Foreign investors’ confidence in Nigeria’s manufacturing sector continues to weaken as foreign direct investment (FDI) into the industry declined sharply in the first quarter of 2025 (Q1’25).
According to the National Bureau of Statistics (NBS), FDI in the sector fell by 32.3 percent to $129.92 million in Q1’25, compared to $191.92 million recorded in the same period of 2024 (Q1’24). This marks a persistent downward trend over the past three years.
The latest figure accounts for only 2.3 percent of total capital importation during the review period.
Capital Importation Trends
Despite the decline in manufacturing FDI, Nigeria’s overall capital importation rose significantly. Total inflows in Q1’25 stood at $5.64 billion, reflecting a 67.12 percent increase from the $3.38 billion recorded in Q1’24 and a 10.86 percent rise compared to $5.09 billion in Q4’24.
A breakdown of the data shows:
Portfolio Investment dominated inflows at $5.20 billion (92.25%)
Other Investment followed with $311.17 million (5.52%)
Foreign Direct Investment (FDI) was the lowest at $126.29 million (2.24%)
Manufacturing Sector Decline
The manufacturing sector’s performance reflects a consistent year-on-year contraction in foreign investment. In Q1’25, it received $129.92 million, a decline from $191.92 million in Q1’24 (down 32.3%), which itself was 25.1 percent lower than $256.12 million in Q1’23.
On a quarter-on-quarter basis, the decline was even more severe. FDI inflows into the sector in Q1’25 dropped 69 percent from $421.04 million recorded in Q4’24.
Sectoral analysis shows that manufacturing ranked far behind others in attracting foreign capital:
Banking sector: $3.13 billion (55.44%)
Financing sector: $2.10 billion (37.18%)
Manufacturing sector: $129.92 million (2.30%)
Structural Barriers
Analysts attribute the sector’s poor performance to persistent structural bottlenecks, including:
Inadequate and unreliable power supply
High energy and production costs
Severe foreign exchange (FX) shortages
Policy inconsistency and uncertainty
These constraints have pushed many investors to favor short-term financial instruments over long-term commitments in manufacturing.
Expert Perspective
Commenting on the situation, Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), explained that the manufacturing sector has borne the brunt of recent economic reforms.
> “The sector has a huge exposure to foreign exchange due to its high dependence on imports. The reforms in the forex market, including currency depreciation and exchange rate convergence, had a severe impact on manufacturing.
> “Another major challenge was the sharp increase in energy costs. The removal of petrol subsidy, although targeted at fuel, indirectly affected diesel prices, which manufacturers rely heavily on. This pushed up logistics costs and eroded returns on investment.
> “For multinational companies, the shocks were even more pronounced. It is only now that some of them are beginning to show signs of recovery.”
