Nigeria is witnessing a significant rebound of foreign investment in its capital markets, signalling a restoration of confidence among global portfolio investors. This resurgence comes as the nation advances currency reforms, market transparency and regulatory adjustments marking what analysts describe as a turning point in the country’s financial-market narrative.
According to research from financial media outlets, foreign portfolio inflows into Nigerian equities surged by nearly 846% over two years, reaching about ₦1 trillion by September 2025. This comeback is credited largely to improved foreign-exchange (FX) conditions, stronger corporate earnings and deeper market liquidity.
Rebuilding Confidence
Historically, Nigeria’s capital-market attractiveness suffered from multiple headwinds: currency volatility, multiple exchange-rate windows, regulatory uncertainty and high interest-rate burdens. These factors translated into elevated risk premia and discouraged long-term foreign participation. However, since late 2023 and into 2024-25, policy interventions have begun shifting sentiment. The central bank’s clearing of FX backlogs and gradual decontrol of the naira have been cited as game-changers in recent assessments of the investor climate.
Foreign investors are now returning in meaningful numbers. For the five-month period ended May 2025, foreign participation in the Nigerian Exchange Group (NGX) reached a five-year high, accounting for nearly 29 % of transactions, more than double the participation seen in the same period of 2023. Total foreign portfolio turnover for that interval surpassed ₦996 billion, compared to ₦458 billion in the comparable period a year earlier.
What’s Fueling the Rally?
Several factors are contributing to the renewed inbound flows:
- FX Improvement & Policy Clarity: With the narrowing of the gap between official and parallel-market rates and clearer FX allocation processes, investors perceive a significantly improved operating environment.
- Corporate Performance: Many Nigerian companies especially those in banking, telecoms and consumer goods have reported stronger margins, improved cost-management and better forex hedging, boosting investor interest.
- Attractive Valuations: Relative to some regional peers, Nigerian equities remain relatively undervalued. The combination of cheaper entry valuations and improving fundamentals is compelling for yield-seeking investors.
- Market Reform Narrative: Recapitalisation efforts in the banking sector, listing expansions on the NGX and improved governance signals are contributing to an improved narrative of reform and resilience.
Market Impact & Broader Implications
The uptick in foreign participation is already having visible impacts. Market liquidity is rising; for H1 2025, the NGX’s total transaction value rose by 61 % to ₦4.19 trillion, up from ₦2.6 trillion in H1 2024. The All-Share Index climbed strongly, and several major sectors posted year-to-date gains outpacing many African peers.
For domestic businesses and issuers, the return of foreign capital opens up several opportunities: enhanced access to global funding, improved valuation metrics, and greater investor confidence which can support rights issues, bond issuances and expansion plans. For regulators and policymakers, the momentum provides a platform to deepen reform, enhance market infrastructure and promote greater capital-market inclusion.
Risks and Fragilities
Despite the positive signs, several risks must be monitored:
- FX Exposure & Currency Risk: Nigeria remains vulnerable to foreign-exchange shocks. A reversal in FX policy or a sharp external shock could reverse the inflow trend.
- Interest-Rate Pressure & Inflation: With inflation still elevated in the low-twenties, and monetary policy tight, cost of capital remains high potentially dampening further flows if not managed.
- Concentration Risk: Foreign flows remain skewed to larger cap stocks and major sectors. Broader market depth and participation are still developing.
- Policy Reversal Risk: The flow rebound is underpinned by reform optimism. Any perceived policy instability such as new foreign-investment restrictions could erode confidence quickly.
What to Watch Going Forward
Key indicators and events that will inform how sustainable this inflow trend is include:
- Net foreign portfolio inflow/outflow trends: Are inflows sustained month-on-month or is this bounce short-lived?
- FX rate stability and movement: Strength or stability of the naira will be a crucial signal to foreign investors.
- Corporate earnings and dividend flows: Do listed firms deliver improved returns, especially for foreign holders?
- Regulatory developments: Clarity on cross-border capital flows, repatriation rules, and listing regime will matter.
- Market breadth & SME participation: Is the participation deepening beyond the few large stocks, supporting sustainable market development?
The return of foreign investment to Nigeria’s capital markets marks an important milestone in the country’s economic trajectory. After years of inward capital flight, the spike in foreign portfolio participation reflects renewed investor confidence in Nigeria’s reform agenda, corporate performance and FX framework.
However, the true test is not the return of foreign flows but their sustainability, breadth and contribution to real-sector growth. For GNA TV’s audience of policymakers, investors and businesses, the message is clear: the tide appears to be turning but unlocking the full potential of this shift will require consistent reform, macro-stability and inclusive market development.
