Foreign investment in manufacturing dips as binding constraints persist

Nigeria’s manufacturing sector continues to struggle with dwindling foreign direct investment (FDI), which fell by 32.3% to $129.92 million in Q1 2025, compared to $191.92 million in Q1 2024. This figure represents only 2.3% of total capital importation during the period, highlighting the sector’s weak attractiveness to foreign investors. By contrast, Nigeria recorded a 67.1% overall increase in capital inflows year-on-year, with Q1 2025 bringing in $5.64 billion against $3.38 billion in Q1 2024.

Data from the National Bureau of Statistics (NBS) shows a steady decline in manufacturing FDI over the past three years. In Q1 2023, the sector attracted $256.12 million, which fell to $191.92 million in Q1 2024 and further down to $129.92 million in Q1 2025. On a quarterly basis, the decline is even sharper: the sector lost 69% of FDI between Q4 2024 ($421.04 million) and Q1 2025.

Analysts attribute this downturn to persistent structural bottlenecks: unreliable electricity supply, soaring energy costs, forex scarcity, and policy uncertainty. These challenges have discouraged long-term industrial commitments, while foreign investors increasingly prefer short-term, high-return instruments. In Q1 2025, portfolio investment dominated capital inflows with $5.20 billion (92.25%), followed by other investments at $311.17 million (5.52%), leaving FDI the lowest at just $126.29 million (2.24%).

Sectoral analysis shows the banking sector led inflows with $3.13 billion (55.44%),followed by financing ($2.10 billion, 37.18%), while manufacturing trailed far behind with just $129.92 million (2.30%).

According to Dr. Muda Yusuf of the Centre for the Promotion of Private Enterprise (CPPE), manufacturing has been one of the hardest-hit sectors by recent economic reforms. The foreign exchange reforms, including currency depreciation and convergence, hurt manufacturers due to their heavy import dependence. Meanwhile, the removal of fuel subsidy and higher diesel prices have sharply raised logistics and energy costs, eroding profitability. Multinational firms were especially affected, though Yusuf noted that some are only now beginning to recover.