Uncertainties marred the first year of the current US administration, spilling over into the global marketplace. Repeated threats of tariffs, the selective application of these tariffs on certain countries, and the implementation of counter-tariffs by target countries left the global economy reeling, leading to a sizable contraction in the value of global trade in 2025. Beyond economic uncertainties, the world witnessed a destructive 12-day conflict between Israel and Iran, which threatened to balloon into a major regional conflict, raised fears of nuclear contamination, and further impacted Mediterranean shipping.
Heading into 2026, the prognosis is anything but positive. A few days into the new year, the US administration undertook the daring raid and capture of a sitting president, following weeks of blockade of its most important economic sector. As the world reels from this, there are talks of potentially replicating these activities in other countries, including the option of military action on a Danish island.
All of these join existing conflicts that already overwhelm key demand and supply centres of the economy. The Ukraine-Russia war, heading into its fourth year, continues with no real end in sight. With the US increasingly bogged down by raids and potential conflicts, it is doubtful that the US administration will have the attention span or moral right to force both sides to a deal. The same applies to other key geopolitical hotspots, including Taiwan and the Israel-Palestine corridor. Whatever was left of the increasingly fragile rules-based system of international relations might finally succumb to the new realities of Hobbesian geopolitics.
Domestic and Regional Realities
It is in this world order that Nigeria and other African countries must operate. In 2025, a raft of reforms, including the removal of fuel subsidies, the liberalisation of the local currency market, and a proposed new tax regime, was aimed at reducing inefficiencies, unleashing the Nigerian economy's potential, and encouraging growth.
To its credit, key macroeconomic stability measures, including inflation, have improved. Nigeria still faces key challenges. A worsening spate of insecurity sits atop this list. And there seems to be no end in sight, despite recent US military forays into the fight against nonstate actors in the country.
Continued insecurity poses a major threat to realising a more robust, growing economy, which these reforms were meant to achieve. The agriculture sector suffers significantly from the activities of armed herdsmen, bandits, and terrorists in key food-producing regions in the country. Illegal mining in the northwest and parts of the southwest discourages formal sector investors while further bankrolling the activities of these nonstate actors. The same applies to the energy sector, where illegal oil theft continues to affect revenue receipts, albeit at much lower levels than in previous years. These challenges create a high risk perception among potential investors, thereby discouraging investment inflows and/or increasing the cost of capital provided. Whether Nigeria can move the needle on these challenges remains to be seen.
The same negative perception persists across most of the African continent. The spike in coup d'états, both successful and attempted, continues to cast a shadow over the continent, especially in West Africa. In 2025, the Benin Republic, one of the bastions of democratic stability in the region, became the latest victim of an attempted coup, in addition to other countries where these activities had been attempted but officially denied, or allegedly carried out with the backing of the ruling administration in a bid to indirectly hold on to power. The overall narrative around coups in the region further worsens investment attractiveness, discourages much-needed regional trade, reduces inter-country coordination in the fight against cross-border terrorism, and heightens the region's perceived risk. In the absence of credible deterrence from regional bodies such as ECOWAS and the African Union, there is no discounting the possibility of further coup attempts in other countries in the near future.
Where Do We Go from Here?
The outlook for 2026 is one of cautious, even limited, optimism, as highlighted in the Veriv Africa Macroeconomic Outlook for 2026. Key demand centres for Nigeria’s exports face trade uncertainties and an increasingly unpredictable geopolitical environment. At the regional level, there seems to be an increasing appetite for coups and other non-democratic activities that further heighten the risk perception in the region. At the domestic level, Nigeria’s festering and complex security challenges cast a long shadow over attempts to trigger significant growth in the domestic economy, in addition to the challenges faced by our key trade partners. The Nigerian government must navigate these complex domestic and international challenges by further diversifying the economy, improving internal security, and pursuing new trade opportunities, including at the continental level through initiatives like the African Continental Free Trade Agreement.
References
Central Bank of Nigeria (2025). Inflation Rate. https://www.cbn.gov.ng/rates/inflrates.html
The International Crisis Group (2025). A foiled coup in Benin, and a win for ECOWAS. https://www.crisisgroup.org/africa/benin-nigeria/foiled-coup-benin-and-win-ecowas-and-nigeria
US Department of War (2025). Trump announces the US military’s capture of Maduro. https://www.war.gov/News/News-Stories/Article/Article/4370431/trump-announces-us-militarys-capture-of-maduro/
Veriv Africa (2025). Nigeria macroeconomic outlook 2026. https://www.verivafrica.com/2026outlook
