Nigeria’s investment risk seen rising on Supreme Court’s Rivers emergency ruling

Nigeria’s investment climate is facing a fresh test following the Supreme Court’s ruling on the state of emergency in Rivers State, with analysts warning that the decision has introduced a new layer of subnational political risk that could weigh on foreign direct investment (FDI), project finance, and long-term capital planning.

The apex court, in its December 15 decision, declined to hear a suit brought by several states challenging President Bola Tinubu’s declaration of emergency rule in Rivers State, which was enforced between March and September 2025.

While the case was struck out on procedural grounds, the court made broad observations that effectively validated the President’s wide discretion under Section 305 of the Constitution, without clearly defining limits to emergency powers.

As Nigeria seeks to attract long-term capital amid fiscal and macroeconomic reforms, analysts warn that resolving constitutional uncertainty may be just as important as passing new economic laws.

In a report titled, ‘The Supreme Court and Nigeria’s Growing Governance Risk,’ SBM Intelligence, an Africa-focused research and consulting firm, said the ruling goes beyond politics and exposes a constitutional ambiguity that investors are likely to price into their risk calculations.

Read also: Nigeria’s infrastructure bet chokes as debt trap crush N10.8trn capital budget 

According to SBM Intelligence, this has created a “novel subnational political risk,” as what occurred in Rivers could, in principle, happen in any state without firm constitutional guardrails.

Rivers State is one of Nigeria’s most economically strategic states, hosting major oil and gas assets, ports, logistics hubs, and critical infrastructure. Disruptions to governance there carry national and international implications, particularly for energy exports and industrial supply chains.

The report noted that “resource-rich and commercially strategic states like Rivers” are especially vulnerable, as emergency rule signals institutional fragility and raises concerns about the reliability of the investment environment.

Analysts say this matters because large projects in oil, gas, infrastructure, and manufacturing rely heavily on stable subnational institutions for permits, land administration, taxation, and regulatory approvals.

Threats to contracts and regulation
One of the most immediate investor concerns is contract enforcement. Emergency rule, which involves the suspension of elected officials and legislatures, raises questions about who has the authority to sign, vary, or honour contracts entered into by previous administrations.

SBM Intelligence warned that the ruling heightens fears around “policy continuity, contract enforcement, and regulatory stability,” particularly where long-term concessions and public-private partnerships are involved.

Regulatory continuity is also at risk. State governments play a critical role in environmental approvals, local taxation, and sector-specific regulation. Sudden governance disruptions increase the risk of delays, reversals, or future legal challenges to decisions taken under emergency administration.

The judgment also sits uneasily alongside ongoing federal reforms aimed at improving Nigeria’s investment attractiveness. Policies such as the Nigeria Tax Act 2025 depend on cooperation and coordination between federal and state governments.

However, the report stated that the Supreme Court’s approach “directly contradicts recent federal efforts to improve fiscal coordination and attract investment,” because these reforms require “stable inter-governmental cooperation to succeed” .

Experts argued that it is difficult to promote predictability in taxation and revenue administration while constitutional uncertainty hangs over the autonomy and continuity of state governments.

By failing to draw clear constitutional boundaries around emergency powers, the Supreme Court has allowed “a persistent political risk premium to hover over subnational governance,” SBM Intelligence said. This, the report adds, could dampen investment appetite and undermine long-term economic planning.

The research firm said that the Rivers emergency ruling should be seen as a political-economy shock rather than a routine legal event. While the court avoided a substantive pronouncement on the suspension of elected officials, its silence has left investors to assume the worst-case scenario when assessing risk.

“In this sense, the judgment is not merely a legal setback but a structural risk to Nigeria’s political economy,” SBM Intelligence noted.