Foreign investors are naturally drawn to economies that promise higher returns than those in their home countries. With improving macroeconomic indicators, Nigeria is emerging as an increasingly attractive destination for global investment. The Central Bank of Nigeria’s decision to pause interest rate hikes has sparked a rally in the Eurobond market, as investors seize the opportunity of a favourable interest rate environment. Additionally, the reduction in inflation to 24.5% in January, coupled with rising Foreign Direct Investment (FDI) and a growing Gross Domestic Product (GDP), further strengthens Nigeria’s appeal. This combination of factors positions the country as a prime investment hub, writes Assistant Editor, COLLINS NWEZE.
Every great leap in human progress—whether through the printing press, the steam engine or the semiconductor—has been propelled by innovative ideas and forward-thinking policies. But beyond these foundational ideas and policies lies a crucial factor: the ability of policymakers to effectively implement strategies that foster lasting change. By creating the right incentives, they can ensure that businesses and the broader economy can thrive.
In Nigeria’s case, the Central Bank of Nigeria (CBN) and other key economic managers have introduced vital reforms aimed at attracting both local and foreign investors, while also providing domestic businesses with ample opportunities for growth. These reforms have begun to yield positive results, with discerning investors returning to the country and injecting significant capital into the economy, spurred by improving macroeconomic indicators and a growing Gross Domestic Product (GDP). For example, recent investment reports show that Nigeria’s Eurobond market closed February on a positive note, reflecting sustained confidence from foreign investors. Data from the Debt Management Office (DMO) reveals that the average yield on Nigeria’s Eurobonds dropped to 8.80 per cent in February, a decline of 41 basis points from 9.21 per cent at the start of the month—an indication of strong investor demand and growing optimism in the country’s economic prospects.
In the Sub-Saharan African Eurobond market, yields also declined by 27 basis points, averaging 8.4 percent, indicating that Nigeria outperformed the broader region. In its weekly report to investors, Ike Chioke, Managing Director of Afrinvest West Africa, credited the renewed investor interest in Nigeria’s economy to improving macroeconomic dynamics and recent pivots in interest rate policies. Other analysts, however, pointed to global risk-off trends, geopolitical uncertainties, and key economic data releases as major contributors to the yield drop.
Looking ahead, analysts anticipate that the market will continue to perform well, fuelled by strong liquidity inflows from upcoming coupon payments of N642.6 billion and bond maturities totalling N562.5 billion. “Additionally, a dovish interest rate outlook should reinforce the bullish bias. In the Sub Saharan Africa market, the hunt for yield is likely to remain a dominant theme for sustained offshore interest in the region,” they said. In the Sub-Saharan African market, the ongoing search for yield is likely to remain a key driver of sustained offshore interest in the region. The decision by the CBN-led Monetary Policy Committee (MPC) to maintain the current interest rate at its most recent meeting has played a crucial role in sustaining global investors’ interest in Nigeria’s domestic economy. By opting for stability, the MPC has helped reinforce confidence among investors, signaling a predictable and favourable environment for capital flow into the country.
How FDIs benefit the economy
Foreign Direct Investment (FDI) plays a pivotal role in driving economic growth and development in the target country. Analysts explain that FDI occurs when an investor establishes business operations abroad or acquires foreign assets, which may include gaining ownership or controlling interest in a foreign company. FDI comes in various forms, depending on the type of companies involved and the investor’s goals. An investor might engage in FDI by purchasing a company through a merger or acquisition, setting up a new venture, or expanding an existing one. Other forms include acquiring shares in an associated company, establishing a wholly-owned business, or participating in a joint venture that spans international borders.
The benefits of FDI for an economy are wide-ranging. It can stimulate economic development in the target country by fostering a more conducive business environment, benefiting both the investor and local communities. By injecting capital into new or existing companies, FDI creates jobs, opening more employment opportunities. As new businesses are established, they contribute to a rise in local incomes, which increases purchasing power for the local population. This, in turn, leads to a broader boost in the economy, as consumer demand grows and economic activity accelerates. Ultimately, FDI serves as a powerful tool for both economic growth and job creation, helping to strengthen the overall economic landscape of the target country.
What rebased GDP means for businesses, economy
The recent rebasing of Nigeria’s GDP by the National Bureau of Statistics (NBS) after a nine-year gap has provided the economy with a significant boost. This rebasing makes the economy appear larger than previously reported, as it now includes fast-growing and emerging sectors such as fintech, e-commerce, entertainment, and digital services. For businesses and the economy at large, the rebased GDP reflects important sectoral shifts in the contributions to the national economy. Technology, telecommunications, and entertainment (including Nollywood and digital startups) are now expected to hold a larger share of GDP, while traditional sectors like agriculture and oil & gas may see their contribution reduced as newer industries gain prominence.
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According to an Abuja-based public commentator, Ayo Olodo, a key benefit of the rebasing is that informal sector activities, which have traditionally been underestimated, may now be more accurately captured. This can provide a clearer picture of the full scope of economic activity, especially in sectors like trade, small businesses, and services, which are vital to the overall economy. From an economic indicators perspective, the rebased GDP may result in changes such as an improved debt-to-GDP ratio. This could make it appear that Nigeria has more fiscal space to borrow, although it is important to note that the cost of servicing debt remains a significant concern.
Additionally, the rebasing may lead to an increase in per capita income, which sounds promising on paper. However, this does not necessarily translate into improved living standards if inflation remains high, as purchasing power may be eroded. Overall, while the rebased GDP offers a more accurate reflection of Nigeria’s evolving economy, the real impact on citizens’ daily lives will depend on how well inflation, fiscal policies, and living conditions are managed in the coming years. He said: “The Implications for Policy and Investment are also worth mentioning here. Foreign investors may be attracted to newly highlighted sectors that were previously underreported. The government may adjust fiscal and monetary policies to better align with the rebased economy. Taxation policies may be reviewed, especially if certain high-growth sectors are found to be under-taxed.”
Moreover, with significant GDP growth, Nigeria may edge closer to achieving upper-middle-income status, which could have important implications for the country’s eligibility for concessional loans and development aid. As Nigeria’s economic standing improves, it may face fewer opportunities for low-cost financing, typically available to low-income countries, which could shift the dynamics of international financial support.
Speaking at the FirstBank Economic Outlook, Olusegun Alebiosu, Chief Executive Officer of FirstBank Group, highlighted key positive economic indicators, including improving government revenues and a better revenue-to-debt service ratio of 68 per cent. These developments suggest a more sustainable fiscal path. Additionally, the growth in foreign reserve balances to over $40 billion further strengthens the country’s financial position, providing greater stability and confidence for both local and foreign investors. These improvements signal a stronger, more resilient economy, positioning Nigeria for better prospects in both regional and global markets.
He further said: “Early signs such as the stability that characterised the forex market after the introduction of the electronic foreign exchange matching system in December 2024; the emergence of competition on the supply side of our nation’s downstream sector that is leading to falling prices in premium motor spirit (PMS) and the coming back on stream of the Port Harcourt & Warri refineries are indicative that there is, indeed, light at the end of the tunnel for us as a country.” Alebiosu emphasised that the timing of these positive developments has significantly strengthened optimism about Nigeria’s economic outlook, particularly as the country enters 2025. With key indicators showing progress, there is growing confidence that the economy is on a more stable and upward trajectory.
Additionally, the passage of the N54.99 trillion 2025 budget is expected to provide a substantial economic stimulus. The improving government revenue position suggests a lower likelihood of poor budget implementation, which has been a concern in the past. With better financial health, the government is in a stronger position to execute its planned projects and investments, potentially driving further economic growth and development in the coming year.
What the MPC did
In its most recent meeting, the Monetary Policy Committee (MPC) decided to maintain the Monetary Policy Rate (MPR) at 27.50 per cent, keeping all other key parameters unchanged. These include the Cash Reserve Requirement (CRR) for Deposit Money Banks (DMBs) and Merchant Banks, set at 50 per cent and 16 per cent, respectively. The asymmetric corridor around the MPR remains at +500 basis points and -100 basis points, while the liquidity ratio stays at 30 per cent. In terms of inflation, Nigeria’s annual rate stood at 24.48 per cent in January, according to the National Bureau of Statistics (NBS). This marks a significant decrease from the previous month, following the rebasing of Nigeria’s Consumer Price Index (CPI) for the first time in over a decade.
CBN Governor Olayemi Cardoso highlighted that the central bank is focused on consolidating the gains made in the market and emphasised the importance of ensuring that these improvements are sustained moving forward. The goal is to create a stable environment that supports continued economic growth and development. “We will enhance collaboration with the fiscal sector by increasing the depth and regularity of our interactions to drive economic growth. With stabilising forex rates, strengthened price controls, and rising investor confidence, the economy shows strong signs of resilience and recovery,” he said.
Cardoso explained that Nfollowing positive developments in the FX market, the CBN’s focus on boosting liquidity and maintaining transparency in forex operations is sacrosanct. “Our Objectives have been and will continue to be, to achieve stability in the Foreign Exchange and the Financial markets. CBN will continue to embrace orthodoxy and stay the course. We remain vigilant and will not take anything for granted; inflation has been too high for too long, and our goal is to bring it down from double digits to single digits in the medium to long term,” he said.
In February, the naira strengthened by 6.95 per cent, reaching N1,510/$ in the parallel market. This improvement was driven by factors such as expectations of a more favourable exchange rate, subdued demand for foreign exchange, and sustained interventions by the CBN. Real sector businesses welcomed the MPC’s decision to hold interest rates steady, seeing it as a move that would sustain the naira’s rally and help reduce the rising cost of borrowing. The MPC’s decision was based on its expectation of robust GDP growth in the medium term, largely driven by strong performance in the non-oil sector. Additionally, the committee noted the sustained rise in domestic crude oil production (reaching 1.74 million barrels per day), anticipating that the oil sector will make a more significant contribution to overall GDP growth, further strengthening the economy.
The MPC also acknowledged the recent rebasing of the Consumer Price Index (CPI) and the adjustments in the weights of items in the CPI basket, highlighting that the new methodology better reflects current consumption patterns. In addition, the committee expressed optimism that inflationary pressures will moderate in the near future, supported by a relatively stable naira and a gradual decrease in the price of Premium Motor Spirit (PMS).
The MPC emphasised the recent appreciation of the naira, which has been supported by improved foreign exchange (FX) liquidity. The Committee also acknowledged the Central Bank of Nigeria’s (CBN) ongoing efforts to enhance transparency and credibility in the FX market, particularly through the implementation of the Electronic Foreign Exchange System (EFEMS) and the Nigerian Foreign Exchange Market (NFEM) FX Code. The MPC expects these continued policy initiatives to foster greater foreign direct investment (FDI) and portfolio investments, as increased investor confidence is anticipated. Additionally, the Committee highlighted the positive impact of rising domestic crude oil production, which is expected to strengthen the current account balance and support further accretion of FX reserves, contributing to overall economic stability.
Boost in investment and remittances
There has been a notable boost in both investment and remittances, with remittances through International Money Transfer Operators (IMTOs) rising by 79.4 per cent to US$4.18 billion in the first three quarters of 2024. This surge demonstrates the positive impact of the recent foreign exchange (FX) reforms implemented by the CBN. Additionally, the CBN took a significant step by lifting the 2015 restriction that had previously barred 41 items from accessing FX at the official market. This move is expected to enhance trade and investment by improving the flow of foreign exchange into the economy.
These reforms highlight the CBN’s commitment to fostering an enabling environment for inclusive economic development. However, achieving sustained macroeconomic stability will require continued vigilance and a proactive monetary policy stance to address emerging challenges and ensure long-term growth. “As we shift from unorthodox to orthodox monetary policy, the CBN remains committed to restoring confidence, strengthening policy credibility, and staying focused on its core mandate of price stability,” Cardoso reaffirmed.
To address the pressing issue of inflation, the Central Bank of Nigeria (CBN) made a decisive move by raising the Monetary Policy Rate (MPR) by 875 basis points to 27.5 per cent in 2024. This bold step was crucial in containing inflation and restoring economic stability. Analysts believe that these measures, under the leadership of CBN Governor Cardoso, have not only bolstered the foreign exchange market but also laid the foundation for long-term economic stability. The decisive actions have created a more predictable environment, fostering investor confidence and supporting sustainable growth.
Equally important is the resilience of Nigeria’s domestic economy, underpinned by a strong and sound financial system. Key financial indicators, such as capital adequacy, liquidity, and Non-Performing Loans (NPLs) ratios, have remained within prudential limits, reflecting effective regulatory oversight and robust risk management practices within the banking sector. Moreover, significant credit has been extended to growth-promoting sectors like agriculture, manufacturing, and commerce, as well as to individuals and households, further driving economic activity and contributing to the overall stability and growth of the economy.
The credit extended to key sectors played a pivotal role in stimulating economic activities and supporting output performance, underscoring the importance of financial institutions and sound regulatory practices under the leadership of the Central Bank of Nigeria (CBN). In addition to these efforts, the CBN has proactively taken strategic steps to address inflation. One such initiative was the recent hosting of the Monetary Policy Forum 2025, which brought together fiscal authorities, legislators, private sector stakeholders, development partners, subject-matter experts, and scholars. The theme of the forum, “Managing the Disinflation Process,” reflects the CBN’s commitment to tackling inflation head-on.
Governor Cardoso highlighted that the apex bank’s primary focus is to sustain price stability, which includes a planned transition to an inflation-targeting framework. This strategy aims to restore purchasing power and ease the economic hardships faced by citizens, ensuring long-term stability and improving the overall economic environment. The CBN is continuing its disciplined approach to monetary policy, aimed at curbing inflation and stabilising the economy. “These actions have yielded measurable progress: relative stability in the FX market, narrowing exchange rate disparities, and a rise in external reserves to over $40 billion as of December 2024.
“The CBN also focused on strengthening the banking sector, introducing new minimum capital requirements for banks (effective March 2026) to ensure resilience and position Nigeria’s banking industry for a $1 trillion economy,” he said.
To further strengthen the foreign exchange market, the CBN introduced the Electronic Foreign Exchange Matching System (EFEMS), a tool that has proven effective in other markets globally. The primary aim of this system is to address forex market distortions, curb speculative activities, and promote greater transparency. EFEMS, commonly used in both developed and developing markets, provides real-time information on currency rates, trading volumes, and market activity, enhancing market efficiency and credibility. For many stakeholders, these measures under Governor Cardoso’s leadership have not only stabilised the forex market but also laid a solid foundation for the economy and businesses to thrive. By fostering transparency and reducing volatility, these reforms offer a more predictable and reliable environment, which is crucial for long-term economic growth and development.
Inflation decline raises hope for naira
In its 2025 macroeconomic outlook, Comercio Partners emphasized that the recent rebasing of Nigeria’s Consumer Price Index (CPI) to 2024 could have statistical effects that may lead to a reduction in inflation figures. As expected, Nigeria’s annual inflation rate dropped to 24.48 per cent in January, according to the NBS. This decline marked a significant improvement from the previous month’s figure, following the rebasing of the CPI for the first time in over a decade.
The combination of factors such as the stabilisation of exchange rates, the normalisation of energy prices after the removal of fuel subsidies, and improved liquidity in the forex market has provided a solid foundation for Nigeria’s economy. These developments offer hope that the country could achieve price stability within the year, which would be crucial for restoring purchasing power and further supporting the naira’s value.
The Comercio Partners report highlighted the critical role of expanding local refining capacity, particularly with the launch of the Dangote Refinery. This development is expected to significantly reduce the impact of exchange rate fluctuations on energy prices. By increasing reliance on domestically refined petroleum, Nigeria stands to experience a reduction in energy price volatility, which has long been a challenge for the economy. Combined with a more stable exchange rate, this shift is anticipated to lower production and transportation costs, leading to a positive ripple effect throughout the broader economy. Lower energy prices will directly benefit businesses by reducing operational costs, which can then translate into lower consumer prices and improved economic efficiency.
Ifeanyi Ubah, Head of Investment Research and Global Macro Strategist, stated, “We expect headline inflation to decrease to around 15 percent in the first half of 2025, signaling a gradual return to economic stability.” The expansion of local refining capacity and stabilisation in energy prices are key factors contributing to this optimistic outlook, providing the foundation for broader economic recovery. The need to control inflation and maintain exchange rate stability were crucial factors influencing the Monetary Policy Committee (MPC) decision to keep rates unchanged during its 299th meeting held last week in Abuja.
As a result, the Committee voted to keep the Monetary Policy Rate (MPR) steady at 27.50 per cent, while also maintaining all other key parameters. These include the Cash Reserve Requirement (CRR) for Deposit Money Banks (DMBs) at 50 per cent, and for Merchant Banks at 16 per cent. Additionally, the asymmetric corridor around the MPR remains at +500 basis points and -100 basis points, with the liquidity ratio held steady at 30 percent. By maintaining these parameters, the MPC aims to strike a balance between containing inflationary pressures and ensuring the stability of the exchange rate, while also fostering an environment conducive to economic growth.
Dollar holdings by central banks
Recent data from the International Monetary Fund (IMF) under its Currency Composition of Official Foreign Exchange Reserves (COFER) report reveals a gradual decline in the US dollar’s share of allocated foreign reserves held by central banks and governments. This shift reflects a broader trend in the global financial landscape.
Interestingly, the reduced dominance of the US dollar over the past two decades has not been offset by increases in the shares of the other major currencies, such as the euro, yen, and pound. Instead, the decline in the dollar’s share has been accompanied by a rise in the use of nontraditional reserve currencies. These include the Australian dollar, Canadian dollar, Chinese renminbi, South Korean won, Singaporean dollar, and the Nordic currencies. This shift suggests a diversification of foreign reserves, as central banks seek to reduce their reliance on the US dollar, while increasing their holdings in a broader range of currencies to mitigate risk and enhance financial stability
One nontraditional reserve currency that has been gaining market share is the Chinese renminbi, which has accounted for about a quarter of the decline in the US dollar’s share of global reserves. The Chinese government has been actively advancing policies to promote the internationalisation of the renminbi, including the development of a cross-border payment system, the expansion of swap lines with other countries, and the piloting of a central bank digital currency (CBDC).
However, despite these efforts, it is interesting to note that the internationalisation of the renminbi, at least in terms of its share in global reserves, appears to be showing signs of stagnation. This could suggest that, while the Chinese currency is gaining traction, the pace of its adoption as a global reserve currency may be slower than expected, facing challenges such as capital controls, geopolitical considerations, and the dominance of other established reserve currencies.
