Foreign direct investment into Nigeria’s production and manufacturing sector plunged by 54.11 percent in the first nine months of 2025, even as total capital inflows more than doubled, exposing a fundamental disconnect between the country’s attractiveness to speculative capital and its ability to secure long-term commitments to productive enterprise. Data from the National Bureau of Statistics show the sector attracted $463.52 million between January and September 2025, down sharply from $1.01 billion in the same period of 2024. This collapse occurred against a backdrop of total capital importation soaring to $16.78 billion, a 131.96 percent increase from $7.23 billion a year earlier.
The divergence deepened in the third quarter, when portfolio investment accounted for 80.7 percent of all inflows at $4.85 billion, while foreign direct investment lagged at $296.25 million. Production and manufacturing drew just $261.35 million, a mere 4.35 percent of total quarterly inflows. The pattern confirms that Nigeria’s reform momentum, including foreign exchange liberalisation and monetary policy tightening, has successfully attracted yield-seeking capital while doing little to address the structural impediments deterring industrial investors.
Stakeholders attribute the decline to persistent operational challenges that undermine the viability of long-term manufacturing commitments. Frank Ike Onyebu, former chairman of the Manufacturers Association of Nigeria’s Apapa branch, cited a “worsening business environment” despite foreign exchange stability, noting that new charges, rising power costs, and escalating logistics expenses continue to squeeze profitability. Manufacturers now spend approximately 40 percent of total production costs on energy generation, a burden that renders Nigerian operations uncompetitive against regional peers.
The dominance of banking and financing sectors in attracting capital tells its own story. In Q3 2025, banking alone received $3.14 billion, or 52.25 percent of total inflows, while the broader financing sector captured another $1.86 billion. Professor Segun Ajibola, former president of the Chartered Institute of Bankers, explained that investors are “ultimately driven by safety and returns,” and the banking sector’s recapitalisation drive offers precisely that combination. The implication is stark: capital is flowing to where risks are manageable and returns predictable, not to where economic transformation happens.
The structural headwinds facing manufacturing are well documented but remain unaddressed. Dr. Muda Yusuf, director of the Centre for the Promotion of Private Enterprise, identified inadequate infrastructure, poor port facilities, high logistics costs, unreliable energy supply, elevated borrowing costs, and exchange rate instability as binding constraints. These are not new problems, but their persistence signals to investors that Nigeria has yet to create the enabling environment necessary for industrial capital formation.
Compounding these supply-side constraints is weak domestic demand. Yusuf warned that Nigeria’s reputation as Africa’s largest market rings hollow without commensurate purchasing power. “Unless the citizens have the purchasing power, that claim may be interrogated,” he stated. Unsold inventory and weak consumption further deter investment in production capacity, creating a vicious cycle where lack of demand discourages investment, and lack of investment perpetuates economic stagnation.
The Federal Government has responded with the National Industrial Policy 2025, unveiled by President Bola Tinubu with a target of raising manufacturing’s GDP contribution to 15 percent by 2030. The policy prioritises energy reform, renewable adoption, state-level electricity autonomy, and private sector-led power solutions for industrial clusters. It also proposes lease-to-own models for renewable systems, support for independent power projects within industrial estates, and full implementation of the Electricity Act 2023 to unlock subnational energy markets.
Aliko Dangote, whose industrial conglomerate epitomises Nigeria’s manufacturing potential, used the policy launch to underscore the urgency of power sector reform. “Without power, there is no way in any country you can create growth or create jobs,” he warned, calling for a national retreat to harmonise reforms and tackle systemic electricity challenges. His intervention reflects private sector frustration with the gap between policy ambition and on-the-ground reality.
The policy’s success will be measured not by documents produced but by whether it can reverse the investment trends documented in the NBS data. President Tinubu acknowledged this explicitly at the launch, stating that success would be measured “by the number of factories that open their gates at dawn, by the jobs created for our young men and women, by the exports that leave our ports bearing the mark of Nigerian excellence”.
For now, the data paints a sobering picture. Nigeria is successfully attracting capital but failing to channel it toward the productive sectors that generate employment, diversify exports, and build sustainable economic resilience. The challenge facing the new industrial policy is not merely to articulate a vision but to dismantle the structural barriers that have made manufacturing a marginal destination for the very capital the country so desperately needs.
