Country risk in Nigeria is high with an OECD country credit grade of 6. This is akin to a speculative grade sovereign rating, which indicates an elevated risk of Nigeria being unable and/or unwilling to meet its external debt obligations.
The World Bank’s ease of doing business gauge—which measures regulation and red tape relevant to a domestic small to mid-sized firm—ranks Nigeria 146 out of 190 economies. Nigeria lags the regional average on most measures on the ease of doing business scorecard but getting credit, protection of minority investors and enforcing contracts is significantly easier in Nigeria.
The World Bank ranks Nigeria in the bottom quartile for all but one dimension of governance. Nigeria also falls behind the sub-Saharan average on almost all areas of governance. Nigeria is particularly prone to political instability and violence, scoring often in the worst 5 countries for terrorism in the last 5 years.
The risk of expropriation in Nigeria is high, despite having laws that protect against expropriation. A US owned waste management company was expropriated in 2008. The judicial system is not always independent and is susceptible to pressure from the government. This would make it difficult for investors to seek recourse from the courts.
Political risk is also high as many extremist groups, including Fulani Herdsmen, Boko Harem and Islamic State continue to undermine security in Nigeria. The government is ill-equipped to combat extremists, as the lack of infrastructure in rural parts of the country makes the guerrilla warfare conducted by terrorists extremely effective.