CBN Reforms: Banking Sector Leads As FDI Surge Raises Investors’ Confidence

Capital inflows to Nigeria hit $5.6bn in the first quarter of 2025, the National Bureau of Statistics (NBS) data shows. The inflows represent significant gains from diverse reforms instituted by the Central Bank of Nigeria to make the country attractive destination for local and foreign investors. For many stakeholders, the $3.1bn inflow to the banking sector, representing 55.44 per cent of the total capital inflows, shows how financial sector stability is buoying investors to the domestic economy.

There is rising interest from domestic and global investors in Nigeria assets, as seen in the latest capital inflows to the country.

The rising investors’ interest is linked to fallout of crucial reforms instituted by the Central Bank of Nigeria (CBN) under the Olayemi Cardoso leadership.

Upon assuming office in October 2023, the apex bank leadership had prioritised reforms to rebuild Nigeria’s economic buffers and strengthen resilience.

CBN’s policies, including the currency reforms, led to investment inflows from abroad, and reduced interventions in the domestic forex market.

The unification of exchange rates and the clearing of over $7bn FX backlog raised the country’s investment outlook, with multilateral organizations, like the World Bank describing it as bold intervention to improve the economy’s sustainability in the long run.

Also, Nigeria’s sovereign risk spread has fallen to the lowest level since January 2020, erasing the premium accumulated during the pandemic and subsequent strain on its economy. All these are deliberate efforts to woo investors and sustain capital inflows to the economy.

Assessing Reforms Impact On FX Inflows

These reforms have led to surge in capital inflows into the Nigeria economy. The inflows rose to $5.6bn in the first quarter of 2025, the National Bureau of Statistics (NBS) report has shown. The inflows represent 67.12 per cent jump from $3.4bn recorded in the same period of last year.

The latest “Nigeria Capital Importation Q1 2025” report released represents 10.86 per cent surge from the $5.1bn reported in fourth quarter of 2024.

“In Q1 2025, total capital importation into Nigeria stood at $5642.07m, higher than $3.37bn recorded in Q1 2024, indicating an increase of 67.12 per cent. In comparison to the preceding quarter, capital importation increased by 10.86 per cent from $5.08bn in Q4 2024,” the report stated.

The NBS also stated that portfolio investment ranked top with $5.2bn, accounting for 92.25 per cent, followed by other investment with $311.17m, accounting for 5.52 per cent.

The report indicated that, “Foreign Direct Investment recorded the least with $126.29m accounting for 2.24 per cent of total capital importation in Q1 2025.”

According to the NBS, the banking sector took the lead with the highest inflows in Q1 2025.

The report stated, “The Banking sector recorded the highest inflow with $3.1bn, representing 55.44 per cent of total capital imported in Q1 2025, followed by the Financing sector, valued at $2.09 billion (37.18 per cent), and Production/Manufacturing sector with $129.92m (2.30 per cent).”

The report further noted that capital importation during the reference period originated largely from the United Kingdom with $3681.96m, showing 65.26 per cent of the total capital imported.

In emailed note to investors, Managing Director, Afrinvest West Africa Limited, Ike Chioke, explained that Portfolio Investment (92.2 per cent of total capital) dominated flows, rising by 30.1 per cent quarter-on-quarter, and 150.8 per cent year-on-year to $5.2bn.

The bulk of the FPI flows was to Money market instruments (up 162.2 per cent year-on-year to $4.2 billion), while Bonds (up 108.5 per cent) and Equities (up 137.7 per cent) attracted $877.4m and $117.3m respectively.

Rebased GDP Presents New Opportunities

Nigeria’s hope of achieving $1tn economy by 2030 will gain significant support from the banking sector.

Nigeria’s statistician-general, Adeyemi Adeniran, had explained how the economy fared in the rebased Gross Domestic Product (GDP) report. He said: “In nominal terms, the rebased GDP for 2019 stood at N205.09tn N213.63tn in 2020, N243.30tn in 2021, N274.23tn in 2022, N314.02tn in 2023, and N372.82tn in 2024”.

The NBS noted that in 2019, the rebased nominal GDP at basic prices represented an increase of 41.7 per cent over the nominal GDP of 2019 of the old base year (2010), 39 per cent in 2020, 38.7 per cent in 2021, 36.1 per cent in 2022, 34.6 per cent in 2023 and 35.4 per cent in 2024.

“The results show that the structure of the Nigerian economy has changed significantly with a rise in the share of agriculture and services sectors and a fall in the share of the industries sector in nominal terms, indicating a shift in the structure of the Nigerian economy than earlier reported,” the NBS said.

Adeniran further explained that the rebasing allows the country to better reflect the realities of the economy. “It’s not just about a bigger number but about accurate, timely data that supports smarter policy and economic planning,” he said.

Banking Sector To The Rescue

A well-recapitalised banking sector is undeniably crucial for the growth of the domestic economy. Hence, Olayemi Cardoso, Central Bank of Nigeria (CBN) governor, advised banks to prepare for a new round of recapitalisation to ensure they have the necessary capital to support the Federal Government’s plan to achieve $1 trillion Gross Domestic Product (GDP) target by 2030.

He said that President Bola Ahmed Tinubu’s economic plan aims to reach a $1tn GDP by 2030, emphasising that the current bank capitalisation is insufficient to support such a large economic scale.

Cardoso asked: “Will Nigerian banks have sufficient capital relative to the financial system’s needs in servicing a $1tn economy in the near future? In my opinion, the answer is “No!” unless we take action. That action was the ongoing recapitalisation of banks, meant to prepare them for expansion and attract big ticket transactions to support economic growth”.

The Policy Advisory Council report on the national economy, had set an ambitious goal of achieving a GDP of $1tn, with clearly defined priority areas and strategies.

Adeniran revealed that incorporated new and emerging sectors, consumption baskets update, and data collection refining methods helped produce a more complete picture of national output.

Aliyu Ilias, developmental economist, noted that several sectors have previously remained uncaptured in official data, particularly entertainment. “By rebasing our GDP now, included those areas properly. This new visibility will make Nigeria appear much stronger to foreign investors, which will naturally help us attract more capital,” he said.

He explained that the exercise will also reveal untapped economic potential and guide government resource allocation. “It will show where we are strongest structurally, such as in mining or other emerging sectors. That insight will help the government focus its efforts more strategically.”

“Finally,” he added, “it will support economic policy formulation, helping us align our strategy with the reality on the ground. We will know exactly where to put more effort.”

Ilias explained that while this statistical adjustment does not instantly generate new revenue, it creates a more reliable framework for fiscal planning, investment strategies, and development interventions.

For him, by aligning economic data with current realities, the government and private sector can more effectively target policies that stimulate job creation, improve productivity, and sustain long-term growth.

Seun Onigbinde, director of Civic Technology Group BudgIT, said the previous rebasing underscored the substantial impact of policy changes in the services and ICT sectors, such as telecommunications deregulation and banking sector recapitalisation.

“Rebasing of the GDP must reflect changes in the economy, which are a product of public policies over time,” he added.

Rebasing is also critical for domestic policy. It allows the government to better assess tax collection efficiency, measure sectoral contributions, and design social programmes that are data-driven and results-oriented.

Gabriel Okeowo, country director for BudgIT, said, “Rebasing allows planners to be more intentional about solving Nigeria’s biggest problems: poverty, infrastructure gaps, and job creation.”

Lagos-based economist, Nelson Adedeji, explained that despite the bump in GDP size, the rebasing never a silver bullet.

“We must acknowledge that genuine economic growth extends beyond statistical adjustments. For ordinary Nigerians to experience meaningful improvement in living standards, the President Bola Tinubu administration must complement GDP rebasing with substantive policies addressing infrastructure deficits, security challenges, agricultural productivity, manufacturing capacity, and the overall ease of doing business,” he stated.

Views From Stakeholders

While US President Donald Trump’s widening trade war has taken emerging markets on a wild ride, Nigeria has quietly held its own, attracting foreign capital reassured by currency reforms and other measures designed to revive the economy of Africa’s most-populous nation.

“Nigeria appears to be back in business as long-awaited economic reforms take shape,” said Emre Akcakmak, portfolio manager at East Capital. Key measures include improved currency liquidity, leeway for investors to repatriate their profit, and the stable naira.

“We feel the Central Bank of Nigeria will continue to stem any sharp appreciation of the naira to limit profit taking from the fast money community,” Akcakmak said.

“Portfolio inflows have likely been supported by improved confidence amid key structural reforms, better FX market functioning and moderating dollar-naira volatility, as well as the still-robust nominal yield buffer,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc told Bloomberg.

“Besides, Nigeria’s local market is seen as less correlated with global risk conditions than more liquid EM peers,” he said.

The Nigeria’s economy and businesses will have so many things to cheer in 2025 and the impact of the economic reforms in FX market, exchange and huge budge outlays begin to pay off for them.

Nigeria’s economy is already exiting the most painful phase of the reform adjustment process in 2025, Bismarck Rewane, managing director, Financial Derivatives Company Limited, predicted.

Rewane projected that the economy would begin to recover from the toughest phase of its reform adjustments this year, emphasizing the importance of strategic policy implementation and institutional reforms.

He noted that while the fundamentals of Nigeria’s exchange rate indicate that the naira should be stronger, achieving stability depends on an efficient and effectively managed FX system. He stressed that the primary challenge lies not in the reforms themselves but in their management, citing poorly sequenced policy changes and insufficient structural reforms as significant obstacles.

He underlined the critical role of investment in driving economic growth. “Revenue alone is not enough,” Rewane stated. “Investment is key, but it will be influenced by confidence, transparency, and the right policies.”

He also called attention to persistent challenges such as power supply inefficiencies and the lack of transparency in the oil and gas sector, which require immediate attention through structural reforms.

Rewane said that 2025 is going to be less hard, less painful, less difficult than last year. He said the fact that things were so difficult in 2024, does not in anyway indicate that the difficulties will persist this year.

CBN Reforms: Banking Sector Leads As FDI Surge Raises Investors’ Confidence is first published on The Whistler Newspaper