Index trend
Previous quarterly editions
Expropriation risk: 68 68 68 68 ► Political violence risk:67 66 67 66 ►Terrorism risk:82 83 85 85 ▲Exchange transfer and trade sanction risk: 64 64 64 64 ►Sovereign default risk:82 82 74 74 ►
Overall Risk Temperature: 73 (Medium high) TREND ►
Special topic: Gray zone aggression
Degree to which the country relies on outbound gray zone action to achieve its strategic objectives1 = Not at all5 = Gray zone action is a core tactic
1
Impact of inbound gray zone attacks on the country1 = Negligible impact5 = Significant impact on economic growth and/or political stability
There is little or no evidence to suggest that Nigeria has ever attempted to exploit gray zone aggression techniques to achieve its objectives against regional or international countries and similarly little or no evidence indicating that the West African country has been the target of such attacks.
Nigeria generally has cordial relations with its neighbors in the regional Economic Community of West African States, despite periodic trade frictions. Newly elected President Bola Tinubu is anxious to attract foreign investment from China, the European Union and the U.S. Ties with Russia have never been particularly close but have become somewhat strained recently following the arrest of 40 people in the north of the country in August for waving the Russian flag during protests over the high cost of living, amid Abuja’s fears that Moscow may be meddling in its internal affairs.
With the explosion of internet penetration over the past decade — now at 55% of the population or 123 million users, with 84% of all internet traffic carried on mobile phones — vulnerabilities to gray zone activity in cyberspace are obvious. Given the exponential increase in internet penetration, the potential for Nigeria to partake in or be the victim of cyberattacks directed by foreign governments can no longer be ignored. Nigeria’s rapidly growing digital economy faces escalating threats from hackers, which now face the second highest number of cyberattacks in Africa and the 50th highest globally. The federal government issued 33 cyberattack advisories over the past year — 22 of them since January. Regular reports by the Nigerian Police Force Cybercrime Unit and related agencies acknowledge a vast increase in cybercrime affecting the private and public sectors in recent years but have little to say about hacks from malign foreign state actors. Such bodies are candid, however, in acknowledging that most cybercrime is perpetrated by unemployed youth in a country where 20 million graduates have no gainful employment.
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Nigeria continues to struggle with attempts to improve its poor governance, weak institutions, deteriorating security, long-term economic decline and poor leadership, which make the country’s business climate one of the most challenging jurisdictions to operate in on the African continent.
While the risk of outright expropriation or confiscation of assets remains remote, a growing list of multinational companies — including Proctor & Gamble, Unilever, Guinness and ShopRite — have abandoned manufacturing in the country in favor of operating distribution networks or have exited the country altogether because of the difficulties faced in doing business.
It took 20 years to pass the Petroleum Industries Act (PIA), but most analysts think it is unlikely to attract fresh foreign investment into the country’s onshore sector (which most international oil companies are in a rush to flee in favor of the offshore sector). This is because of the difficulties of operating onshore, especially the challenge of managing community relations in the Niger Delta where between one-third and half of output is stolen.
Two decades ago, Nigeria was a major African oil producer pumping 2.5 million barrels a day. Not only has output fallen dramatically but fresh discoveries in western, southern and eastern Africa have stripped Nigeria of the importance it once had.
Ten of the 124 protestors arrested in August during the civil society #EndBadGovernace protests across the country have been charged with treason and attempts to sabotage the government — charges that can carry the death penalty.
The protests came in the wake of the abolition of fuel subsidies, which saw prices triple overnight, and the abolition of exchange controls, which triggered a 100% devaluation in value of the naira that led to the cost of imports — including food — increasing by 40%.
The charges — regarded as unusually harsh by Nigerian standards — have been interpreted as the authorities sending out a strong message about its intolerance of dissent and its determination to press ahead with long overdue macro-fiscal reforms.
The government has since suspended taxes on food imports and authorized the importation of 250,000 tons of wheat and 250,000 tons of maize, aiming to ease food shortages. However, this may not be enough to end street protests if severe hardship continues.
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More than 30 people were killed and others injured in the northern town of Gwoza in Borno state in June following the latest attack by a suicide bomber, whom the authorities believe to have been female. Borno state has been the center of a 15-year insurgency by Boko Haram/Islamic State West Africa Province (ISWAP), which has claimed the lives of an estimated 40,000 people and displaced 2.7 million others. The authorities believe that the suspected female suicide bomber — the latest in a series of similar attacks — may have been recruited from the 270 schoolgirls kidnapped in the town of Chibok in 2014. Half of suicide bombers in northern Nigeria are believed to be female.
There are also growing fears of jihadists using regional networks to equip themselves with drone technology, according to South Africa’s Institute for Security Studies. The institute says that Boko Haram, ISWAP and al-Shabab are acquiring drone technology for their own purposes, citing evidence of ISWAP using drones to shoot propaganda videos showcasing a training camp, and for use in surveillance before mounting attacks.
Nigeria’s inflation fell for a second consecutive month in August, down to 32.15% year-on-year, compared with 33.40% in July — although food price inflation touched 40%. Runaway inflation — which reached a 28-year high in April of 33.69% — has been driven by the abolition of fuel subsidies, exchange rate reform and off-the-books loans of $19 billion to the government by Central Bank Governor Godwin Emefiele — who is now facing trial by the Economic and Financial Crimes Commission charged with a $4.5 billion fraud (he denies any wrongdoing).
Hopes for a further slowdown in the rate of inflation are likely to be short-lived following two additional fuel price hikes in September, which have further angered Nigerians struggling with the worst cost-of-living crisis in a generation, and by widespread floods in the north, which have washed away crops and could result in higher food price inflation.
The central bank has raised rates four times this year, which are now standing at 26.75% — an all-time high. The average interest rate in Nigeria between 2007 and 2024 was 12.29%, which contrasts markedly with current highs, and effectively chokes off any potential for businesses borrowing to finance investment and growth.
Nigeria’s debt-to-GDP ratio remains low at 37.4%, compared with most other African states. Debt servicing consumed 68% of federal revenues in the first half of 2024 — highlighting the high cost of borrowing in the current high interest rate climate — although this is an improvement on the cost of debt servicing in previous years.
While there appears little prospect of Nigeria defaulting on its foreign or domestic debt obligations, recent estimates by J.P. Morgan Chase suggest that Nigeria’s net foreign reserves stand at $4 billion dollars — significantly lower than the official Nigerian estimate of $34 billion dollars. Nigeria has a reputation for presenting “optimistic” official figures, and if the J.P. Morgan estimate proves correct, Nigeria has a far smaller capital cushion, and therefore significantly less liquidity, than most foreign observers may realize.
