This week, we focus on the recently published capital importation data for Q1:2025 which signalled the strongest investment flows in 20 quarters.
Capital importation captures financial and physical capital entering a country from offshore sources, based on banking sector and Customs records. These inflows expand the capital stock available to drive economic growth and often serve as a litmus test of an economy’s health and international investment competitiveness.
Based on the number released, Capital imported to Nigeria rose by 10.9% q/q to $5.6bn in Q1:2025 – the highest level since Q1:2020 ($5.9bn) – supported by strong growth in Portfolio Investment (up 30.1% q/q), which outweighed downturn in Other Investment (down 53.4%) and Foreign Direct Investment – FDI (down 70.1%).
Consequently, on a y/y basis, total capital surged 67.1%, underpinned by favourable yield on Naira assets amid stabilising price and currency in Q1.
In details, Portfolio Investment (92.2% of total capital) dominated flows, rising by 30.1% q/q and 150.8% y/y to $5.2bn. The bulk of the FPI flows was to Money market instruments (up 162.2% y/y to $4.2bn), while Bonds (up 108.5%) and Equities (up 137.7%) attracted $877.4m and $117.3m respectively.
Elsewhere, FDI – patient form of capital – rose 6.0% y/y to $126.3m but contracted 70.1% q/q, resulting in a total share of 2.2% in overall capital imported (Q1-2024: 3.5% share). Meanwhile, Other Investments fell 53.3% q/q and 73.0% y/y to $311.2m.
Sectoral Breakdown
The sectoral breakdown of the Q1:2025 capital inflows shows that Banking (55.4%) and Financing (37.2%) were top recipient, accounting for a combined share of 92.6% of imported capital. In contrast, Production/Manufacturing and Telecoms attracted only a paltry 2.3% and 1.4% respectively.
On a geographical basis, inflows were heavily skewed towards FCT ($3.0bn) and Lagos ($2.6bn) which together captured 99.7% of the overall investment.
On the surface, the rise in quarterly capital importation to a five-year high might suggest renewed foreign investor optimism in the domestic economy. While partially accurate, the quality of inflows raises concern. For instance, the share of portfolio flows (“hot money”) in total capital rose to 92.2% from 61.5% and 78.6% in Q1:2024 and Q4:2024 respectively.
In our view, this spike was driven by opportunistic investments in the money market, where Treasury Bills, Bonds, and OMO bills offered rates above 20.0% in the period. However, such flows are highly sensitive to shifts in domestic monetary policy, global risk sentiment, and macroeconomic shocks, and flows momentum could wane when the CBN pivots to a more accommodative rate stance.
Meanwhile, the share of FDI – a cheaper and more impactful capital on long-term economic growth – continues to diminish. This trend is reflective of low confidence in the long-term prospects of the economy amid the legacy issues of insecurity, weak institutions and enforcement of law, bureaucratic inefficiencies, and a high corruption perception. Similarly, weak traction into non-financial sectors such as Manufacturing, ICT, Construction, Oil & Gas, and Transporation, paints a less compelling picture of the overall surge in capital inflows in Q1.
We note that while the uptick may support currency stability and short-term growth spurts, the underlying quality of these inflows mirrors previous episodes of hot-money dependence that heightened vulnerability to external shocks.
Lastly, the concentration of investments in Lagos and Abuja (only 0.4% of the $5.6bn inflows were directed elsewhere) spotlights the deep competitiveness gaps across subnationals. Hence, subnational governments need to strengthen their business environments and improve overall investment attractiveness.
For FY:2025, we project capital importation to reach $19.3m, implying a 56.1% y/y increase. The outlook is informed by favourable domestic interest rate environment and price-currency stability, impact of tariff-war on global investment sentiment and potential for subsequent US rate cut.
Domestic Equities Market: Positive Outing on Customs Street… ASI up 3.2% w/w
This week, the local bourse closed in the green for the eleventh consecutive time on the back of gains in the Insurance and Industrial Goods tickers. Consequently, the NGX-ASI rose 3.2% w/w to 145,754.91 points. Similarly, market capitalisation rose by 3.2%, translating to a ₦2.8tn gain to close at ₦92.2tn, while YTD return strengthened to 41.6% (previously 37.2%).
Activity level varied as average volume traded rose 80.2% w/w to 1.7bn units while value traded dipped 10.1% w/w to ₦26.9bn. Top traded stocks by volume were LINKASSURE (1.6bn units), UNIVINSURE (461.8m units), and STERLINGNG (455.7m units), while DANGCEM (₦13.6bn), ZENITH (₦12.6bn), and GTCO (₦12.5bn) led by value.
Across our coverage sectors performance was positive, as five indices gained, while the Banking index fell 0.8% w/w due to price depreciation in ZENITH (-2.4%) and ACCESSCORP (-1.4%). The Insurance and Industrial Goods indices led the gainers for the week, up 41.0% and 8.7% respectively, on the back of gains in MBENEFIT (+60.4%), AIICO (+59.8%), BUACEMENT (+13.9%), and DANGCEM (+9.2%).
Similarly, price appreciation in GUINNESS (+33.1%), BUAFOODS (+18.9%), OMATEK (+17.4%), and ETRANSACT (+8.9%) pushed the Consumer Goods and AFR-ICT indices up 8.3% and 0.6% w/w, respectively. Following, the Oil & Gas index rose 0.2% w/w on the back of buy interest in OANDO (+5.5%) and JAPAULGOLD (+4.6%).
Investor sentiment, as measured by market breadth, improved to 0.6x previously 0.1x as 64 stocks gained, 39 lost, while 39 remained unchanged. Top gainers for the week were MBENEFIT (+60.4%), AIICO (+59.8%), and ROYALEX (+59.8%), while LIVINGTRUST (-24.1%), ACADEMY (-18.2%), and UPDCREDIT (-11.8%) topped the losers’ chart. Next week, we expect the bourse to halt its 11-week bullish run, as several stocks now has limited upside potential.
Afrinvest
