Foreign investment in Nigeria’s production and manufacturing sector declined to its lowest level in nine years during the first nine months of 2025.
This trend highlights a shift in capital dynamics, as domestic financing increasingly replaces the role previously held by foreign investors.
Analysis of National Bureau of Statistics capital importation data reveals that the manufacturing sector attracted $463.52 million in the nine months of 2025.
This represents a 118.1 percent decline from $1.01 billion recorded in the corresponding period of 2024.
The 2025 inflow falls below levels seen since 2017, when approximately $445 million was reported.
The drop occurs amid growing optimism among investors about macroeconomic reforms and currency stabilization in Nigeria.
Ayo Teriba, CEO of Economic Associates (EA), told BusinessDay that the decline in foreign capital flowing into Nigeria’s manufacturing sector may not signal weakness but rather a structural shift toward stronger domestic financing, indicating that local liquidity is increasingly replacing imported capital.
Nigeria’s equity market growth demonstrates this change.
The market capitalization of the Nigerian Exchange Group increased sharply from N62.7 trillion at the end of 2024 to N99.38 trillion by December 31, 2025.
This expansion created billions of dollars in new equity value, with some directed to manufacturing firms and banks raising fresh capital.
“If overall capital available to manufacturing increased, then a drop in imported capital is not a contraction but a substitution,” he noted. “Domestic issuance can displace foreign inflows when local markets become more liquid and attractive.”
Data shows manufacturing accounted for only eight percent of the total $6.01 billion in foreign capital imported during the review period.
It trailed sectors like financial services, telecommunications, and oil and gas.
Analysts link the trend to global investors preferring sectors with quicker returns and reduced operational risks.
Sola Obadimu, director general of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture, attributed the trend to infrastructure gaps and security concerns that raise production costs and extend planning horizons for foreign investors.
He added that currency depreciation increased input costs in local currency terms and impacted demand expectations due to reduced household purchasing power.
Local manufacturers caution that limited foreign participation hinders scaling production capacity.
International investors provide not only capital but also technical expertise, global supply chain links, and export market access.
“Foreign partners help local firms integrate into global value chains,” said a manufacturing association official. “If inflows decline, it affects competitiveness and reduces the pace of industrial expansion.”
Data from the Manufacturers Association of Nigeria (MAN) indicates the CEO Confidence Index rose by 0.4 points to 50.7 in the third quarter of 2025 from 50.3 in the second quarter.
NBS gross domestic product data for Q3 2025 shows manufacturing real output grew by 1.25 percent in the third quarter, up from 0.8 percent in the same period of 2024.
The sector’s real contribution to GDP in the third quarter stood at 7.62 percent, down from 7.82 percent in the corresponding period of 2024 and 7.81 percent in the second quarter of 2025.
According to MAN’s Q3 report, indices for current business condition, employment, and production levels improved due to ongoing disinflation and greater exchange rate stability.
Segun Ajayi-Kadir, director general of MAN, said current indices remain below the 50-point benchmark despite improvement in business conditions, employment, and production levels linked to disinflation and exchange-rate stability.
He said inflation, interest rates, and exchange-rate conditions continue to affect manufacturing activity.
PwC’s 2026 outlook noted increased adoption of digital systems in manufacturing during 2025, including blockchain, predictive maintenance tools, automation, and connected factory systems.
The firm projected output growth of about 3.1 percent in 2026, driven by tax measures, levy harmonization, and wider use of automated production systems.
It added that investment inflows could rise if policy measures and infrastructure projects advance, while credit access and borrowing costs may constrain large-scale expansion.
Muyiwa Oni, head of research at Stanbic IBTC, said January 2026 purchasing managers’ index data showed business activity grew across agriculture, manufacturing, and services.
“Notably, the government has been visible in infrastructure, livestock development, easing trade constraints, and attracting investments in oil & gas and manufacturing,” he added.
However, the Cost of Doing Business Monitor by the Lagos Chamber of Commerce and Industry showed its industrial sector index, covering manufacturing, mining, and oil and gas, declined from 77.7 in the third quarter of 2025 to 64.5 in the fourth quarter.
Central Bank of Nigeria statistical bulletin data indicates manufacturing foreign exchange demand rose to $1.8 billion in the nine months of 2025, the highest in five years.
This reflects growing demand for raw materials and machinery to expand productive capacity.
This aligns with Teriba’s view that falling foreign capital inflows into manufacturing should not be misread as sectoral weakness.
Stronger domestic financing appears to complement rather than limit industrial activity, with elevated FX demand signaling expanding production capacity and forward-looking investment by manufacturers.
