Rising geopolitical tensions and persistent macroeconomic shocks are driving capital flight from emerging markets to safer assets, Professor Joseph Nnanna, Chief Economist at the Development Bank of Nigeria, has warned.
He made this known at an investment forum organised by VNL Capital Asset Management in Lagos, themed “Global Shocks and Market Opportunities: How to Invest in 2026.”
The development demonstrates growing concerns over how global instability is reshaping investment flows and economic prospects for countries like Nigeria.
What the expert is saying
Nnanna said the global macroeconomic environment is changing rapidly, forcing investors, businesses, and policymakers to rethink strategies.
- “But here, what global uncertainty means for emerging markets? The first, capital flight. So in general, what this means is the inflows emerging markets will typically get will now have to go to a safe haven,” he said.
- “Whether it’s a location, whether it’s an asset class, they relocate regardless of how you feel.”
- “And the reality is this, when inflation shoots up to a point where small businesses in particular have the lowest savings propensity, as a result they feel the pinch the most.”
- “What you envision in your strategic retreats last year, coming into this year, will have to change. If you remain static, you will regress backwards and you get left behind.”
He noted that global instability, particularly conflicts, has direct implications for inflation, investment flows, and economic stability.
More insights
Nnanna traced current global volatility to a series of geopolitical shocks that have disrupted supply chains and driven inflation.
- The Russia-Ukraine war in 2022 triggered a surge in global gas prices and supply chain disruptions.
- Ongoing tensions in the Middle East, particularly involving Iran, have intensified pressures on global energy markets.
- About 20% of global oil flows through the Strait of Hormuz, making it a critical chokepoint for energy supply.
- Rising global energy prices have led to increased fuel costs in both developed economies and Nigeria.
These developments have heightened inflationary pressures globally and exposed emerging markets to external vulnerabilities.
Nnanna highlighted key economic implications and investment opportunities despite the challenging environment.
- Exchange rate volatility remains a concern, although Nigeria’s managed float system and foreign reserves have helped stabilise the naira.
- Capital flight continues to pressure emerging markets, while rising global interest rates increase the cost of servicing foreign debt.
- He emphasised the importance of the African Continental Free Trade Area (AfCFTA) in driving intra-African trade and achieving economies of scale.
- Key investment opportunities exist in renewable energy, agriculture, fintech, infrastructure, and the creative economy.
He also encouraged the adoption of local currency trade systems such as the Pan-African Payments and Settlement System (PAPSS) to reduce reliance on the dollar.
What you should know
Earlier this month, the United States and Israel launched coordinated airstrikes on Iranian cities, including Tehran, killing senior officials and triggering widespread explosions and smoke columns.
- Saudi Aramco suspended operations at its 550,000 barrels per day Ras Tanura refinery in Saudi Arabia’s Eastern Province following a drone attack linked to Iran’s retaliatory strikes.
- QatarEnergy halted downstream production after attacks targeted LNG facilities in Ras Laffan Industrial City and Mesaieed Industrial City.
