Security Crisis Puts Nigeria's Economic Gains at Risk
Nigeria's fragile economic recovery is facing serious threats from a worsening security situation that is rapidly eroding investor confidence and crippling key productive sectors across the country. Rather than building on the modest progress achieved over the past two years, the nation is sinking deeper into uncertainty as violent attacks, abductions, and insurgent activities spread, particularly in agricultural zones.
The situation sends alarming signals to global markets that Nigeria remains a high-risk investment destination, with severe consequences already visible across multiple economic indicators.
Capital Markets Under Severe Pressure
The Nigerian capital market is experiencing significant strain, with recent data revealing dramatic declines in trading activity. Total transactions on the Nigerian Exchange plunged by 36.31 percent in October alone, dropping from N1.621 trillion to N1.033 trillion. The situation is even more dire for foreign participation, which suffered a catastrophic collapse of 51.85 percent to N186.6 billion.
Even typically resilient institutional investors are pulling back, with their investments shrinking by 46.17 percent, indicating that long-horizon investors are becoming increasingly wary of Nigeria's volatile environment.
The market value has taken a massive hit, with listed equities losing N6.4 trillion since US President Donald Trump designated Nigeria as a Country of Particular Concern. This represents the steepest market decline in recent years, with one trading session recording losses not seen since the COVID-19 market dumping.
Investment Drought and Food Security Concerns
Foreign Direct Investment has cratered by more than 70 percent, dropping from $421.88 million in the last quarter of 2024 to just $126.29 million in the first quarter of 2025. This dramatic decline starves the economy of the long-term capital essential for infrastructure development, industrial expansion, and job creation.
The agricultural sector faces particularly severe challenges, with insecurity disrupting farmlands and transport routes across the country. Despite inflation easing to 16.05 percent in October, food supply pressures persist, raising concerns that any broader economic recovery could stall before gaining momentum.
Farmers are warning that next year could be precarious as they continue scaling down activities, threatening Nigeria's prospects for food sufficiency and potentially exacerbating the ongoing cost of living crisis.
Expert Warnings and Reputational Damage
Economic experts and market analysts are sounding alarms about the long-term implications of the security crisis. Dr Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, warned that the mere threat of military action by a global superpower has inflicted significant reputational damage on Nigeria's image as a safe investment destination.
Patric Ajudua, President of NewDimension Shareholders Association of Nigeria, noted that Nigeria's escalating insecurity is undermining investor confidence and putting the country's capital markets under significant strain. He revealed that the All Share Index has dropped by 145,000 basis points, while market capitalisation has contracted to N91.415 trillion.
Professor Jonathan Aremu, an economist, expressed concern that investors would continue to be scared of volatile environments, noting that capital inflows have mainly come from foreign portfolio investors rather than the much-needed foreign direct investors.
The combined effect of security concerns and policy measures such as capital gains tax has contributed to the slowdown in Foreign Direct Investment, further weakening market participation and threatening Nigeria's economic stability.
Unless security conditions improve decisively, Nigeria risks prolonging the cycle of capital flight, subdued investment, and slowed economic recovery, leaving the country vulnerable to further erosion of market confidence and economic potential.
