After a year of significant outflows, Nigeria’s equity market celebrated a return to positive territory in 2025 with a net foreign portfolio inflow of ₦161.05 billion, a figure that appears to signal a revival of international confidence. This turnaround, which reversed the previous year’s ₦59.21 billion net outflow, was driven by total foreign inflows of ₦1.40 trillion marginally exceeding total outflows of ₦1.24 trillion. On the surface, these numbers suggest a market on the mend, successfully luring back offshore capital after a period of apprehension. However, a deeper examination of the monthly data reveals a far more complex and precarious situation. The headline figure masks significant volatility and a concerning lack of sustained investment, raising critical questions about the durability of this recovery. The market’s performance was not a story of steady, broad-based growth but rather one punctuated by sporadic, high-impact events that obscure the underlying caution still pervading the investment landscape. This points to a recovery that may be more illusion than reality, built on a shaky foundation rather than solid, long-term investor conviction.
A Closer Look at the Numbers
The annual data for 2025 painted a picture of heightened activity, even if commitment remained shallow. Total foreign portfolio transactions surged by an impressive 210.72%, reaching ₦2.65 trillion. This dramatic increase in trading volume indicates that foreign investors were far more engaged with the Nigerian market than in the previous year. Both inflows and outflows saw substantial rises, suggesting a dynamic environment where capital was moving rapidly in both directions. This flurry of activity, while generating a modest net positive inflow for the year, points more toward a speculative or opportunistic approach from international players. Recent foreign exchange market reforms, aimed at improving liquidity and easing repatriation concerns, likely played a role in encouraging this increased participation. Investors, feeling more confident that they could move their capital out of the country if needed, were more willing to enter the market. However, the slim margin between total inflows and outflows underscores the delicate balance, indicating that this renewed interest was tentative and highly sensitive to market conditions and policy signals.
The positive annual net inflow for 2025 was almost entirely attributable to an extraordinary performance in a single month. In September alone, the market recorded a staggering net inflow of ₦263.30 billion, an anomaly that single-handedly pushed the full-year figures into positive territory. Without this exceptional event, which was likely driven by specific, large-scale transactions such as major block trades or index rebalancing events, the year would have ended with a substantial net outflow. This heavy reliance on a one-off occurrence highlights the fundamental fragility of the recovery. Most other months throughout the year displayed a very different trend, characterized by either modest gains or significant net outflows. For instance, July saw a considerable withdrawal of foreign capital, with a net outflow of ₦44.99 billion. This stark monthly volatility demonstrates that foreign investment was not a steady stream but rather an unpredictable series of episodic engagements, suggesting a lack of broad, sustained confidence in the market’s long-term prospects.
Understanding Investor Behavior and Economic Headwinds
The pattern of capital movement throughout 2025 strongly suggests that foreign investors were not pursuing long-term, value-based investment strategies. Instead, their behavior was characterized by tactical, short-term maneuvers designed to capitalize on brief market rallies and currency fluctuations. Investors appeared to be entering the market selectively, aiming to secure quick profits before exiting at the first sign of instability or after achieving their target returns. This “hit-and-run” approach is indicative of a market perceived as high-risk, where long-term exposure is deemed too uncertain. Lingering macroeconomic challenges, including persistent inflation and unpredictable currency movements, continued to weigh heavily on investor sentiment. While foreign exchange reforms did reduce some of the critical risks associated with capital repatriation, they did not eliminate the broader economic concerns that keep long-term investors on the sidelines. The result was a market with high transactional velocity but low capital stickiness, where money flowed in and out rapidly without contributing to stable, foundational growth.
The Path to a Sustainable Inflow
The experience of 2025 provided clear lessons on what is required to transform these fleeting inflows into durable, long-term capital. The sporadic nature of foreign investment underscored that fundamental macroeconomic stability is non-negotiable for building lasting investor confidence. Achieving greater stability, providing clearer and more consistent foreign exchange policies, and ensuring stronger corporate earnings visibility were identified as critical pillars for attracting sustained investment. Investors needed to see a predictable economic environment where they could forecast returns with a reasonable degree of certainty. The year’s events showed that while policy tweaks could generate short-term interest, only a comprehensive and credible commitment to structural economic reforms could convince global capital managers to make the long-term commitments Nigeria’s market truly needs for a robust and resilient recovery.
