Nigeria’s economy is grappling with a significant setback as foreign direct investment (FDI) nosedived by 70% in the first quarter of 2025, dropping from $421.88 million to $126.29 million, according to the National Bureau of Statistics.
This sharp decline has raised alarms about the country’s ability to attract stable, long-term investments, impacting regions like Rivers State, where economic progress hinges on a robust business environment.FDI, which fuels projects like factories and infrastructure, is vital for job creation and development.
In Rivers State, for instance, foreign investment bolsters industries such as oil and gas, supporting local workers and businesses. However, recent data reveal a troubling trend: investors are increasingly favoring short-term, high-yield options often termed “hot money” like government bonds and treasury bills over sustainable projects.
These short-term investments accounted for over 90% of the $5.64 billion in total capital inflows in Q1 2025, with FDI making up just 2.24% of the total.
While overall capital inflows grew from $5.09 billion in Q4 2024 and $3.38 billion in Q1 2024, the heavy reliance on short-term instruments highlights a disconnect between these headline figures and investments that drive meaningful economic growth.
The preference for short-term investments is largely driven by Nigeria’s high interest rates, part of the Central Bank’s strategy to stabilize the naira. Although these rates attract quick capital, they deter investors from committing to long-term ventures that could benefit communities in places like Port Harcourt.
Such investments, unlike bonds or treasury bills, are crucial for industrial expansion, job creation, and infrastructure development, areas critical to regions like Rivers State.
The 70.36% drop in equity-based FDI underscores waning investor confidence, compounded by past challenges like foreign exchange shortages.
Analysts warn that this trend could stall economic progress, particularly in states like Rivers, where small businesses and youth employment rely on a vibrant economy. Despite a modest 5.97% year-on-year FDI increase from $119.18 million in Q1 2024, the broader outlook remains concerning.
The focus on short-term gains leaves Nigeria vulnerable to sudden capital outflows, which could exacerbate economic woes. In response, policymakers are exploring reforms to restore investor trust, such as simplifying business regulations and stabilizing the currency.
In Rivers State, local efforts are underway to attract sustainable investments in agriculture and technology to counter the national downturn. Nigerians now await bold actions to secure long-term growth, ensuring communities remain connected to global opportunities.
