Nigeria's Political Instability and Economic Deterioration

Nigeria's investment landscape faces mounting headwinds as political fragmentation intersects with severe macroeconomic deterioration, creating a complex risk environment for European entrepreneurs and investors operating across the continent's largest economy.

The data speaks clearly. Nigeria's Balance of Payments surplus collapsed 38.1% in 2025 to $4.23 billion—down from $6.83 billion the previous year. More critically, crude oil exports declined 14.41% to $31.54 billion, while foreign portfolio investments plummeted 48.3% to $8.04 billion. These figures underscore a fundamental erosion of external sector confidence, driven by both commodity price volatility and investor uncertainty surrounding governance and policy consistency.

Simultaneously, Nigeria's political establishment is fracturing along multiple fault lines. The Peoples Democratic Party (PDP) faces internal civil war, with factional camps led by FCT Minister Nyesom Wike proceeding with rival conventions despite reconciliation efforts. Plateau State's PDP suspended its Southern Zone Vice Chairman over anti-party conduct, signaling deepening institutional decay within opposition structures. Meanwhile, the ruling All Progressives Congress (APC) maintains electoral dominance not through policy delivery, but through opposition self-sabotage—a dynamic that undermines democratic accountability and policy predictability.

More concerning for institutional investors is the apparent attempt by the National Assembly to modify the Electoral Act 2026, potentially excluding certificate forgery and qualification verification as grounds for election petitions. The African Democratic Congress (ADC) condemned the silence of academic unions, civil society organizations, and student bodies on this proposal, while civic groups including Yoruba Ronu Leadership Forum have publicly criticized the exclusion. This legislative move threatens the integrity of electoral processes and raises questions about the rule of law framework that foreign capital depends upon.

The judiciary compounds these concerns. The Kwankwasiyya Movement has raised alarm over conflicting court rulings across Nigeria's judicial system, warning that inconsistent judicial pronouncements undermine democratic stability. For investors, contradictory court decisions create unmanageable legal risk—contracts may be enforced differently depending on venue, party connections, or judicial interpretation drift.

President Tinubu's ongoing UK state visit—the first by a Nigerian president in 37 years—signals an attempt to rebuild bilateral relationships and secure Western support for Nigeria's terrorism challenges. His solicitation of British partnership to counter Sahel terrorism reflects recognition that security deterioration threatens regional stability and economic activity. Yet domestic critics question the optics of foreign engagement amid ongoing insecurity and victim suffering from recent bombings in Maiduguri.

For European investors, the convergence of these factors creates a challenging calculus. Economic fundamentals are weakening (FPI down 48%), political institutions are fragmenting (PDP civil war, judicial inconsistency), and the rules-based framework is under stress (Electoral Act amendments, certificate forgery legalization attempts). While Nigeria's 223 million-person market and energy sector remain strategically important, 2025 demands heightened due diligence on counterparty stability, contract enforceability, and political risk.

The window for managed engagement exists, but it is narrowing. Investors must reassess exposure, demand enhanced governance covenants, and consider phased deployment rather than aggressive expansion.