Geopolitical Risk and Religious Tensions in Nigeria: Implications for Energy and Emerging Market Investments

The interplay of U.S. policy shifts and religious instability in Nigeria is reshaping the dynamics of its oil sector and emerging market equities. As Nigeria remains a critical player in global energy markets and a focal point for emerging market (EM) investments, the convergence of these factors demands a nuanced analysis for investors navigating geopolitical and socio-economic risks.

U.S. Policy Shifts and Energy Market Volatility

Recent U.S. policy developments under President have introduced significant uncertainty for Nigeria's oil exports. Trump's threats to impose higher tariffs on energy imports from the EU, coupled with his designation of Nigeria as a "country of particular concern" for religious freedom violations in October 2025, signal a strategic pivot to bolster American energy dominance while leveraging diplomatic pressure, as reported in a Leadership article. This move, though not immediately triggering sanctions, opens the door for future economic penalties, including restrictions on non-humanitarian aid and arms sales, according to an Economic Times report. Such measures could strain U.S.-Nigeria relations and indirectly reduce European demand for Nigerian crude, as the Leadership article argues, by encouraging allies to prioritize American energy over non-U.S. suppliers.

Nigeria's oil sector, , as noted in an EIA analysis. The Dangote refinery, a cornerstone of Nigeria's energy revival, has necessitated U.S. , highlighting the country's growing reliance on external feedstock, a point the EIA analysis also makes. However, U.S. policy-driven instability in global energy markets could disrupt this delicate balance, exacerbating volatility in a sector already vulnerable to geopolitical shocks.

Religious Instability and Investor Sentiment

Religious tensions in Nigeria have intensified since 2023, , according to a Times of India article. While U.S. lawmakers frame this as anti-Christian persecution by groups like and , Nigerian authorities argue the conflict is multifaceted, involving ethnic and land disputes, a nuance also highlighted in the Times of India coverage. Nevertheless, the U.S. designation of Nigeria as a "country of particular concern" has amplified diplomatic pressure, , as reported in a US News report.

The ripple effects on EM equities are evident. Institutional investors have shown mixed signals: Carlyle Group Inc. , while Palliser Capital UK Ltd. increased holdings, according to a MarketBeat filing. This divergence reflects broader uncertainty, as religious instability undermines Nigeria's appeal as an EM investment destination. Research underscores the moderating role of religious freedom in reducing income inequality, but Nigeria's current climate threatens to erode financial development's positive impacts, particularly in regions with weak institutional frameworks, as an MF-Journal study finds.

Intersecting Risks and Strategic Considerations

The intersection of U.S. policy and religious instability creates a dual risk layer for Nigeria's economy. On one hand, potential sanctions could disrupt oil exports and reduce access to U.S. technical support, critical for maintaining infrastructure at the Forcados and Bonny terminals, according to NUPRC data. On the other, religious violence deters (FDI), , as NUPRC data and the MarketBeat filing indicate.

For investors, the key lies in hedging against these risks. The Nigerian government's efforts to attract equity partners for its refineries-aimed at reducing fuel import dependence-could stabilize the sector, according to a Reuters report. However, without addressing the root causes of religious and ethnic tensions, long-term gains remain uncertain.

Conclusion

Nigeria's energy and EM markets are at a crossroads. U.S. policy shifts and domestic instability are converging to create a volatile environment, where oil production gains are offset by geopolitical and socio-economic headwinds. Investors must weigh short-term opportunities, such as the Dangote refinery's operational expansion, against long-term risks tied to policy uncertainty and religious conflict. As Nigeria navigates this complex landscape, the path to sustainable growth will require both diplomatic engagement and domestic reforms to stabilize its fragile equilibrium.