Nigeria started 2014 as a darling of investors seeking opportunities in ever more far-flung frontiers, but now the African economy could take a body blow from the oil price decline.
"In a country plagued by deep regional and religious divisions, oil revenue is literally the glue that binds the fractious elites together," RBC Capital said in a note last week, adding that Nigeria is likely the OPEC country with the most immediate risk for civil unrest amid oil price declines. "Nigeria has experienced coups in previous low price environments due in part to drying up patronage funds."
It's a major shift from earlier this year when many major European and U.S. multinational companies said they were putting the country at the top of their list of frontier markets where they were considering investments. Nigeria overtook South Africa as Africa's largest economy this year, and investors were eyeing its robust long-term growth prospects, underpinned by the combination of natural resources, an impending demographic dividend and an underpenetrated consumer market.