Nigeria’s dollar-denominated bonds recorded the steepest losses in emerging markets on Monday following comments by former U.S. President Donald Trump threatening possible military action against the country.
The remarks triggered an immediate sell-off across Nigeria’s sovereign debt curve and renewed concerns about political risk in Africa’s largest economy.
Data from global debt markets showed Nigerian Eurobonds dominated the worst performers list across emerging markets trading by mid-morning, with all ten weakest notes linked to Nigeria.
The 2047 maturity led the declines, sliding as much as 0.6 cents to 88.26 cents before trimming losses later in the session.
The development marked the sharpest downturn in weeks and reflected investor sensitivity to geopolitical headlines.
Trump, in a Truth Social post over the weekend, warned of “possible action” if Nigerian authorities fail to curb attacks against Christians, and threatened an immediate termination of U.S. aid.
The United States provided roughly $1 billion in support to Nigeria in 2023. The comments followed an earlier announcement labeling Nigeria a “Country of Particular Concern.”
President Bola Tinubu dismissed the comments as misrepresentative, reiterating that his administration remains committed to protecting religious freedoms and addressing security challenges.
Nigeria, with a population of over 230 million citizens almost evenly divided between Muslims and Christians, has battled Islamist insurgency and communal violence for more than a decade, particularly in the northeast.
The market reaction extended beyond the bond segment. The naira weakened 1.2% intraday to ₦1,442.80 per U.S. dollar, posting its largest single-day slide since June and ranking as the worst-performing emerging-market currency on the day.
Dealers cited a combination of dollar scarcity, risk-off sentiment, and heightened global uncertainty.
Despite the volatility, major institutional investors maintained a cautiously constructive outlook. Portfolio managers noted that Nigeria’s credit fundamentals remain solid, supported by ongoing policy reforms under President Tinubu, including fuel subsidy removal and foreign-exchange liberalization.
Those reforms contributed to a significant compression in sovereign spreads, from nearly 1,000 basis points in 2023 to about 400 basis points in recent months, alongside a near-60% gain in dollar-adjusted Nigerian equities this year.
Market analysts described the sell-off as a “knee-jerk reaction” to geopolitical rhetoric rather than a shift in long-term risk assessment. They expect stabilization as investors refocus on Nigeria’s reform efforts, improving fiscal outlook, and strengthening external position.
However, the episode underlines Nigeria’s exposure to global political developments and the sensitivity of international capital flows to diplomatic tensions.
With Nigeria seeking to sustain renewed investor confidence and attract foreign capital to deepen FX liquidity and boost reserves, policymakers are likely to monitor external commentary closely.
While the threat of U.S. intervention appears remote, the remarks introduce a layer of uncertainty at a time when Nigeria is navigating structural economic adjustments.
Sustained progress on security, foreign-exchange stability, and fiscal consolidation remains central to maintaining investor appetite in the months ahead.