Country Risk Report – December 2023
Level 1 – Exercise Normal Precautions
MENA FATF Member
Country Risk Report – January 2024
|State Department Travel Advisory Level
Level 3 – Reconsider Travel
|Corruption Index Score (2022)
|Anti-Money Laundering/Terrorist Financing
Inter Governmental Action Group against Money Laundering in West Africa (GIABA)
|Property Rights Index
|Freedom House Ranking
Nigeria tops several lists in terms of overall economic activity in Africa. Indeed, Lagos is firmly established on the world map for the energy and financial services industries. However, security issues pervade, and corruption is still a significant risk factor.
The territory of the modern-day Nigerian state has a rich history from its many ethnic and religious groups, which still exist today. Nigeria is home to more than 250 ethnic groups with over 500 indigenous languages spoken in addition to English, the official language. The country’s religious composition is mainly split between Islam and Christianity at 53.5% and 45.9%, respectively, with a small minority of other religions.
Nigeria came under British control in 1861 and was formally colonized in 1914 until its eventual independence in 1960. Briefly after its independence and transition to a republic, Nigeria fell into a period of ethnic strife, leading to a series of coups, military control of the government, and disastrous civil war in the early 1970s, which led to the starvation of millions of ethnic Biafrans. Instability and frequent violent transitions between governments occurred until the 1999 Constitution was enacted.
Briefly, after the new constitution was implemented, ethnic strife resumed in some regions of the country, along with conflict between Muslims and Christians following the institution of Islamic Law in several states, particularly in the Northern areas, which added to the challenges the democracy has faced since the 1999 constitution.
Other challenges include corruption among the political elite, low voter turnout, voter intimidation, powerful local military and armed groups, vote buying, and irregularities in voting results.
Despite steps to improve the democratic process, corruption, violence, election irregularities, and voter suppression continue to mar political stability and prevent high voter turnout. The last few transitions to new administrations have been peaceful despite changing political parties in control of the government.
On February 25, 2023, Nigeria held presidential elections, and the former governor of Lagos, Bola Tinubu, was narrowly elected over Peter Obi and Atiku Abubakar.
As with past elections, voting irregularities were present, and over 134 attacks were recorded on offices and personnel of the Independent National Electoral Commission. Although the number of opposition votes shows growing acceptance of political differences in the country, political violence was high on election day. The election results are expected to be contested by Tinubu’s opposition.
Legitimate, fair, and free elections will be crucial for Nigeria's security, economy, and business environment going forward.
Nigeria faces a complex security environment due to the widespread use of violence by various groups, drug and human trafficking, and abuses by government-sponsored groups. Communal violence is common, as is political and religious violence. It is estimated that there are over 3.1 million internally displaced people in Nigeria because of the violence.
Security by region:
Southwest: Southwestern Nigeria has been subject to some intercommunal violence (often over land use and resources), as well as attacks from the Islamic State West Africa, which carried out two attacks in 2022. The Southwest is home to Nigeria’s largest city, Lagos, which experiences violence from traffickers and smugglers and is susceptible to political and terrorist violence.
Niger Delta Region: The Niger Delta region is home to much of Nigeria’s oil and gas production. Issues over land rights, corruption, and pollution have sparked violence between communal farmers, fishermen, and other locals and the oil and gas companies operating there. Local militant groups frequently carry out attacks on infrastructure and oil and gas facilities. They also threaten current and proposed oil installation projects.
Southeast Nigeria: Southeastern Nigeria is home to the Biafra ethnic group, which fought a bloody civil war against the government in the 1970s. The Indigenous People of Biafra (IPOB) maintain the goal of establishing an independent state and often clash with government security forces sent to retain control of the region.
Abuja and the Federal Capital Territory: The capital city of Abuja and its territory are increasingly susceptible to terrorist attacks from Boko Haram and Islamic State West Africa (ISWA), as well as political violence, protests, and riots.
Increasing threats of terrorism in the capital prompted the withdrawal of US diplomats’ families in 2022.
North and Northwest Nigeria: This area is typically prone to inter-communal violence, usually revolving around land use and resources, as well as spillover from Islamic extremist violence in the northeast and in neighboring Niger.
Northeast: The security environment in the northeast region has been the most unstable in recent years. This is where most of the violence committed by Boko Haram and ISWAP has occurred, prompting the displacement of civilians and frequent violent encounters with government security forces. Although casualties from Boko-Haram-related violence have been lower than in recent years, there are still frequent deadly encounters. As Boko Haram has lost some of its momentum recently, ISWAP’s presence in the region has been growing.
The Nigerian coastline and the Gulf of Guinea also pose security threats from frequent piracy. Oil tankers are often the targets of attack, given their frequent passage through the Gulf of Guinea and the Nigerian coastline.
While the Nigerian economy is expected to grow this year, the security situation has created significant drag. The security landscape in Nigeria has dramatically affected economic growth and productivity over the years. This has been further exasperated by shifting oil prices due to the global pandemic and the war in Ukraine. Nigeria must move from its dependence on oil exports to enjoy consistent economic gain.
Another major problem impeding development is rapid population growth. 2021 population growth was measured at a 2.5% annual increase, whereas economic growth has been trending downward and only experienced 1.5%. If this trend continues in the coming years, Nigeria could face rising poverty rates, joblessness, and poor foreign exchange rates. Increasing joblessness may also lead to more young men joining militant groups.
The business environment in Nigeria is likewise not thriving. According to a recent survey, three main issues prevent business development: a hostile business environment, problems finding competent staff, and a lack of market information and data. Government corruption, bureaucratic red tape, and political volatility have also impacted business growth.
Recently, cash shortages have been impeding economic growth as banks do not have enough naira to cover the need for withdrawals from members. The Nigerian economy is primarily cash-based, so shocks to the money supply, or in this case, the inability to print sufficient bills, significantly affect the ability to participate in economic activity in any capacity. Changes in policy, such as the one causing the current shortage, have forced businesses to fail or to leave the country.
Lack of affordable financing also impedes business growth. The average interest rate for loans from Nigerian banks is 25%, a cost that is too high for most firms. Despite falling inflation rates and low economic growth, the government has also been raising interest rates.
Despite the challenges faced above, western firms have seen success in the financial services and energy sectors.
Level 3 – Reconsider Travel
Reconsider travel to Nigeria due to crime, terrorism, civil unrest, kidnapping, and armed gangs. Additionally, some areas have increased risk. Read the entire Travel Advisory.
US businesses considering doing business in Nigeria need to consider the country's risk profile and carefully assess any new business partners by conducting in-depth due diligence investigations.
As mentioned above, the security situation throughout the country can vary. Accordingly, conducting business in Nigeria requires a boots-on-the-ground approach to examining the security, economic, and risk profile specific to each sub-region within Nigeria. This is essential to mitigating unseen risks and protecting a company’s long-term value.
Firms should also invest in cybersecurity protections to protect intellectual property and sensitive data.
For a deeper review of political, economic, due diligence and security risks for Nigeria, please contact us.
Our due diligence investigations help you understand fraud, bribery and corruption issues so your organization can avoid unnecessary risk exposures.
Protecting your corporation’s Board of Directors, shareholders and employees are part of key risk mitigation strategy.
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