Menu

How coup baiting is toxic for the economy 07 Nov 2025

It is important to start this essay with a disclaimer. I am writing on Sunday, 19 October 2025. By the time you are reading this in my November column, more details of the purported coup plot against the government of President Bola Ahmed Tinubu may have emerged. However, I have no interest in the veracity of the rumour.

The fragility of Nigeria’s democratic project is nowhere more exposed than in the response of its economy to political uncertainty. For a country that has spent nearly three decades attempting to solidify civilian rule after decades of debilitating military dictatorships, the mere whisper of an unconstitutional power grab acts as a powerful economic poison. 

Since 1999, rumours of coup attempts have circulated without much public substantiation of the illegal attempts at overthrowing the government. Such cynical rumours are, therefore, viewed as “coup baiting.” This refers to deliberate propagation of coup rumours or the reckless invitation of military intervention by political actors and disgruntled elites. But this is not just political mischief; it is an act of fundamental economic sabotage that weaponises the nation's past trauma in an attempt to score a short-term political gain.

The economic consequences of the unverified rumours are immediate and severe. Their first victim is political certainty, the single most vital ingredient for a thriving, investment-led economy. Coup baiting, historically employed during periods of political transitions and economic hardship in Nigeria, has proven to be disastrously effective in aggravating political risk. As investors react to the rumours by pausing investment decisions or exiting their portfolio investments in the country, fiscal stress and economic hardship grow worse, heightening the initial public discontent.

Coup baiting can be defined as the strategic and reckless dissemination of information that suggests or encourages a military takeover of government. In Nigeria, this phenomenon is rooted in the country’s turbulent history, where political conflict frequently provided the opening for military seizure of government.

During the First Republic, the acrimonious political environment, rife with accusations of corruption and regional dominance, arguably constituted an environment of political brinkmanship that preceded the bloody January 1966 coup. Similarly, throughout the Second Republic and the aborted Third Republic, the fragility of democratic structures was often tested by politicians who, upon losing power or facing accountability, deliberately created chaos or invoked the spectre of the military as an alternative to civilian administration.

This cycle of instability resulted in an economy characterised by policy inconsistency, institutional decay, and endemic corruption. Military regimes, often driven by survival rather than economic logic, oversaw the decline of the civil service, the nationalisation of industries without clear purpose, and the institutionalisation of rent-seeking behaviour, particularly within the oil sector. This is the ultimate economic outcome of successful coup baiting: a prolonged period of stagnant growth, stunted diversification, and pervasive poverty. The country has continued to struggle with these untoward outcomes.

For the global investment community, political stability is a binary choice. Coup baiting injects a dose of uncertainty, triggering an instantaneous and damaging reaction. It sparks a rapid exodus of foreign portfolio investors. Short-term investors, who hold Nigerian equities and sovereign bonds, are often the first to flee. Regardless of how quickly the rumour of a coup is denied, it nevertheless conveys a sense of high political risk, prompting a sell-off of Nigerian assets. This capital flight immediately drains the country’s foreign exchange reserves, reducing the supply of foreign exchange necessary for legitimate international trade.

Perhaps more devastating, coup-baiting also causes Foreign Direct Investment (FDI) to dry up. Companies considering long-term investments in Nigeria calculate their returns based on the assumption of a stable operating environment. The whisper of a coup, particularly one amplified by political actors, forces corporate boards to impose high political risk premia on Nigeria. This can make a project non-viable overnight, leading to the deferral or cancellation of billions of dollars’ worth of potential investment. The core problem is that FDI requires sunk costs (irrecoverable expenditures), and no rational investor will commit irreversible capital when the country's political future is uncertain, regardless of whether the risk is real or maliciously contrived.

As the characterisation of political risk takes hold, Nigeria becomes less attractive for foreign investment inflows than smaller African economies that are perceived to be more politically stable. Despite having the continent’s largest population and consumer market, the smaller economies are the ones attracting more FDIs that create quality jobs.

The naira is considerably vulnerable to coup baiting. The value of the currency, like others, is determined by the country’s economic fundamentals as well as investor confidence in the political system. The moment a coup rumour gains traction, individuals and businesses would start to engage in panic buying of hard currency. They view currencies such as the US dollar or the euro as the only reliable store of value against the potential chaos, border closures, and unpredictable financial policies that accompany a military regime. This speculative surge in demand creates an artificial scarcity of foreign exchange in the country, leading to the depreciation of its currency value on the parallel market. Everyone suffers from this, as the imported inflation that ensues affects food and machinery, which ordinary people and industries rely on.

Coup-baiting also causes policy paralysis. The Tinubu government is wrestling with monumental economic challenges, including the need to unify the complex exchange rate system and manage the fallout from the removal of the petrol subsidy. Implementing these necessary, structural reforms requires immense political capital and institutional stability to weather the inevitable public outcry of their immediate impact.

A government constantly distracted by or forced to defend itself against politically motivated coup rumours loses its capacity to govern decisively. It fears that any tough economic decision by the government could attract public backlashes, and coup-baiters could use it to instigate political unrest. Consequently, vital reforms are delayed or watered down, leaving the economy stuck in a debilitating state of flux, unable to achieve the policy coherence required for sustainable growth. The weaponisation of instability thus becomes a direct impediment to Nigeria's economic recovery.

However, the destructive economic cycle initiated by coup baiting extends far beyond the financial markets. As already noted, it directly impacts the lives of ordinary Nigerians and fosters future instability.

For local businesses, particularly SMEs, the political risk translates into increased operational costs and a severe credit crunch. Banks, fearful of a systemic crisis, tighten lending criteria, starving the sector of the capital it needs to grow and create jobs. Domestic consumers, sensing the rising political heat, pull back on spending, further slowing economic activity. This collective caution leads to stagnant employment rates and increased poverty, creating the very suffering that the political instigators of coup-baiting often claim they are addressing.

Furthermore, the practice undermines democracy across West Africa. As a regional hegemon, Nigeria’s stability is crucial for the ECOWAS region. When coup-baiting in Nigeria takes hold, it normalises the idea of extra-constitutional change, sending a dangerous signal across West Africa, which has witnessed a recent spate of successful coups in the Sahel. A crisis in Nigeria would not only halt trade but also fatally undermine the democratic credibility of the entire regional bloc, leading to wider economic and security destabilisation.

Coup baiting is not merely a political nuisance; it is an economic malignancy. It is a historical tactic that has demonstrably led to decades of economic misdirection, mass corruption, and the systematic erosion of Nigerian institutions. The deliberate propagation of these rumours is a direct assault on the nation’s currency, its investment climate, and its capacity to conduct effective fiscal policy.

To safeguard Nigeria's economic future, it is paramount that the political elite and the public alike recognise coup baiting for what it is: an act of profound and selfish economic treachery. The economy's long-term stability depends entirely on the resolute and unified rejection of all forms of political instability, ensuring that the whispers of a coup, whether genuine or politically manufactured, are met with an unambiguous commitment to constitutional democracy and good governance. This is the only way to lower the country's punishing political risk premium and unlock its immense economic potential.

Cheta Nwanze is Lead Partner at SBM Intelligence.