Portfolio funds dominate Nigeria’s $10.37bn Q1 inflows, says PwC

FOREIGN portfolio investors (FPI) accounted for almost all of Nigeria’s $10.37 billion capital inflows in the first quarter (Q2) of 2026, while foreign direct investment contributed just 1.3 percent, PwC has said.

The firm disclosed this in its second half (H2) 2026 Nigeria Economic Outlook, noting that total capital importation rose 83.8 percent year-on-year during the period.

FPI increased by 89.5 percent year-on-year and 79.77 percent quarter-on-quarter to $9.86 billion, representing 95.1 percent of total foreign capital entering the country.

In contrast, FDI rose 6.96 percent year-on-year to $135.08 million. PwC said the relatively small share of FDI showed that Nigeria was attracting substantial foreign interest but had yet to convert much of it into long-term investment in productive assets.

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The firm said the immediate challenge was to turn the strong appetite for Nigerian financial assets into capital committed to businesses, infrastructure and other productive activities.

According to PwC, money market instruments attracted $6.5 billion, while bonds received $3.23 billion, indicating that foreign investors remained heavily focused on financial-market opportunities.

PwC said Nigeria could improve FDI inflows by providing greater policy certainty, developing more bankable projects and improving the overall operating environment for businesses.

It added that removing approval, land, financing and foreign exchange constraints would help investment translate into increased production, stronger supply chains and job creation.

Private-sector lending lags

The report also highlighted weak private-sector credit as a major constraint on business expansion and investment.

PwC said private-sector credit was equivalent to 21.3 percent of GDP, significantly below the 33 percent average recorded across sub-Saharan Africa.

It noted that lending to the private sector increased by only 6.9 percent between December 2025 and May 2026, compared with an 18 percent rise in credit to government.

The imbalance became more pronounced between February and May, when private-sector credit fell 14.3 percent while government credit rose 2.6 percent.

PwC attributed the situation partly to tight monetary conditions, which have supported price and foreign exchange stability but kept borrowing costs elevated.

The firm proposed credit windows, partial credit guarantees and blended financing to improve access to funds for MSMEs seeking loans of between N500,000 and N30 million.

Debt service limits fiscal space

PwC also warned that fiscal pressures could remain high through the H2 of 2026 because of continued expenditure demands, the budget deficit and government financing requirements.

It said weaker-than-expected revenue could force the government to borrow more, potentially worsening debt-service pressures.

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The firm identified debt service as Nigeria’s major fiscal vulnerability, pointing out that almost half of government revenue was used to service debt in 2025.

PwC said the burden was restricting funds available for capital projects and other investments that could support economic expansion.

While acknowledging progress in macroeconomic stabilisation, the firm said households had not yet fully benefited from the improvement.

It cited high essential living costs, weak income and employment gains, restricted access to credit and inadequate social protection as factors limiting improvements in household purchasing power.

PwC recommended targeted household support, improved agricultural output, better storage and logistics systems, and increased domestic energy supply to help ease pressure on household costs.