year and 79.77 percent quarter-on-quarter to $9.86 billion, representing 95.1 percent of total capital inflows during the period.
By comparison, FDI, which represents longer-term investment in businesses and productive assets, stood at $135.08 million, despite rising by 6.96 percent year-on-year.
PwC said the figures showed that foreign investors were participating significantly in Nigeria’s financial markets, while relatively little of the capital was being committed to productive businesses and assets.
“The opportunity is to translate this investor interest into more long-term capital,” PwC said.
The firm said portfolio investment was concentrated largely in money market instruments and bonds, which attracted $6.5 billion and $3.23 billion respectively.
“Portfolio investment accounted for 95.1% of total capital inflows, supported by attractive yields and greater participation in Nigerian financial assets,” PwC said.
It added that the pattern indicated that foreign capital remained heavily weighted towards financial assets rather than investment that could directly expand productive capacity, employment and supply chains.
PwC said Nigeria must now focus on creating the conditions required to convert the increased foreign investor interest into long-term investment in businesses and infrastructure.
“Greater policy certainty, a stronger pipeline of bankable projects and a competitive operating environment can attract more FDI into businesses and infrastructure,” the firm said.
According to PwC, such investment would help expand productive capacity, deepen supply chains, create jobs and support broader economic growth.
The firm identified approval processes, access to land and financing, as well as foreign exchange bottlenecks, among the factors delaying the conversion of investment interest into operating businesses and jobs.
PwC also identified limited access to affordable credit as a major constraint on private-sector investment and expansion, noting that private-sector credit stood at 21.3 percent of GDP, below the 33 percent average for sub-Saharan Africa.
“Easing access to affordable private sector credit is critical to translating reforms into MSME-led growth,” PwC said.
The report noted that credit to government increased by 18 percent between December 2025 and May 2026, compared with 6.9 percent growth in private-sector credit.
PwC further said private-sector credit declined by 14.3 percent between February and May 2026, while credit to government increased by 2.6 percent over the same period.
The firm said the trend underscored the need to strengthen lending to productive private-sector activities, particularly as high borrowing costs continue to constrain businesses.
PwC recommended credit windows, partial credit guarantees and blended finance to help bridge the financing gap confronting small and medium-sized businesses seeking facilities between N500,000 and N30 million.
The firm also warned that Nigeria’s fiscal pressures could remain elevated in the second half of 2026 due to continued spending needs, a persistent budget deficit and high government financing requirements.
According to PwC, uneven revenue performance could increase the government’s financing needs and lead to higher borrowing requirements and continued debt-service pressures.
“Debt service pressure remains the key fiscal vulnerability, as nearly half of government revenue is still absorbed by debt payments, limiting fiscal space for capital spending and growth-enhancing investment,” the firm said.
While PwC said Nigeria’s macroeconomic stabilisation had improved, it noted that the gains had yet to fully translate into stronger household welfare.
The firm identified high essential costs, limited access to credit, weak income and employment gains and inadequate social protection as factors continuing to weigh on household purchasing power.
PwC recommended targeted household support, improved agricultural productivity, better storage and logistics, and expanded domestic energy supply to help reduce pressure on households and ensure that economic reforms translate into broader improvements in living standards.
