Despite 11.7% FDI Growth, Hot Money Dominates Q2 Capital Inflows

Nigeria recorded an 11.7 per cent increase in foreign direct investment (FDI) in the second quarter of 2026, but short-term portfolio flows continued to dominate foreign capital entering the economy, accounting for more than six times the amount committed as direct investment.

Latest Balance of Payments data from the Central Bank of Nigeria (CBN) showed that FDI inflows rose to $1.15 billion in the second quarter from $1.03 billion in the first three months of the year.

Foreign portfolio investment, often described as hot money because of the relative ease with which investors can move funds in and out of financial assets, climbed faster in absolute terms, rising by $1.06 billion to $7.09 billion from $6.03 billion in the preceding quarter.

This represents a 17.6 per cent increase in portfolio inflows within three months and leaves FDI at just 16.2 per cent of the value of portfolio investment attracted during the quarter.

Put differently, for every $1 of long-term direct investment that entered Nigeria in the second quarter, about $6.17 came through portfolio investments.

Combined FDI and portfolio investment inflows stood at $8.24 billion during the quarter, with portfolio investment accounting for about 86 per cent of the total, compared with just 14 per cent for FDI.

Beyond FDI and portfolio flows, other investment liabilities brought another $2.75 billion into the economy during the quarter. However, Nigerian investments abroad also resulted in capital outflows. Direct investment assets totalled $560 million, while portfolio investment assets totalled $700 million.

Other investment assets generated a much larger $7.96 billion outflow, partly offsetting the foreign capital entering the economy.

Consequently, the country’s financial account recorded a net lending position of $1.74 billion in the second quarter, reversing the $2.03 billion net borrowing position recorded in the preceding quarter.

The improvement in capital flows came alongside a stronger external sector position, as Nigeria’s current account surplus jumped 67.9 per cent quarter on quarter to $7.54 billion from $4.49 billion.

Compared with the corresponding period of 2025, the current account surplus was 45.8 per cent higher than the $5.17 billion recorded in the second quarter of last year.

The improvement was driven largely by a widening goods account surplus, which rose to $10.12 billion from $5.96 billion in the first quarter and $4.85 billion in the corresponding period of 2025.

Total exports climbed to $20.08 billion from $15.56 billion in the preceding quarter, supported by higher earnings from crude oil, natural gas, refined petroleum products and non-oil exports.

Refined petroleum product exports recorded the strongest increase, rising by 66.24 per cent to $3.94 billion, while non-oil exports increased by 25.30 per cent to $3.12 billion.

Diaspora inflows also strengthened the external account, with workers’ remittances rising by 9.8 per cent to $5.82 billion from $5.30 billion in the first quarter