The Centre for the Promotion of Private Enterprise (CPPE) has warned that the recent threat of possible military action against Nigeria by United States President Donald Trump could trigger capital flight and weaken the naira.
In a statement on Monday, Muda Yusuf, Chief Executive Officer (CEO) of CPPE, warned that the threat could have far-reaching implications for the country’s economy and investor confidence.
“Even the mere threat of military action by a global superpower has inflicted significant reputational damage on Nigeria’s image as a safe and viable investment destination.
“Such rhetoric can trigger decline in foreign direct investment (FDI) inflows, capital flight from portfolio and equity investors, a decline in venture capital and startup funding, and heightened country risk ratings and investor anxiety”,
He added that the threat also has financial market repercussions as market volatility would likely intensify as investors reassess Nigeria’s risk profile.
The likely consequences according to CPPE include falling stock market valuations, rising country risk premiums and insurance costs, higher sovereign bond yields, naira depreciation due to capital outflows and portfolio reversals
“Uncertainty and fear would lead investors to adopt a wait-and-see posture, delaying or cancelling major projects. Private equity and venture funds may diversify away from Nigeria toward peer economies in Africa or Asia, with lower perceived political risk,” Yusuf warned.
To mitigate the risks, Yusuf advised the federal government to adopt a proactive diplomatic strategy, including high-level diplomatic engagement with the United States government to clarify facts and de-escalate tensions.
He also recommended strengthening security partnerships, enhancing communication to reassure investors of Nigeria’s stability, and deepening domestic reforms in governance and macroeconomic management to reinforce resilience against external shocks.
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