Capital importation: Despite rebound, CPPE expresses concerns on structural risks

The Centre for the Promotion of Private Enterprise (CPPE) has said despite the significant rebound in Nigeria’s capital importation in the third quarter of 2025, there are still vulnerabilities and structural risks to be addressed.

In the period under review, total inflows rose to US$6.01 billion, representing a remarkable 380 percent year-on-year increase and a 17 percent quarter-on-quarter growth.

But, CPPE, in a statement issued by its Chief Executive Officer,  Dr. Muda Yusuf, on Sunday, argued that while the headline numbers remain encouraging, a deeper examination of the structure and distribution of inflows, however, revealed underlying vulnerabilities that must be addressed to ensure durability and long-term economic transformation.

According to the Centre, the resurgence in capital importation is overwhelmingly portfolio-led, with more than 80 percent of total inflows in Q3 2025 portfolio investments, while foreign direct investment (FDI) accounted for less than five percent.

It expressed concerns about such composition, noting that portfolio flows, by nature, are highly sensitive to global interest-rate movements, risk sentiment, and policy credibility.

“They provide liquidity support and can help stabilise financial markets in the short term, but volatile and prone to sudden reversals.

Sustainable economic growth, job creation, and export expansion depend not on short-term capital but on stable, long-horizon FDI tied to production, infrastructure, manufacturing, and technology transfer,” it added.

The organisation, therefore, described the current structure as reflecting cyclical financial recovery, rather than structural economic transformation.

It described the development as weak transmission to the real economy, since the bulk of inflows went into the banking and financial sectors, with only marginal allocation to manufacturing, infrastructure, and other productive activities.

The Centre expressed concerns that such rise in capital importation is not yet translating into meaningful expansion of productive capacity, noting that without stronger capital flows into industry, agro-processing, logistics, energy, and export-oriented manufacturing, the broader economy will see limited gains in employment, productivity, and inclusive growth.

“Financial deepening without real-sector expansion risks creating a liquidity-driven recovery that does not fundamentally alter Nigeria’s productive base,” it argued.

CPPE noted that the current capital-flow structure exposes the economy to several risks, such as sudden portfolio reversals, which could destabilise exchange rates and external reserves; persistently weak FDI, reflecting unresolved structural constraints in power supply, infrastructure, logistics efficiency, and regulatory predictability, among others.

It therefore called on government to deliberately incentivise capital flows into export-oriented manufacturing, agro-processing, mineral beneficiation, industrial parks, and infrastructure development.

The Centre argued that without such policy direction, foreign capital would remain concentrated in short-term financial instruments rather than real economic assets.