Trump: Nigeria, other emerging markets at risk of capital flight –JP Morgan

JP Morgan has warned that emerging markets, including Nigeria, face significant capital outflows due to global financial conditions and policies like former U.S. President Donald Trump’s “America First” agenda. The investment bank reported a net capital outflow of $19 billion in the last quarter of 2024, with an additional $10 billion expected in early 2025. The combination of rising interest rates in developed economies and policy shifts in the U.S. has made foreign investors more cautious about investing in riskier markets.

For Nigeria, capital flight poses a major economic risk, as the country depends on foreign investments to stabilize its currency and finance critical infrastructure. The depreciation of the naira, inflationary pressures, and fiscal constraints could worsen if capital outflows continue. In addition, Nigeria’s reliance on oil revenues makes it vulnerable to global financial shocks, with declining oil demand and prices further complicating economic stability. Experts emphasize the need for Nigeria to strengthen its fiscal and monetary policies to attract long-term investment and ensure macroeconomic stability.

Despite these concerns, JP Morgan noted that most emerging markets, including Nigeria, should be able to withstand the effects of capital flight, although countries like Romania, Malaysia, and South Africa remain more vulnerable. The Central Bank of Nigeria (CBN) has intervened to stabilize the naira, leading to a 1.1% appreciation in the official market. However, foreign exchange reserves declined due to these interventions. Analysts suggest that enhanced financial transparency and stronger economic policies will be key to mitigating risks and maintaining investor confidence in Nigeria’s economy.

Source: The Sun