Nigerians are sighing and groaning over the crushing weight of spiraling double digit inflation which has depleted the purchasing power of the naira in everyone’s pocket. Ironically, the international community is seeing glowing investment opportunities in Nigeria at the same time.
Foreign direct and portfolio investors are falling over each other in the hot scramble to invest in Nigeria.
It is a rather strange development triggered by the simmering wars in the Middle East and the brewing trade war engendered by the enigmatic tariff hikes by Donald John Trump, America’s pugnacious president. The global investment climate has become very unpredictable because of the wars in the Middle East and Trump’s tariff war. The price of crude oil has been fluctuating in the last several months because of these developments.
Crude oil price tumbled from $75 to $65 per barrel within weeks of Trump’s declaration of tariff war against scores of countries including America’s allies in Canada and the European Union (EU).
The prevailing fears that the punitive tariff hikes would torch off a trade war and force down the consumption of crude oil by leading industrial nations like China was behind the tumbling crude oil prices.
Along with the falling crude oil prices was a marked decline in leading stock markets all over the globe.
There were fears that the brewing trade war would conjure massive declines in corporate bodies’ financial returns leading to remarkably low returns on investments.
Consequently, the World Bank downgraded its projected growth for most of the developed countries for 2025 because of the uncertainty in the global economic outlook.
Just as Trump’s tariff war was taking a toll on global oil prices, Israel launched massive strikes on Iranian nuclear sites along with targeted attacks on the country’s military high command which depleted Iran’s military leadership.
Crude oil prices suddenly surged when market watchers concluded that Israel will take out Iran’s oil production facilities and cut global daily production by at least 2 million barrels.
America backed Israel by striking Iran’s nuclear sites with bunker bursting bombs weighing 15 tonnes each. When Iranian oil facilities were spared, oil prices tumbled from $75 per barrel to $65 per barrel. Foreign direct investors and their counterparts in portfolio investment have been suspicious of the global developments and are afraid of investing in developed economies and the Middle East because of prevailing uncertainties.
Global stock markets have consequently tumbled significantly. Ironically, the development in Nigeria has defied both the uncertainty triggered by the war in the Middle East and Trump’s tariff war along with the double digit inflation plaguing the country internally.
Foreign portfolio investors see Nigeria as a strangely safe country for their money at the moment. Developments in the country’s economy appear to justify the foreign direct and portfolio investors’ perception.
Nigeria’s spiraling double digit inflation is heading south. Inflation now hovers around 21 per cent, down from 34 per cent in February 2025. The country’s crude oil production which tumbled to a record 1.4 million barrels per day has resurged to 1.7 million barrels per day.
That and the commencement of crude oil refining and consequent export of refined petroleum products by the Dangote Refinery have combined to improve Nigeria’s foreign exchange earning capacity.
The country’s foreign reserves rose from the endemic rate of $33 billion over the decades to a record $40 billion in November 2024.
Consequently, foreign portfolio investors are scrambling to invest in the Nigerian stock market. The market has therefore defied the southward journey of global stock markets as its capitalisation surges. The market capitalisation of the Nigerian Stock Exchange (NGX) stands menacingly at a record N79.7 trillion. Last Friday NGX capitalisation rose by N1.07 trillion in one day.
During the first half of 2025, foreign portfolio investors pumped a record $8 billion into the NGX. The figure is expected to double by year end. NGX return on investment during the first half of 2025 surged to 32.2 per cent. The perception is that no other capital market recorded such gains during the period.
Nigeria’s fixed income instruments like the federal government bonds have become very attractive to investors in the whole globe.
CardinaldStone, a leading investor in the global financial system, has reviewed upward its assessment of Nigeria’s fixed income instruments.
While the World Bank recently downgraded its growth projections for most of the developed countries, the International Monetary Fund (IMF) upgraded its growth projections for Nigeria in 2025 from three per cent to 3.4 per cent after concluding its Article 4 consultations with Nigeria.
Investment in Nigeria is surging even as the country is plagued by one of the world’s most catastrophic infrastructure deficits. Nigeria generates a paltry 5,000 megawatts (mw) of electricity for its population of 218 million.
Adebayo Adelabu, Nigeria’s minister of power, recently lamented that private generators produce 40,000mw of electricity daily while public power facilities merely chip in a scant 5,000mw.
The power supply problem is so precarious that the Manufacturers Association of Nigeria (MAN) recently lamented that its members spent a staggering N1 trillion on diesel and petrol for fueling their power generation plants in 2024.
Experts are worried that Nigeria can only sustain the surge in foreign direct and portfolio investments if it takes appropriate steps to improve its faltering infrastructure especially power supply.
Even the rail system is deep in decay. The failure of the rail system is partially blamed for the surging food inflation. In the absence of a functional rail system, food is evacuated from inaccessible rural farming communities through dilapidated roads dotted with hundreds of illegal toll gates mounted by corrupt law enforcement agencies who extort money from transporters. One of the transport associations recently warned that its members spend enormous sums on the illegal toll gates daily.
The money extorted from transporters is factored into the final cost of the food items evacuated thus fueling food inflation. Government has to develop a functional rail system along with improved power supply to sustain the surging foreign investments.