Index trend
Previous Quarterly Editions
Expropriation risk: 68 68 67 66 ► Political violence risk:67 66 73 73 ►Terrorism risk:83 85 85 88 ▲Exchange transfer and trade sanction risk: 64 64 64 64 ►Sovereign default risk:74 74 74 74 ►
Overall Risk Temperature: 75 (High 1) TREND ►
Special topic: Political polarization
Home to more than 300 ethnic groups — dominated by the Hausa (29%), Yoruba (15%) and Igbo (15%) — and speaking some 500 languages, Nigeria is a highly diverse country riven by ethnic, sectarian and separatist fault lines, often cynically exploited by politicians in the run-up to presidential and legislative elections.
The presidency and seats in the National Assembly are fiercely contested, as whoever controls them holds the keys to the country’s vast fiscal receipts from the export of hydrocarbons — valued at $43 billion in 2023. The president, government ministers and lawmakers allocate this wealth through the annual federal budget and government contracts distributed via extensive patronage networks.
Political violence tends to peak in tandem with the four-year election cycle in which politicians across the political spectrum compete ferociously in what is seen by participants as a zero-sum game for power and patronage.
Intense political rivalry sits on top of a deep-rooted sectarian divide between a largely Christian south and a largely Muslim north. There are frequent and lethal sectarian clashes in the Middle Belt, a 16-year-long Islamic insurgency in the north, a renewed separatist movement in southeastern Nigeria, endemic violence and theft in the oil-rich Niger Delta, and widespread criminality and banditry across the country.
Only 25 million of Nigeria’s 93 million voters participated in the deeply flawed 2023 presidential ballot, which saw Bola Tinubu, leader of the All Progressives Party, declared victor with 20% of a 56% turnout — a mere 8.7 million votes — branded illegitimate by more than a dozen opposition parties.
Social media have become a breeding ground for the amplification of extremist political, religious and separatist views and are responsible for an alarming increase in the dissemination of disinformation, hate speech and harassment, polarizing public opinion and undermining the integrity of the democratic process.
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The government has set out to create a more stable climate for trade and investment as part of Tinubu’s ambition to transform Nigeria into Africa’s first trillion-dollar economy, so it is unlikely to engage in any action likely to be seen as the arbitrary expropriation of foreign investor assets.
The Nigerian Investment Promotion Commission provides guarantees against arbitrary expropriation, offering fair compensation and legal redress, although litigation can be a protracted process.
Tinubu’s wide-ranging economic reform agenda — including the abolition of fuel and electricity subsidies, unification and devaluation of the naira exchange rate, and increased capital requirements for the banking sector — has boosted domestic and foreign investor confidence significantly.
Foreign direct investment in Nigeria has declined from $8.8 billion in 2011 to less the $2 billion in 2024 as investors exited the country’s hostile investment climate, hitting the oil and manufacturing sectors particularly hard. That could now see a turnaround.
Political violence is likely to remain subdued over the short term but can be expected to increase in the run-up to the 2027 presidential and legislative ballots. Sporadic outbursts of violence, however, cannot be ruled out as Nigeria’s 230 million people struggle to adjust to a 400% increase in petrol prices, a 100% devaluation of the naira and runaway inflation that has triggered a sharp spike in food prices.
Renewed ‘#EndBadGovernment’ protests have taken place across the country following Tinubu’s appeal to Nigerians to be patient and give his reform agenda time to yield results. Nigeria needs successive years of 6% economic growth to keep pace with population growth and to deliver any noticeable improvement in living standards.
Food prices have increased by some 80% since the February 2023 presidential ballot, blighting the lives of more than 50% of the population living below the poverty line.
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Islamist extremists mounted a series of attacks on Christian communities in the Middle Belt in December, with the worst incident resulting in 47 deaths on Christmas Day — although the 99 incidents recorded during 2024, leading to 565 deaths, was the lowest in 10 years — according to data compiled by the Global Terrorism Index.
The decision by the U.S. government in 2025 to cut flows of foreign aid is expected to have a detrimental impact on Nigeria’s security, as Washington has in recent years granted Abuja millions of dollars in security assistance in its efforts to suppress jihadist movements such as Boko Haram and the Islamic State.
The U.S. has supported the Nigerian military with training, equipment, logistics and intelligence. The withdrawal of these can only be detrimental to Nigeria’s ability to counter terrorist groups. The U.S. has also supported millions of Nigerians affected by terrorism with humanitarian assistance, aiding victims of terrorism, internally displaced people and refugees. This assistance will be sorely missed.
Following the 2023–2024 devaluation, the naira fell to around 1,500 to the U.S. dollar at the beginning of 2025 and remains volatile. Inflation hit 33.8% in October — a 30-year high — forcing the central bank to raise the benchmark interest rate to 27.5%.
GDP grew more than expected at 3.84% in the fourth quarter of 2024, raising growth for the full year to 3.4%, up from the 2.74% recorded in 2023, triggering speculation that the economy has finally turned a corner and is responding to market-oriented reforms.
Investor confidence is up sharply, and there is a new mood of public optimism, due in no small part to the ramping up of the $19 billion Dangote Petroleum and Petrochemicals Refinery, which is expected to reach full capacity of 650,000 barrels per day in early 2025, meeting domestic needs and turning Nigeria into a refined petroleum products exporter.
Nigeria has for decades been an importer of refined petroleum products despite being sub-Saharan Africa’s largest oil exporter. The new refinery is a transformational breakthrough that should ease the pressure on scarce foreign exchange reserves by eliminating the country’s crippling fuel import bill.
The Central Bank of Nigeria’s hard currency reserves exceeded $40 billion at year end 2024, roughly the same as the government’s stock of external debt, rendering the risk of a sovereign default all but negligible.
Naira devaluation, while painful for Nigerians, has had the beneficial effect for the country of improving Nigeria’s balance of payments — the current account is now in surplus — while reducing the fiscal deficit from 6.4% of GDP in 2023 to 4.4% in 2024.
Tinubu unveiled a 54.99 trillion naira ($36.6 billion) federal budget in March, 35% of which will be consumed by debt servicing. The government will borrow $6 billion to help finance the budget, up from $5.2 billion in 2024, while the fiscal deficit is forecast to fall further to 3.8% in 2025.
Debt servicing, government personnel and other overheads now account for 65% of budget expenditure, leaving only 35% for capital expenditure such as infrastructure, which critics argue is too low to drive sustained long-term economic growth.
