How Nigeria Reclaimed Its Position as Africa’s Top FDI Destination in 2025

Nigeria has experienced a tremendous turnaround in the economy, as it has regained its title as the leading destination of Foreign Direct Investment (FDI) in Africa in 2025. This reversal is being led through wide-scale reform, strategic infrastructure developments, and renewed investor confidence in the world. UNCTAD data show that in the first half of 2025, Nigeria recorded over 12 billion dollars in FDI inflows, surpassing the conventional regional leaders, South Africa and Egypt. This paper examines the forces behind this revival, the areas that are driving it, and the obstacles that are still in place.

Drivers of Nigeria’s FDI Resurgence

1. Policy Reforms and Economic Stability: The government of Nigeria has carried out several drastic reforms to stabilize the economy and raise foreign capital. Most notable of these is the harmonization of the exchange rate, which decreased the volatility of the currency and gave a clearer indication to investors. Also, the Investment and Securities Act (ISA) of 2025 has updated capital market regulations, expressly regulating the use of virtual assets and digital investment contracts. This has been especially attractive to tech investors who want to be certain and clear.

2. Sectoral Diversification and Infrastructure Projects: 2025 has seen a diversification in FDI to other sectors such as renewable energy, technology and manufacturing, unlike in the previous years where most of the FDI was concentrated in extractive industries. The Konexa solar plant, supported by blended finance of 80 million, and the 122 billion investment target of the National Integrated Electricity Policy have attracted massive foreign attention. The financing and banking industries received more than $2.1 billion and over 3.1 billion, respectively, in Q1 2025, reflecting the financial services sector in the growth of FDI.

3. International Investor Confidence: Sovereign wealth funds in the Middle East, Asia and Europe are also showing increasing interest in Nigerian assets. The United Kingdom is the highest contributor to its capital imports, which constituted 65.26% of the total imports in Q1 2025, followed by South Africa and Mauritius. The recent feeling of confidence is also due to the fact that Nigeria has been trying to deal with structural problems like security threats by implementing strategies like Multi-Agency Anti-Kidnap Fusion Cell, which has made the country safer in the major areas.

Persistent Challenges and Risks

Despite these positive trends, Nigeria must address several structural bottlenecks to sustain its FDI momentum:

Infrastructure Deficits: Power shortages and logistical bottlenecks continue to hinder operational efficiency for businesses. While reforms in the energy sector are underway, the reliability of electricity supply remains a concern for manufacturers and tech companies.

Governance and Political Risks: Corruption, bureaucratic red tape, and policy inconsistencies are lingering issues. Moreover, with the 2027 elections approaching, political stability is crucial. The emergence of a strong opposition coalition, the African Democratic Congress (ADC), could introduce policy uncertainties if there is a shift in leadership.

FDI Quality and Composition: Although overall capital importation has surged, FDI remains a small fraction (2.2% in Q1 2025) of total inflows, dominated by portfolio investments ("hot money"), which are volatile and sensitive to global sentiment. To ensure long-term growth, Nigeria must attract more stable, equity-based FDI that commits to job creation and technology transfer.

The fact that Nigeria is once again the leading FDI destination in Africa in 2025 is a testimony to the effects of the strategic reforms and the trust of global investors. Nevertheless, the road to the future must take into consideration the existing problems, such as infrastructural shortages, governance systems, and political concerns. With the ability to maintain gains and achieve policy continuity, Nigeria has the potential to realize long-term sustainable growth that will be beneficial to investors and its population. The stakes are also high, but the opportunities are even greater.