(Ecofin Agency) - The increase in net foreign capital inflows stems from the gradual reforms undertaken by the Tinubu administration to achieve an exchange rate determined by market forces.

Nigeria saw a significant rise in foreign capital inflows during the first half of 2024, with an increase of 177% compared to the same period in 2023. According to the National Bureau of Statistics (NBS), these flows totaled $5.98 billion.

This surge was largely driven by the return of portfolio investors, following the government's easing of foreign exchange controls. The United Kingdom and the Netherlands were the top sources of foreign capital for Nigeria between January and June 2024, with the banking sector receiving most of the portfolio investments.

After President Bola Tinubu took office in May 2023, his administration launched a major overhaul of Nigeria’s foreign exchange system, aimed at returning to a market-determined exchange rate. As part of this reform, the naira was devalued twice, narrowing the gap between the official exchange rate and the parallel market rate. The government also removed caps on exchange rates for interbank transactions and international money transfers.

In addition, the Central Bank of Nigeria raised interest rates five times since the beginning of 2024 to combat inflation and attract portfolio investors seeking high returns. The bank also plans to automate foreign currency transactions starting in December 2024, which is expected to improve transparency and eliminate any remaining market distortions.