The recent economic reforms implemented by the Nigerian government have significantly boosted investor confidence, leading to a rally in naira-denominated assets, including stocks and Eurobonds, while yields have declined.
According to Lamido Abubakar Yuguda in the newly released personal statements of members after the 299th meeting of the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC), the sovereign risk spread has also dropped to its lowest level since the pandemic.
In a personal statement, Yuguda emphasized the importance of sustaining the policies driving this economic optimism while highlighting critical external risks that could threaten Nigeria’s growth outlook.
“The recent reforms have generated confidence that is engendering bullishness in naira denominated assets, with stocks and Eurobonds rallying and yields declining. The sovereign risk spread has also declined to its lowest level since the pandemic. Thus, it would be imperative for all the factors sustaining confidence in the economy to be preserved,” he noted.
These risks include escalating geopolitical tensions in Europe and the Middle East, as well as the emerging trade dispute between the United States and its key trading partners.
He said, “ There are, however, certain key external risk factors to the growth outlook. These include the geopolitical developments in Europe and the Middle East and the impact of the emerging international trade dispute between the US and its key trading partners.”
Geopolitical tensions and their Impact on Nigeria
Yuguda noted that ongoing discussions among global stakeholders to resolve the Russia-Ukraine war and the Middle East conflict could play a crucial role in stabilizing the global economy.
“Achievement of sustainable peace on both fronts will be beneficial to Nigeria and the global economy,” he stated.
However, prolonged conflicts could disrupt global supply chains, increase energy prices, and heighten financial market volatility—factors that could negatively impact Nigeria’s import-dependent economy and foreign exchange stability.
US Protectionist Trade Policies and Global Economic Risks
Another major concern raised by the MPC member is the recent protectionist trade policy stance adopted by the United States, which has imposed higher tariffs on several imported goods. Countries affected by these tariffs, including China and members of the European Union, have already announced retaliatory measures, raising fears of a full-blown trade war.
“The impending trade wars could increase costs of essential inputs across different industries in many countries, thereby increasing the general price level, dampening consumer demand, decreasing global output, eroding corporate profits, jolting currency markets, and heightening volatility across several asset classes,” Yuguda warned.
For Nigeria, a global trade war could lead to higher import costs, inflationary pressures, and reduced foreign investment inflows, further complicating the country’s economic recovery efforts.
The Need for Policy Stability and Proactive Measures
Despite these external risks, Yuguda stressed that maintaining the current economic reforms—including foreign exchange market liberalization, fiscal discipline, and investor-friendly policies—is critical to sustaining confidence in Nigeria’s economy.
He urged Nigerian policymakers to remain vigilant and prepare contingency plans to mitigate potential shocks from global economic disruptions. Strengthening domestic production, diversifying export revenue sources, and enhancing trade partnerships with emerging markets were suggested as key strategies to cushion the economy against external vulnerabilities.
