How Trump’s warning of possible US military action could affect Nigeria’s economy

Nigeria, one of Africa’s largest economies, now finds itself at the centre of a geopolitical storm that could test its economic resilience, diplomatic acumen, and financial stability.

Nigeria’s government swiftly rejected the accusations, reaffirming its commitment to constitutional protections for religious freedom.

However, even the mere mention of American military action can jolt financial markets. Nigeria’s Eurobond curve, already volatile through 2025, could see spreads widen further as investors price in heightened risk.

The Debt Management Office has reported active trading into late October, while analysts warn that risk aversion is driving yields higher, a sign of more challenging borrowing conditions for both the government and industry.

For a country that has only begun to breathe easier after years of tight monetary policy, the timing could not be worse. The Central Bank of Nigeria (CBN) had just started to ease, buoyed by a modest decline in inflation.

Yet a geopolitical shock of this scale could send portfolio investors fleeing, push the naira under fresh pressure, and force policymakers to slam the brakes on recovery.

The United States remains a vital economic partner for Nigeria. Bilateral trade in goods and services reached approximately $13 billion in 2024, according to official data from the Office of the U.S. Trade Representative.

Trump’s threat to cut “aid and assistance” could therefore ripple through multiple channels, from trade finance to energy exports, and from defence procurement to humanitarian programs.

Such a move could cripple the momentum Nigeria has built in non-oil exports, particularly in textiles, agro-processing, and light manufacturing. The country’s export council recently reported a nearly 20% rise in shipments during the first half of 2025, driven by global demand for cocoa, urea, and cashew.

If Western importers begin to hesitate or reroute orders, these fragile gains could unravel. Higher insurance premia and costlier trade credit would make Nigerian goods less competitive, even before a single sanction is imposed.

Despite efforts to diversify, oil remains the lifeblood of Nigeria’s economy, feeding both foreign exchange reserves and government coffers.

Any escalation that disrupts production, shipping, or insurance coverage would squeeze dollar inflows just as Nigeria battles to narrow its fiscal deficit.

In such a scenario, the country’s budgetary gaps could widen, forcing deeper austerity or additional borrowing at punishing rates.

Should this evolve into broader trade or financial restrictions, the consequences would ripple through development programmes and private-sector partnerships that underpin President Bola Tinubu’s economic reforms.

The symbolism alone is damaging. When Washington labels a nation “high risk,” compliance officers and financiers take note. Deals slow, valuations fall, and multilateral lenders grow cautious.

Even without a missile being fired, conflict rhetoric carries a heavy price. Insurance costs soar, port clearances slow, freight rates rise.

These invisible taxes trickle down into everyday life, raising import costs, stoking inflation, and eroding household incomes.

Nigeria’s inflation had only just begun to cool; another price surge could jeopardise the government’s ambition to achieve 7% GDP growth by 2027.

For now, the damage is mostly psychological, a tremor rather than an earthquake. Nigeria’s government has launched a vigorous diplomatic counteroffensive, keen to contain both the narrative and the economic fallout. But markets, like mirrors, reflect fear faster than reason.

If Trump’s rhetoric hardens into sanctions or, worse, kinetic action, Africa’s largest economy could find itself fighting not only for its global reputation but for its financial survival.

Ultimately, this is not just a story of one man’s threat against one nation. It is a reminder that in our tightly woven world, a sentence typed in anger can rattle currencies, stall investment, and reshape destinies.

The sound of sabres rattling in Washington may seem distant, but in Lagos, Abuja, and Port Harcourt, the echo could be costly indeed.