Nigeria’s economy is experiencing mixed signals—modest growth, a strengthening Naira, but persistent inflation and concerning debt servicing costs. Trump’s second term will likely bring tougher immigration policies for Nigeria and along with that, reduced security cooperation, and funding cuts for health initiatives, but we do see potential gains for Nigeria’s oil sector.
USA. As President Trump begins his second stint in the Oval Office we see significant implications for Nigeria. Specifically we see his administration will bring a shift that will affect diplomatic relations, trade, immigration policies and security cooperation. Already, Nigerian visa applicants can no longer renew via the drop box processing option. Previously, eligible applicants had been able to renew their travel documents without an in person interview but this option has now been removed from the online application portal. In 2018, during Trump’s first administration, the same feature also disappeared for the US Embassy website. Coincidence? We think not. However there are some potential gains to be had. If Trump rolls back climate policies and re-emphasizes fossil fuel investments, oil prices may rise and that is only good news for Nigeria’s economy as it aims to increase oil output.
Funding Shortfalls. Trump’s decision to pull out of the World Health Organisation and suspend USAID presents significant issues for Nigeria. In 2023, The US spent more than USD600 million in Nigerian health assistance – equal to approximately 21% of the national health budget. President Tinubu appears to, naively, have counted on that being continued. In the 2024 financial year, his government allocated 5.5% of spending to health. This year, that figure had dropped to 4.8%. The biggest programmes at risk are malaria diagnosis, treatment and prevention along with HIV testing, counselling and prevention. The nation’s Centre for Disease Control must now urgently act to fill the financial holes. For this an emergency fund must be established but for that to be credited other areas will have to tighten their belts. Trump’s action should have been anticipated. Tinubu and his government have, once again, failed citizens by not seeing it coming. Approximately 1.8 million Nigerians are living with HIV. Malaria too must be viewed as an urgent concern. Almost 27% of all malaria cases globally are in Nigeria. We won’t get into other risks from Cholera, Yellow Fever, Meningitis and Lassa Fever, to name but a few, but you can see how big the problem is. At this time it is unclear if Trump will reverse his decision but backup plans and new partnerships must now be sought. The Nigerian Federal Executive Council has already approved USD1 billion for healthcare sector reforms and has reserved an additional USD3.2 million to buy 150,000 HIV treatment packs over the next four months. We anticipate that approaches will be made to the UK, Canada and Japan for support – all already contribute – but more money is much needed.
China. China’s Foreign Minister Wang Yi visited Nigeria in January. He met with his counterpart, Yusuf Tuggar. The pair discussed plans to increase cooperation in sectors such as defence, finance, security and clean energy. It should be recalled that Tinubu visited China in September last year. This latest Ministers’ meeting is a continuation of that. We anticipate continued close ties between these two nations and also an expansion of the current currency swap agreement as Nigeria looks for non US support – just in case …
Diplomacy. Tinubu met with Kazakhstan’s President Tokayev in January at the Abu Dhabi Sustainability Week and the pair obviously got on well as by February the Kazakh Deputy Foreign Minister received a Nigerian trade delegation. On the agenda was the expansion of economic ties, trade and investment between the two nations. Later this month a Kazakh delegation will visit Nigeria. Stronger ties between Nigeria and Kazakhstan would bring mutual economic benefits but Nigeria will have to play fairly and quit its habit of corruption and obfuscation. By doing so it will gain access to Kazakhstan’s technological expertise, investment, and trade opportunities. If both nations strategically and successfully collaborate, Nigeria could strengthen its industrial base, enhance food security, and boost energy and mining output, driving long-term economic growth. But as always with Nigeria that is a big IF.
Legislation. The House of Representatives has passed a constitutional change proposal that could potentially see an additional 31 states being created bring the nation’s total to 67. On the surface this could be considered a progressive move. Making State level governments responsible for fewer people and smaller regions should help identify and address issues affecting citizens at a local level. In reality however, it will simply cost money. Local assemblies will need to be established or constructed and the staff to run them must be recruited and trained. Federal budget allocations would also have to be redrawn at a time when states like Lagos and Rivers are already disputing spending and campaigning for more of their earnings to be retained locally and not sent to lower revenue earning regions. More states could amplify these disputes, leading to further fragmentation of Nigeria’s economic structure. The House has been keen to spin this as a way to improve governance and bring government closer to the people. From where we sit, however, we see this proposal as being more likely to increase costs, deepen regional disputes, and create new political challenges. It will take a major political and electoral response to see this happen – the current constitution is very clear on that – and ultimately the National Assembly must give final approval. Nigerian lawmakers are notorious for being ‘seen’ to be busy while accomplishing very little. Although the creation of new states is still some ways away it is entirely possible that it could happen faster than you can say Tinubu. And if it does, local business, taxation and employment legislation must be monitored to ensure operational efficiency and compliance.
Numbers. Nigeria’s economy is experiencing modest growth. The World Bank has predicted a 3.5% increase in GDP this year. The Naira has appreciated against the USD and is the highest it has been in seven months. We anticipate this will continue in the near future seeing USD1 buying around NGN1,575 by the end of this month. Even so, stability remains uncertain and we cannot rule out a potential devaluation down the road somewhere at this time. Inflation increased to 34.80% in December up from 34.60% in November of 2024. The Central Bank of Nigeria (CBN) reports that Nigeria spent NGN8.94 trillion in the first nine months of 2024 servicing debt. In October in his Independence Day address, Tinubu claimed that he has brought the national debt to service ratio down from 97% to just 68% yet numbers published by the CBN contradict this putting the number at a much higher rate of 147%. Someone has got their numbers wrong and we know who our money is betting on.
BRICS. Nigeria is now the ninth partner country of the BRICS block of nations. It joins Belarus, Bolivia, Cuba, Kazakhstan, Malaysia, Thailand, Uganda, and Uzbekistan. Last year, Trump threatened 100% tariffs against BRICS if they act to undermine the U.S. Dollar. Russia and China have already developed SWIFT alternatives. If this is facility is expanded into a unified financial system Nigeria, and other members, will be able to protect their economies from trade restrictions and sanctions. However, Nigeria should proceed with caution. As big as Nigeria is it lacks the global trade ties of other nations – notably Brazil, China, and India. With that in mind we see a subtle and gradual shift towards BRICS which will create more economic independence and diversification but will it be executed carefully enough? That remains unclear at this time. Nigeria’s BRICS partnership is a double-edged sword. If handled correctly it offers economic opportunities, but if handled poorly, there is huge potential for trade disruptions, financial instability, and geopolitical tensions. Tinubu must tread carefully here. He cannot afford to upset ECOWAS partners or Western economies.
Beer. This sector has been hit with devaluation and inflation pressure which has prompted losses for all major producers. In the first nine months of 2024, Nigerian Breweries reported a 77% year-on-year revenue increase to NGN710.9 billion. In the same period, International Breweries reported an 87% revenue growth to NGN343.4 billion. But the biggest winner was Guinness Nigeria who achieved the most substantial growth as they doubled revenues to reach NGN125.9 billion. We attribute this to Guiness’ successful leveraging of Tolaram, its new majority shareholder. Even so, despite these revenue gains, profit margins have been eroded significantly. Increased importation and energy costs compounded by the deprecation of the Naira has reduced revenue. Looking at the bottom line, these three companies reported a combined after tax loss of NGN274.5 billion at the same time that their income grew. We anticipate that 2025 will remain challenging for brewers but it is not all doom and gloom. There is growing momentum and if the Naira continues to stabilise it will bring down import overheads. Even so, there will be challenges to face. Increasing inflation coupled with declining consumer spending and FX stability may not be enough to keep on an even keel. Consumers may drink less but they still have many sorrows to drown. This sector must adjust its course slightly to cruise through these troubled waters. Resilience will mitigate risk. If economic conditions improve, 2025 might be the turning point for a sector currently battling against strong economic currents.
Statistics. In 2024, Nigeria experienced a 38.16% rise in security incidents and a staggering 138.99% increase in kidnappings compared to 2023. At least 326 security personnel were killed in various incidents throughout last year. 22 soldiers lost their lives in a deadly operation in January 2025, (see below). We see no signs that these numbers will decrease. We anticipate continued security risk in the North West and Central regions but we also see separatist violence increasing in the South East. During Trump’s first term he cut funding for African counterterrorism programs, including those assisting Nigeria in fighting Boko Haram and ISWAP. Anticipate history repeating which will reduce military cooperation from the US. This will be a weakness that terror groups will exploit.
Borno. Six soldiers and 34 extremists were killed in clashes in early January. The militants, riding on motorcycles and trucks launched a surprise attack on troops in the village of Sabon Gari. A gun battle followed. The Nigerian military have been trying to say that they have the security situation in this area under control and that rebel forces have been “degraded”. Incidents like this prove that they are wrong. Heightened risk remains.
While GDP growth at 3.5% is promising, Nigeria’s economic challenges—high inflation, FX volatility, and unsustainable debt costs—continue to pose risks. The next few months will be critical. The proposed creation of 31 new states could fragment economic resources rather than improve governance. This, in turn, could increase violence, particularly in the North West, Central, and South East. Combine this with potential cuts to U.S. counterterrorism aid, and insurgents will be emboldened. Tinubu’s time would be better spent fixing and stabilising his existing states before adding more but he is not renowned for his progressive policies. Nigeria cannot afford policy missteps right now. By stabilizing the economy, securing alternative partnerships, and managing security risks proactively, it can navigate this turbulent period … but it will be stormy.
Published: 10th February 2025