LCCI CAUTIONS ON RISING COSTS, WEAK FDI DESPITE INFLATION RELIEF
The Lagos Chamber of Commerce and Industry (LCCI) notes with mixed feelings the latest data from the National Bureau of Statistics (NBS) on inflation and capital importation. While headline inflation has eased for the fourth consecutive month and capital inflows rose significantly in Q1 2025, the details reveal persisting structural weaknesses that continue to weigh on the economy.
Nigeria’s headline inflation rate dropped to 21.88 per cent in July 2025, down from 22.22 per cent in June and well below the 33.40 per cent recorded in July 2024. This is welcome progress and reflects the impact of recent reforms and changes in the CPI base year. However, the month-on-month inflation rate increased to 1.99 per cent in July, up from 1.68 per cent in June, showing that prices still rise in real time for households and businesses.
Though inflation is moderating annually, food inflation remains elevated at 22.74 per cent year-on-year, with rural communities experiencing sharper monthly increases than urban centres. This persistent rise in food costs underscores the urgent need for targeted interventions in agriculture, rural infrastructure, and logistics efficiency to ease supply-side bottlenecks. We need policy interventions that support more productive economic activities, create sufficient supply, make goods available at the right places, create jobs, and let businesses thrive in an enabling business environment. The interventions should deal with energy cost, power supply, logistics, infrastructure deficits, business process bottlenecks around licensing and registration, access to credit, and FOREX liquidity through non-oil exports.
On capital importation, Nigeria attracted $5.64 billion in Q1 2025, representing a 67% year-on-year increase and 11% growth quarter-on-quarter. While this surge signals renewed investor interest, the structure of inflows raises concern. Over 90 per cent of total inflows were in portfolio investments, short-term funds chasing high yields in government securities. By contrast, Foreign Direct Investment (FDI) plunged to $126.29 million, down 70 per cent from the previous quarter, accounting for just 2.24 per cent of total inflows.
This imbalance reveals that investors remain cautious about making long-term commitments to Nigeria’s real sector. Particularly worrying is the continued decline in investment into manufacturing, which attracted only $129.92 million in Q1 2025, a 32 per cent drop from the same period in 2024. Weak inflows into this critical sector reflect persistent challenges around forex liquidity, energy costs, job losses, and operating uncertainties, all of which have driven several multinationals to scale back or exit.
The LCCI therefore calls for urgent measures to translate macro-level gains into broad-based, sustainable growth including the following:
- Deepen structural reforms to create a more efficient oil and gas sector that supports cheaper energy and logistics costs. Similarly, we need a more structured and efficient power sector to increase electricity supply.
- Strengthen incentives for FDI, including stable tax and regulatory frameworks that reduce perceived risks.
- Rebuild domestic investor confidence, as local capital commitments often precede foreign inflows.
- Consolidate macroeconomic stability, ensuring predictable exchange rate management and monetary policies.
- Expand agricultural support to tackle food inflation, especially in rural areas with acute cost pressures.
- Reposition manufacturing and industry through targeted policies that attract capital into value-adding and job-creating sectors.
The easing of headline inflation and the rise in capital inflows are encouraging signals. However, we must not lose sight of Nigerian households grappling with rising costs, and investors are hesitant to commit long-term capital. The heavy reliance on short-term portfolio inflows is not sustainable. Our economy urgently needs a deliberate strategy to attract and retain productive investment that drives jobs, industrial growth, and long-term competitiveness.
Dr. Chinyere Almona, FCA
Director General
Lagos Chamber of Commerce and Industry
Wednesday 20th August 2025
