Cowry Research has sounded a note of caution over Nigeria’s recent rebound in capital imports, warning that the current inflow structure remains predominantly composed of short-term funds that leave the economy highly susceptible to volatility.

The firm noted that such dependence on short-term portfolio investments creates a fragile foundation for economic stability, as these funds can exit the market as quickly as they arrive.

According to the report, even marginal shifts in global investor sentiment, the escalation of geopolitical tensions, or the tightening of trade protectionist measures, particularly those linked to President Donald Trump’s renewed tariff regime, could set off a wave of capital flight, swiftly eroding the recent gains made in external inflows.

While acknowledging these vulnerabilities, Cowry Research underscored that the uptick in capital importation nonetheless reflects a marked improvement in investor confidence toward Nigeria’s macroeconomic prospects.

It explained that this recovery has been underpinned by a confluence of positive domestic developments. Notably, foreign exchange markets have begun to stabilise after a prolonged period of volatility, inflation has been on a consistent downward trend since January 2025, and the government has embarked on policy and structural reforms designed to make the investment climate more transparent, predictable, and attractive to global investors.

These factors have not only bolstered the country’s appeal to portfolio managers but have also helped reposition Nigeria within the competitive landscape of emerging markets seeking foreign capital.

However, Cowry Research stressed that the challenge now lies in converting this short-term boost into a foundation for long-term economic stability.
Over-reliance on portfolio inflows, often described as ‘hot money’ due to their tendency to move quickly in and out of markets, means the country remains exposed to abrupt global market swings and policy changes beyond its control.

For Nigeria to reduce this risk, the report recommended a strategic shift toward attracting long-term, patient capital such as foreign direct investment, which is more resilient to external shocks.

To achieve this transition, Cowry Research called for deeper structural reforms across key sectors of the economy, including measures to improve infrastructure, streamline regulatory processes, and enhance the ease of doing business.

It also urged the government to prioritise tackling insecurity, which has been a persistent deterrent to both domestic and foreign investors, and to maintain a stable and credible macroeconomic policy framework.

By addressing these core challenges, the firm argued, Nigeria can build a more sustainable investment profile, enhance economic resilience, and secure a steady inflow of capital that will support development and growth well beyond the current cycle of market optimism.