The Future of FDI in Nigeria: Opportunities and Risks

Among all the countries in the African continent, Nigeria will always attract the attention of foreign investors. Being the most populous country in Africa and the largest economy, it has a gravitational force that is huge and unquestionable in attracting global capital. However, its association with Foreign Direct Investment (FDI) has been a tale of unrealized potential, a topsy-turvy cycle of busts and booms, which is pegged on oil prices and policy changes. In this new era of the economy, Nigeria today is at a crossroad. The future of it as an FDI destination will be the result of a multifaceted interplay between its strengths and its capacity to decisively address the weaknesses that it has well underlined

Investment prospects are large and have their basis in long-term and underlying realities. The first one is the demographic dividend. Nigeria has a population of more than 200 million people, with more than 60% of them below the age of 25, and it presents one of the final frontier markets. This reflects in a huge and expanding consumer market, a large labour force and a vibrant youthful energy that is increasingly being directed to entrepreneurship. This brings us to the second significant opportunity: the rapidly growing digital economy. The tech industry in Nigeria has gained a stronghold in the region, and it is now the unrivalled leader in the African continent in terms of venture capital. Whether it is fintech giants such as Flutterwave and Paystack or emerging e-commerce and EdTech startups, the ecosystem has proven a strong pull on investment in search of high growth in a digital-first future.

Other than demographics and technology, there is the resource base of Nigeria, which is also a major attraction. Although oil and gas remain important, new reforms, especially the Petroleum Industry Act (PIA), are intended to open up long-stagnant investment in this vital sector through the offering of more predictable regulatory frameworks and fiscal terms. Moreover, there is increasing interest in the diversification of other resources, such as huge solid minerals deposits and renewable energy potential, especially solar. The recent drive by the government to enhance the business environment, particularly the highly publicized Investment and Securities Act 2025 that reforms capital market regulation and the current push to align foreign exchange rates, are concrete initiatives which have been well received by the international business community. The reforms are an indicator of a desire to shift towards ad-hoc policies of the past and develop a more transparent and rules-based system.

But these attractive opportunities are offset by a series of chronic and harsh risks, which cause many institutional investors to pause. The macroeconomic environment is the priority. The high inflation has reduced consumer purchasing power and also made business life tough due to high costs. The reaction of the Central Bank of Nigeria, which has raised interest rates to control inflation, has rendered local borrowing too costly, and this has killed local investment and it has created difficulties in financial forecasting by the foreign entrants. Another problem closely associated with this is the ever-present problem of foreign exchange liquidity. Although there have been attempts to standardize the exchange rate, the availability of U.S dollars to repatriate the profits, as well as to import the raw materials that are needed to run operations, has been a major operational challenge, which has brought about uncertainty and, in effect, provided an investment tax.

Perhaps the most visceral risk is the insecurity across large parts of the country. From insurgency in the Northeast to rampant kidnapping and banditry in the Northwest and communal clashes in the Middle Belt, these security challenges disrupt agricultural supply chains, threaten personnel and assets, and deter the expatriate talent essential for managing complex investments. This insecurity directly undermines one of Nigeria’s key advantages: its large internal market.

Ultimately, the future trajectory of FDI in Nigeria hinges on governance. The scale of the opportunity is undeniable and has been for decades. The difference between a breakthrough and another cycle of stagnation will be determined by the government’s ability to deepen and sustain its reform agenda. This goes beyond high-level legislation. It requires tangible improvements in the day-to-day realities of doing business: strengthening institutions to ensure transparent contract enforcement, enhancing regulatory clarity to protect investors, and decisively addressing the security and macroeconomic instability that currently clouds the nation’s bright potential.