Afreximbank Warns of Economic Fallout in Nigeria Post U.S. Aid Withdrawal

The African Export-Import Bank (Afreximbank) has raised alarm over Nigeria’s deepening fiscal challenges following the suspension of assistance from the United States Agency for International Development (USAID). In its April 2025 market update, the trade bank emphasised that the loss of U.S. support underscores the urgent need for Nigeria to explore alternative funding sources to stabilise its economy.

The report, which provided a comprehensive analysis of global and African economic trends, painted a sobering picture of the continent’s fiscal landscape. Nigeria, Africa’s largest economy, is projected to run a fiscal deficit of 3.89% of its GDP in 2025—a consequence of its expansionary budget aimed at stimulating growth through public spending.

However, Afreximbank cautioned that the country’s growing debt burden and weakening external support now demand swift policy shifts. “The recent suspension of USAID assistance further compounds Nigeria’s fiscal challenges, necessitating alternative funding mechanisms such as domestic borrowing, multilateral support, and enhanced revenue mobilisation through taxation and economic diversification initiatives,” the bank stated.

Despite a generally moderate global economic outlook for 2025, the bank warned of serious headwinds that could derail progress. Geopolitical tensions, volatile commodity prices, and fluctuating U.S. trade policies were flagged as key threats to global stability.

“Varying monetary policy approaches across major economies add another layer of complexity,” the report noted. It also highlighted rising U.S. inflation and the potential for further interest rate hikes—factors that could tighten global liquidity, increase borrowing costs, and trigger capital outflows from emerging markets, including African nations.

In a brighter note, Afreximbank acknowledged that several African countries, including Nigeria, Egypt, Morocco, and Angola, have seen their currencies appreciate due to targeted policy interventions. Nigeria, in particular, has benefited from strategic exchange rate management efforts.

Yet, the broader trend across Africa remains mixed, with many currencies under pressure from a strong U.S. dollar, shifting investment flows, and volatile trade dynamics. “Addressing currency volatility remains a priority for policymakers to ensure macroeconomic stability,” the bank advised.

The report also pointed to instability in global commodity markets, especially oil. Crude prices fell to $70 per barrel in February, largely due to expectations of relaxed sanctions on Russian exports. While this may benefit oil-importing countries, it poses revenue risks for African exporters like Nigeria.

Afreximbank did not shy away from addressing the deeper structural issues hampering economic growth across Africa. Persistent security threats—ranging from terrorism to armed conflicts and electoral instability—continue to undermine investor confidence.

“Territorial disputes, terrorism, and election cycles significantly impact economic policymaking and capital flows,” the report stated, adding that improved governance, regional cooperation, and stronger security frameworks are essential to creating a more stable investment environment.

As global economic conditions remain fragile and Nigeria faces mounting internal pressures, Afreximbank’s message is clear: survival depends on strategic adaptation. With traditional sources of aid under threat, the path forward must be paved through resilience, innovation, and long-overdue reforms.