Overseas funding for factory production drops by more than half over a two-year period

Nigeria's manufacturing sector has experienced a significant decline in foreign investment over the past two years, with capital importation plummeting to $772.45m in 2025, underscoring waning investor confidence in the country's real sector.

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This downturn is evident in the 51.44 per cent drop from the $1.59 billion recorded in 2023, as revealed by data from the National Bureau of Statistics (NBS).

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The sector's share of total capital importation has also drastically weakened, falling from 49.73 per cent in 2023 to 11.58 per cent in 2024, and further to 3.33 per cent in 2025, marking a major structural shift in foreign investment patterns.

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Meanwhile, total capital importation into the economy has surged, rising sharply from $3.91 billion in 2023 to $12.32 billion in 2024, and nearly doubling again to $23.22 billion in 2025, according to NBS data.

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This disparity highlights a growing preference among foreign investors for short-term financial instruments over long-term productive investments such as manufacturing, which is a key indicator of investor confidence and economic attractiveness.

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A breakdown of fourth quarter (Q4) 2025 data further reinforces this trend, with total capital importation standing at $6.44 billion, representing a 26.61 per cent increase compared to $5.09 billion recorded in the corresponding period of 2024.

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On a quarter-on-quarter basis, inflows rose by 7.13 per cent from $6.01 billion in Q3 2025, with the bulk of these inflows being portfolio investments, which accounted for $5.49 billion or 85.14 per cent of total capital imported during the quarter.

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Other investments contributed $599.65 million (9.31 per cent), while Foreign Direct Investment (FDI) lagged significantly at $357.80 million, representing just 5.55 per cent of total capital importation.

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Sectoral distribution shows that the banking sector attracted the highest inflow at $3.85 billion (59.75 per cent), followed by the financing sector with $1.94 billion (30.15 per cent), while the production/manufacturing sector recorded a modest $308.93 million, accounting for only 4.79 per cent.

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Analysts warn that the sharp decline in manufacturing investment raises concerns about Nigeria's industrialisation prospects, particularly at a time when the country is seeking to diversify away from oil and boost local production.