Also, S&P Dow Jones Indices recently suggested upgrading Nigeria to frontier market status, a news that will sound like a music in the ears of investors searching for emerging markets to make their money work.

To know more about the NGX’s bull run, International Finance caught up with Hon. Dele Kelvin Oye, who serves as the Chairman of two key bodies: Alliance for Economic Research and Ethics LTDGTE and the Nigeria–Turkiye Business Council. Kelvin Oye talked in detail about the various facets of the stock market uptick, including the key sectors driving the rally, the key numbers and data that everyone should take note from the bull run and most importantly, how the Bola Tinubu administration’s reform drive helped in Nigeria earning the investor confidence.

Here the excerpts from the interview.

With a 67% return, Nigeria’s stock market has been the best-performing equity market globally in dollar terms in 2026. What have been the key factors driving the rally?

Three years ago, many investors would have regarded a sustained Nigerian equity-market rally as improbable. Nigeria was widely associated with frontier-market risk: foreign-exchange uncertainty, shallow liquidity, uneven policy transmission, and difficulty in converting local currency returns into reliable dollar outcomes. That scepticism was not irrational. It reflected real institutional and macroeconomic constraints.

The important point today is not that those constraints have disappeared. It is that the direction of travel has changed. Nigeria’s equity market has responded to a combination of reform expectations, bank recapitalisation, improved foreign-exchange liquidity, stronger market infrastructure, corporate capital raising, and renewed interest in the Nigeria’s long-term productive capacity.

NGX reported, citing Bloomberg data across 92 global exchanges, that Nigeria’s benchmark equity index had delivered a 67% return in US-dollar terms since the beginning of 2026, narrowly ahead of South Korea’s KOSPI at 66%. That is an extraordinary dated observation. It should be respected, but not romanticised.

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A market rally is not a referendum on one policy or one administration. It is a forward-looking aggregation of expectations about earnings, liquidity, currency, interest rates, commodity prices, governance, and political risk. The Nigerian Exchange is therefore pricing both improvement and uncertainty. The task before policymakers and market institutions is to convert a powerful repricing into durable capital formation.

The reform programme began with difficult decisions, including the removal of the petrol subsidy and the movement toward a more unified, market-based foreign-exchange regime. The social costs have been substantial, and responsible economic leadership must acknowledge them.

The IMF’s 2026 assessment recognised improved macroeconomic resilience while also warning that poverty and food insecurity remained severe. Stability that is not eventually translated into lower living costs, employment, energy reliability, and wider opportunity will not possess enduring legitimacy.

At the Alliance for Economic Research and Ethics, we view the current market through four lenses: the strengthening of bank balance sheets, the arrival and prospective arrival of strategic issuers, the interaction between currency conditions and asset prices, and the continuing influence of oil and gas on Nigeria’s external and fiscal position. These are not guarantees of perpetual appreciation. They are the principal mechanisms through which reform expectations are being transmitted into market prices.

S&P Dow Jones Indices has suggested upgrading Nigeria to frontier market status. How do you view this development?

S&P Dow Jones Indices’ decision to place Nigeria on its 2027 Country Classification Watchlist is significant, but the language must be precise. Nigeria is being considered for possible reclassification from Standalone Market to Frontier Market; this is not an upgrade from an existing frontier classification.

The distinction matters because index classification is not a ceremonial label. It affects how global investors define their investable universe, how benchmark providers construct portfolios, and how asset owners assess operational accessibility.

A possible reclassification would signal that Nigeria’s market infrastructure, regulatory environment, transparency, enforcement, and accessibility are moving closer to the requirements of a recognised frontier-market universe. It would not, by itself, create sustainable foreign inflows.

Nor should we confuse a watchlist with a completed decision. S&P DJI has indicated that consistent policy implementation and operational resilience will be important to the review. The appropriate Nigerian response is neither triumphalism nor defensiveness.

It is to keep improving the practical experience of investing: timely settlement, reliable price discovery, predictable regulation, credible enforcement, transparent corporate actions, and efficient repatriation through authorised channels.

The broader lesson is that market credibility is accumulated through repetition. One successful transaction is encouraging; a decade of consistent execution is transformative.

Please tell our readers about some of the sectors that have driven the NGX’s bull run.

The rally has involved more than one sector, but it has not been evenly distributed. The available H1 2026 data show a market that is broad in direction and concentrated in leadership and magnitude. BusinessDay newspaper, citing NGX index performance, reported H1 gains of approximately 90.2% for Oil & Gas and 79.0% for Industrial Goods. The NGX’s weekly report for the period ended June 26 2026 recorded broadly similar year-to-date figures.

Banking has also been a major contributor. The CBN’s recapitalisation framework requires minimum capital of 500 billion naira for commercial banks with international authorisation, 200 billion naira for national banks, and 50 billion naira for regional banks. The exercise has encouraged banks to raise equity, strengthen their balance sheets, reassess their strategic scale, and prepare for a more competitive regional environment.

ALSO READ | At NGX, Share Prices Rise Faster Than Profits

NGX reported that Nigerian banks raised and listed an estimated 2.25 trillion naira in 2025. Total NGX listings were estimated at 6.34 trillion naira, including 3.79 trillion naira in Federal Government bonds and 299.69 billion naira in other corporate listings. These figures are evidence of a more active primary market. They are not, by themselves, proof that every new issue will create value or that the secondary market has become deep enough for all investors.

Consumer Goods also gained, although more modestly, while the Insurance sector was negative in the NGX report accessed for the period. It is therefore more accurate to say that the market has experienced meaningful sectoral participation with pronounced leadership from Oil & Gas, Industrial Goods, and selected financial and energy names. The result is impressive, but it should not be described as an evenly distributed, all-sector advance.

This distinction is important for investors and policymakers alike. Breadth of participation matters, but concentration matters too. A market driven by a few large constituents can produce a strong index return while leaving liquidity and valuation risks unresolved elsewhere.

Can you break down some of the key data and numbers behind the NGX’s valuation rise in 2026?

The NGX All-Share Index closed at approximately 74,800 points at the end of 2023 and stood at 245,209.34 points on August 6 2026 according to market-data reports. The arithmetic implies a nominal naira index increase of approximately 227.8% over that interval.

That is an extraordinary movement, but it is a price-index return, not a claim that the underlying economy or every listed company increased in value by the same amount.

Market capitalisation also rose sharply. Contemporary reports placed it at approximately 158.3 trillion naira in early August 2026, compared with about 30 trillion naira at the end of 2023. Market capitalisation is a valuable measure of the market’s scale, but it is not identical to real wealth creation. It can change because share prices rise, new securities are issued, companies are admitted to the market, corporate actions alter the share count, or the currency and nominal price level change.

The strongest international comparison is the one that is explicitly dated and denominated. NGX reported that the benchmark delivered 67% in US-dollar terms since the start of 2026, ahead of South Korea’s KOSPI at 66% in the Bloomberg comparison cited by NGX.

Naira returns and dollar returns answer different questions. A domestic investor experiences the local-currency return; an international investor also experiences the movement of the naira against the dollar.

Liquidity deserves the same precision. NGX reported that banks and other issuers contributed materially to the 6.34 trillion-naira of 2025 listings, while the broader market’s daily trading depth remains a separate question. A larger market is not automatically a liquid market.

Liquidity is the capacity to transact meaningful size at reasonable cost, with dependable two-way prices and without materially moving the market.

The proper conclusion is therefore measured: the rally has been substantial, participation has widened, and primary-market activity has strengthened, but the durability of the repricing will ultimately be tested by earnings, free cash flow, governance, valuation, and the ability to trade and repatriate capital under pressure.

Since the beginning of 2026, the naira has strengthened by about 4% against the US dollar, amplifying returns for international investors. How do you read the currency’s renewed strength and the NGX’s meteoric rise?

The naira and the NGX have moved in a relationship that deserves careful analysis. When the currency is volatile, a foreign investor may make a profit in naira and still lose money in dollars. That possibility creates what can be described as confidence deficit. The movement toward a more market-based FX regime has therefore been important, even though it has not eliminated liquidity, documentation, or execution risks.

NGX reported an approximate 4% appreciation of the naira against the US dollar since January in the context of its July 2026 market report. The IMF, using a different comparison period, reported a 10% year-on-year appreciation against the dollar in March 2026. These figures are not necessarily inconsistent; they measure different intervals and may use different reference points. A responsible speaker must always state the date range and exchange-rate basis.

A currency can influence equity performance through several channels. It affects the translated value of hard-currency earnings, the naira value of foreign assets and liabilities, import costs, interest-rate expectations, and the willingness of international investors to hold local securities.

It can also produce accounting gains that are not the same as recurring operating earnings. That is why FX revaluation gains should never be treated as a substitute for durable business performance.

The IMF has rightly welcomed the Nigerian government’s commitment to a flexible exchange-rate regime while continuing to call for the reduction of remaining exchange restrictions, capital-flow measures, and multiple-currency practices as conditions permit. The mature position is neither to deny progress nor to claim completion. Nigeria has moved in the direction of a more unified market-based system; the work of building deep, predictable, and trusted FX liquidity continues.

The naira’s depreciation created a powerful incentive for foreign investors to seek inflation hedges in equities. Can you elaborate further on this dynamic?

Currency depreciation can encourage investors to seek assets with pricing power, inflation protection, or hard-currency earnings. In Nigeria, companies with export exposure, regulated pricing, strong brands, or the ability to reprice products may be perceived as better positioned than businesses whose revenues are fixed in naira while their costs are imported.

But this mechanism must not be presented as a universal law. Depreciation can also weaken household purchasing power, increase working-capital requirements, raise debt-service burdens, and reduce the real value of domestic savings. In banks, FX movements can generate large reported gains or losses that may not recur. In consumer businesses, the ability to pass on costs depends on demand, competition, and the consumer’s capacity to pay.

The more defensible conclusion is that depreciation may redirect capital toward selected equities, especially where investors perceive a hedge against inflation or currency weakness. It does not make equities immune to macroeconomic damage. If currency deterioration becomes disorderly, the market’s valuation, financing conditions, and earnings quality can all suffer.

For the next phase, returns must increasingly be earned through revenue growth, productivity, stronger balance sheets, dividends, and disciplined capital allocation. The depreciation trade is not a development strategy. It is, at most, a transitional feature of a market adjusting to a new nominal environment.

How much have the government reforms contributed to the NGX’s bull run, and how important have they been in restoring investor confidence?

President Tinubu’s reforms have been important to the market’s change in direction, but it would be too simple to attribute the entire rally to one administration or one announcement.

Investor confidence is built through a chain of expectations: the belief that prices are becoming more transparent, that contracts will be respected, that capital can be moved through lawful channels, that financial institutions are resilient, and that policy will be implemented consistently/predictably.

The Central Bank of Nigeria (CBN) states that Nigeria moved toward a new foreign-exchange framework in June 2023, including a willing-buyer, willing-seller model.

This was a significant policy shift. It should not, however, be described as a guarantee of a permanently single exchange rate or frictionless access to dollars. The IMF’s 2026 assessment continued to identify remaining exchange restrictions and multiple-currency practices as matters for further reform.

The same principle applies to fiscal reform. President Tinubu assented to four tax-reform Acts on June 26 2025, with the principal provisions scheduled to commence on January 1 2026. That is a consequential legislative achievement. Yet enactment is not the same as successful implementation.

The credibility of Nigeria’s tax reform will depend on administrative clarity, institutional capacity, taxpayer confidence, and the quality of public expenditure.

The market does not require government to promise perfection. It requires government to demonstrate a credible process: explain the objective, publish the rules, apply them fairly, measure the results, and correct errors without destroying predictability. That is the foundation of a genuine credibility dividend.

The NGX is also eagerly awaiting the listing of Dangote Petroleum Refinery. Do you see the listing creating another bull run in the Nigerian equities market?

A potential listing of Dangote Petroleum Refinery could become an important event for Nigeria’s capital market. It would bring a large strategic industrial asset into the public-market conversation, broaden sectoral representation, create an opportunity for price discovery, and test the NGX’s capacity to support a transaction of global significance.

The word potential is essential. Current reporting points to a proposed offering, but the reported stake, timing, valuation, and proceeds have changed across accounts. Reuters reported in August 2026 that the refinery was aiming to raise USD 5 billion through a proposed October 2026 listing, following a reported USD 2.5 billion private placement for a 6% stake that implied a valuation of approximately USD 40 billion. Those reported terms should not be confused with a final prospectus or approved offer document.

Nor should investors assume that a large listing automatically creates a bull market. The effect would depend on valuation, free float, governance, disclosure, dividend policy, the treatment of foreign-currency earnings, and the ability of local and international investors to trade the shares.

Reports of possible dollar-denominated dividends should remain described as a proposed feature until formally documented in the offer materials and approved through the relevant regulatory process.

The strategic significance would nevertheless be considerable. Nigeria needs more large, transparent, productive companies represented in the public market—not only banks and consumer companies, but energy, infrastructure, technology, healthcare, agriculture, and industrial businesses.

A successful offering would be valuable not because size alone is virtuous, but because it could establish a higher standard for disclosure, governance, research coverage, and long-term ownership.

Do you see more IPO opportunities arriving at the NGX amid the ongoing bull run? What sectors or companies could potentially drive the next wave of listings?

Nigeria has a credible opportunity to deepen the pipeline of public-market issuers, but the language should be realistic. Energy infrastructure, gas processing, power, agriculture, food manufacturing, healthcare, logistics, and technology all require long-term capital. The NGX can become an important channel for that capital if it continues to improve listing standards, research coverage, settlement, market making, and investor education.

The history of recent listings also teaches us to distinguish between a primary capital raising and a listing by introduction. Geregu Power was admitted to the NGX in October 2022, BUA Foods in January 2022, Transcorp Power in March 2024, and Aradel Holdings in October 2024. Several of these were listings by introduction rather than public offerings that raised new equity at the time of admission.

They listings were still strategically important. They broadened the investable universe, enhanced visibility, improved price discovery, and created a public-market platform that could support future financing. But precision matters. A listing can be a major capital-market event without being a primary IPO.

The next wave will be determined by the willingness of credible companies to accept the disciplines of public ownership: audited reporting, timely disclosure, independent oversight, investor relations, and accountability to minority shareholders. Those disciplines are not bureaucratic burdens. They are the infrastructure of trust.

What must be done from the Tinubu administration to sustain both the economic and market momentum?

The first requirement is policy consistency, understood not as stubbornness but as predictable governance. Reforms should be evaluated honestly, adjusted where evidence demands it, and protected from arbitrary reversals. Policy stability is strongest when it is supported by transparent rules and institutions rather than by personal assurances.

The second requirement is deeper liquidity. The market needs more market makers, more institutional participation, more credible research, more investable products, and more large-cap issuers. Pension funds and insurance companies can contribute significant patient capital, but the regulatory framework must balance development objectives with fiduciary responsibility. Encouraging equity investment is not the same as compelling it.

The third requirement is investor protection. The SEC, NGX, NGX Regulation, and market-infrastructure institutions must maintain high standards of enforcement, disclosure, settlement, and corporate governance. A market cannot become globally investable if minority shareholders do not trust the quality and timeliness of information.

The fourth requirement is social legitimacy. Investors do not allocate capital to statistics; they allocate capital to economies populated by people, firms, institutions, and consumers. Reforms must therefore be judged by whether they improve productivity and opportunity, not only by whether they produce a stronger index in a particular year.

Higher crude prices, driven by volatile geopolitics, have boosted government revenues and corporate profitability in the energy sector. Do you see this rally sustaining in the long run?

Higher oil prices can support Nigeria’s fiscal revenues, foreign-exchange availability, and energy-sector earnings. A prolonged oil-price decline would create pressure through the budget, the external account, the currency, and investor sentiment. That vulnerability remains real.

Yet Nigeria’s long-term market story cannot be an oil-price story alone. The sustainable objective is to use periods of favourable commodity income to build non-oil productive capacity, improve tax administration, strengthen infrastructure, and invest in human capital. The IMF projects continued growth in both oil and non-oil activity while identifying fiscal, external, security, and social risks that must be managed.

Diversification is not a slogan. It means that more Nigerian firms should earn revenue from manufacturing, food processing, improved mining investment climate, solid minerals processing/value addition, services, technology, logistics, healthcare, and regional trade. It means that the capital market should finance those firms transparently and at a cost that rewards discipline.

The post The naira and the NGX have moved in a relationship that deserves careful analysis: Dele Kelvin Oye appeared first on International Finance.

Within the space of a single week in August, the world was handed two irreconcilable accounts of the same economy.

In the first, Russian officials told global media that the domestic economy has kept a strong and healthy profile despite what they described as unprecedented foreign pressure since the full-scale invasion of Ukraine in early 2022.

The Russian embassy in London told CNBC that the country’s fiscal position remains ‘significantly stronger’ than that of many Western economies, pointing to foreign public debt of around $57 billion, and noting that this is ‘considerably less’ than what the United States, the United Kingdom, Italy or France spend on debt servicing alone.

In the second account, Andrei Klepach, for twelve years the chief economist of the state development corporation VEB.RF and before that a deputy economy minister, was removed from his post on August 16 after remarks he made in May began circulating in Russian media.

He had told a gathering of economists at the Moscow Exchange’s Nikitsky Club that the country was losing the technological and economic contest, that it would not win a war of attrition, and that the country was heading towards a social crisis.

Both accounts contain truths. The gap between them is where the real story sits.

Absorbing four-and-a-half years of sanctions

Russia has been the target of the most extensive sanctions regime ever applied to a major economy, but it has not collapsed. It has not come close.

The adaptation happened along three main lines. Trade was redirected, with crude and refined products rerouted from Europe to India, China and Turkey, moved on a shadow fleet of ageing tankers that has grown faster than Western authorities can designate it.

The European Union’s twentieth sanctions package, adopted in April 2026, added 46 more vessels to the port access ban, taking the designated total past 630, which is itself an indication of how large the fleet has become.

Second, the state stepped into the vacuum left by departing Western firms. Public spending, above all the defence order, replaced private investment as the engine of demand. In 2023 and 2024 that produced growth above 4% a year, which was less a boom than a fiscal injection with a growth rate attached.

Third, the macroeconomic plumbing held. The central bank under Elvira Nabiullina defended the rouble aggressively, ran a genuinely orthodox inflation-targeting policy, and imposed rates that reached 21% before easing began. Inflation was brought down from around 9.5% to below 6%. Sovereign external debt stayed low, which is exactly the point the embassy is making.

So, the headline claim survives scrutiny. Russia’s external public debt is modest, its banking system has not seized up, its shops are stocked, its currency has not spiralled, and unemployment sat at 2.2% in June. Anyone who predicted a 2022-style implosion was wrong.

Where things have actually deteriorated

Low foreign public debt is partly a symptom of exclusion rather than a sign of health. Russia cannot borrow abroad because foreign capital markets are shut to it, so the debt it does not owe overseas is a measure of what it cannot access, not of what it has chosen to avoid. The pressure has simply moved to the domestic balance sheet, and there the numbers are less comfortable.

Between January and July 2026, the federal budget ran a deficit of 6.46 trillion roubles, roughly $79 billion. That is already well beyond the full-year target of 3.79 trillion roubles, which was set at 1.6% of GDP.

Depending on the GDP base used, the seven-month gap works out at somewhere between 2.5% and 2.8% of output. Former deputy central bank chairman Sergei Aleksashenko expects the full-year figure to land between 7 and 7.5 trillion roubles, roughly 3% of GDP.

The composition of that gap matters more than its size. Oil and gas revenues fell 16.8% year on year to 4.6 trillion roubles, despite a Middle East conflict that briefly pushed crude sharply higher. The domestic fuel damper mechanism, which compensates refiners for selling into the home market below export parity, consumed most of the windfall.

Meanwhile, spending has run ahead of plan, with government procurement including the state defence order up around 40% year-on-year to 8.44 trillion roubles by the end of July, some 80% of the entire annual allocation.

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The finance ministry raised 2.3 trillion roubles through OFZ bond issuance in the first seven months, largely absorbed by state banks, and then paused placements because yields near 16% made the exercise punitively expensive. Debt servicing has become one of the largest single lines in federal spending.

Around 460 billion roubles was drawn from the ‘National Wealth Fund’, about 200 billion roubles came from selling nationalised assets, and roughly 3.5 trillion was covered by running down Treasury balances parked in commercial banks, with a little over 4.5 trillion left in that pool.

The cushion that made the first years of the war survivable has largely gone. Before February 2022, the National Wealth Fund held around $113 billion in liquid assets, equal to 7.3% of GDP. It is now worth roughly a third of that in real terms, at about 2% of GDP. A fund designed to co-finance pensions has been spent covering a war.

The corporate picture behind those aggregates is weakening in parallel. More than half of Russia’s large companies closed 2025 with lower profits, and many have cut or frozen investment programmes outright.

The coal sector, hit by falling global prices, sanctions and rising rail tariffs, has been running at a loss across a majority of its enterprises. Regional finances have deteriorated alongside, with the great bulk of Russia’s regions running deficits simultaneously for the first time. None of this shows up in a sovereign external debt figure.

The rest of the bill has been passed on to households and firms. VAT went to 22% at the start of 2026, the highest rate since 1992, and the revenue threshold at which smaller businesses must register for it was cut sharply. VAT receipts rose almost 25% in the first seven months. That is not economic growth. It is a transfer from the private sector to the treasury, and it is being made in an economy where growth has already stalled.

What Klepach actually said

Klepach’s speech on May 21 was not a dissident manifesto. It was a technical diagnosis delivered to a room of professional economists, which is part of why it was so damaging when it surfaced.

He began by apportioning blame for the slowdown. Around half of it, he argued, came from the central bank’s extremely tight monetary policy, which had crushed investment and, in combination with reduced subsidised lending, dampened consumer demand.

Roughly 30% he attributed to industrial policy failure, citing the surrender of the vehicle market to Chinese manufacturers, who now account for close to half of passenger car sales and more than 70% including local assembly, and 60% of trucks.

He then went through the sectors. Design and technical problems in the new domestic civil aircraft programme. Weak demand in construction materials and metallurgy. Raw material shortages and import dependence in light industry.

His conclusion on monetary policy was pointed. Not every barrier, he said, comes from the central bank, and even a substantial rate cut would not deliver rapid growth.

His medium-term ceiling for the economy, assuming the war continues and sanctions hold, was 2% to 2.5% a year. Then came the passages that ended his career.

“We won’t win the competition in this war of attrition,” he said, adding that Russia was losing not only to China and the United States but in some ways to Ukraine, which he acknowledged was an unpleasant thing for him to say.

Ukraine’s economy is partly destroyed and demographically shattered, he noted, but it is being financed by the West at a scale that dwarfs Russian capital outflows. The assumption that it would simply collapse has not held, and will not hold.

His summary was that Russia would not fall apart and would not suffer economic collapse, but that its lag would keep widening, and that he was almost certain the country was heading for a social crisis. He added that these things arrive when nobody expects them, and reminded his audience that ‘no one expected the February Revolution either’.

VEB.RF Chairman Igor Shuvalov reportedly acted after a call from above. An acquaintance told the business daily Vedomosti that the dismissal was related to personal and harsh assessments that could not be reconciled with the corporation’s official position.

Testing his analysis against the data

The striking thing about Klepach’s assessment is how closely it tracks the official numbers, including the ones Rosstat published after he spoke.

Second-quarter GDP grew 1.3% year-on-year, beating both the central bank’s 0.8% estimate and the economy ministry’s 0.9%. Taken alone, it reads as vindication for Moscow. Taken in context, it does not. The first quarter contracted 0.2%, the first decline since 2023, so first-half growth came to just 0.6%, around half of last year’s pace and a fraction of the wartime surge of 2023 and 2024.

The quarterly rebound also rests on temporary supports. There were 5% more working days than a year earlier. Federal spending in the quarter rose about 13% to 11.5 trillion roubles, with government procurement up 38.5%. Retail turnover jumped 7.2%.

The economy ministry itself cut its 2026 growth forecast threefold in May, from 1.3% to 0.4%, and the central bank in July projected a range of zero to 1%.

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Underneath the aggregate, the two-speed structure Klepach described is visible in the data. Industrial output growth accelerated only because a defence complex flush with orders offset declines elsewhere.

Civilian manufacturing, excluding oil, fell 2.1% in June and remains close to 4% below its 2024 monthly average, on calculations by the Centre for Macroeconomic Analysis and Short-Term Forecasting. Civilian industry as a whole has been contracting by more than 3% year-on-year.

The energy picture has deteriorated faster than he could have anticipated in May. Sustained Ukrainian drone strikes have pushed Russian refinery runs to roughly 3.6 to 3.9 million barrels a day in July, the lowest in more than two decades and about a third below the seasonal norm, with 18 refineries targeted in that month alone.

The resulting petrol shortages forced export restrictions and drove the central bank to raise its 2026 inflation forecast to between 6% and 7% while cutting the key rate by only a quarter point to 14%. Most of the damage will not appear in the national accounts until third-quarter data.

The labour market completes the picture. Unemployment of 2.2% sounds like strength, but it reflects a workforce hollowed out by casualties, emigration and recruitment, with authorities projecting a shortfall of around 3.1 million workers by 2030. An economy cannot grow out of stagnation with no spare labour, no spare capital, and a central bank rate in double digits.

Reading the social crisis warning

Klepach was careful about his terms, and the care is the substance of the argument. He explicitly ruled out collapse. What he described is slower, less dramatic, and harder to reverse.

The mechanism runs roughly as follows. Growth settles near zero while inflation stays around 6%, so real incomes barely move. Growth in real disposable income could be as little as 0.6% this year.

Inequality, which narrowed in 2023 and 2024 as military wages and defence sector pay lifted incomes in poorer regions, has begun widening again. Pensions are falling further behind wages. Tax rises are squeezing small and medium-sized businesses hardest, and those firms employ the people who are not on the defence payroll.

Klepach also cited survey evidence that perceived healthcare quality is deteriorating, which is what happens when nearly 40% of federal spending goes to defence and security.

There is also a quieter adjustment happening beneath the headline employment figure. Vacancies have been falling while the number of CVs in circulation rises, a pattern that usually signals hidden unemployment rather than a tight market.

Employers have responded to cost pressure by cutting hours, freezing pay, and shedding administrative staff rather than by making formal redundancies, which keeps the official rate low while incomes stagnate. Demand for second jobs has risen sharply.

A labour market can look fully employed and still be delivering falling living standards, and that combination is exactly what produces political surprises.

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The politics of this are more delicate than the economics. The war economy created a large constituency of beneficiaries, from contract soldiers and their families to defence plant workers in regions that had seen no investment in decades.

A social crisis in Klepach’s sense is what happens when that constituency stops growing and starts shrinking, when the payments stop rising in real terms, when the coal towns and civilian factories that were already unprofitable finally close, and when veterans return to a labour market with no room for them. His invocation of February 1917 was not a prediction of revolution. It was a reminder that this category of breakdown is not forecastable from a spreadsheet.

Slow decline

The embassy is right that Russia is not about to default or implode, and Western policymakers who keep waiting for a cliff edge will keep being disappointed. Klepach is right that an economy running at 0.4% growth, financing a war by taxing its own citizens and draining its Treasury balances, with its refining base under weekly attack and its technological gap widening, is not healthy in any sense that matters over a decade.

The indicators worth tracking are the full-year deficit against Aleksashenko’s 7 to 7.5 trillion rouble estimate, the resumption or otherwise of OFZ issuance, third-quarter GDP once the fuel crisis lands in the data, and real disposable income growth into 2027.

The most telling signal, though, has already been given. When a state corporation dismisses one of the country’s most respected macroeconomists for describing the contents of its own government’s forecasts, the problem is no longer only economic.

The post Russia’s economy is holding, but decline could take decades to heal appeared first on International Finance.

The rule that has governed global finance for forty years has been that when something breaks, money leaves the developing world. It happened in 1994, in 1997, in 2008, in 2013 when the US Federal Reserve merely hinted at slowing its bond purchases, and again after 2020, when the COVID pandemic shock pushed Zambia into default that November, and Sri Lanka and Ghana into default two years later.

By that rule, 2026 should have been a bloodbath. A war that began in late February has effectively closed the Strait of Hormuz, the passage that carried roughly a fifth of the world’s oil. Brent crude has traded near USD 89 a barrel in mid-August, up about a quarter on pre-war levels after touching USD 110 earlier in the year.

Fertiliser prices have followed, and behind them food. The yield on the 10-year US Treasury note, the number against which almost all developing country borrowing is priced, sits near 4.65%, against 3.97% before the fighting started. Traders have spent the summer arguing not about how quickly the Fed will cut rates, but whether it will have to raise them.

The rule did not hold. Institute of International Finance data shows foreign investors put USD 214.4 billion into emerging market debt in the first seven months of 2026, against USD 177.7 billion in the same stretch of 2025, the strongest run in more than two decades.

Governments have exploited the appetite. Roughly USD 19 billion of sovereign bonds were sold in July alone, about twice the average for that month over the past ten years, taking issuance for the year to a record USD 187 billion.

Something has changed, and it is worth being precise about what.

The comparison that flatters the developing world

Ask whether emerging economies have handled geopolitical disruption better than rich ones and the honest answer is that they have handled their own balance sheets better, which is not quite the same thing.

The IMF’s April 2026 Fiscal Monitor put global public debt just under 94% of GDP in 2025, on course to cross 100% by 2029, a year earlier than the fund projected only twelve months previously. The accumulation is driven overwhelmingly by the largest economies.

On the fund’s April World Economic Outlook database, US general government gross debt is projected at 126% of GDP this year and 142% by 2031, the biggest absolute increase in the advanced world. Japan sits above 200%. Twenty-three economies now carry gross debt above 100% of output, and the list is dominated by rich countries, not poor ones.

Set against that, the emerging market picture looks almost conservative. Central banks across Latin America, Asia and Africa spent the 2022 to 2024 inflation shock raising rates early and hard, which left them with real yields that are genuinely positive, and room to cut when their advanced counterparts have none.

Reserve buffers are thicker. Central bank independence, which was a slogan in the 1990s, is now closer to institutional fact in Brazil, Mexico and South Africa.

Ratings agencies have noticed. Pakistan, Ghana, Ecuador, Nigeria and Argentina have all collected upgrades. Oman and Azerbaijan have reached investment grade. Fund managers report the strongest upgrade momentum among lower rated sovereigns in over a decade, an unusual thing to say in a year of war.

Political risk, meanwhile, has migrated. The disorder that investors once priced into Latin American and African assets now shows up in a record US government shutdown, fractured European coalitions, and defence spending commitments that nobody has explained how to fund.

The growth arithmetic points the same way. The IMF’s July update expects emerging market and developing economies to grow 3.8% this year and 4.5% in 2027, against 1.7% and 1.8% for advanced economies. Global growth of 3.0% in 2026 recovering to 3.4% in 2027 is what the fund calls a V shaped path around the war shock.

The caveat matters, though, and it is a heavy one. The World Bank’s June Global Economic Prospects cut its global forecast to 2.5% for 2026, the weakest since the pandemic, and downgraded two-thirds of economies. South Asia, the fastest growing region, decelerates from 7% to 6.3%.

Low-income countries manage 5.4%, three-tenths lower than previously expected, with fertiliser driven food inflation doing much of the damage. Most sobering, the bank calculates that by 2028 developing economies other than China and India will have spent nearly a decade making no progress at all in closing the income gap with rich countries.

So, the financial resilience is real. The developmental resilience is not. Bond markets and living standards have decoupled, and anyone reading the inflow numbers as evidence of broad-based prosperity is reading them wrong.

Why the money is moving

For a decade-and-a-half, global portfolios were built on a single assumption, that American assets were the default, and everything else was a satellite allocation. That assumption is being quietly unwound.

The IMF has begun writing about the erosion of the US Treasury’s safety premium in its own fiscal surveillance. Investors who spent 2025 watching the dollar post its sharpest annual fall in eight years have concluded they are over allocated to one jurisdiction, and, in a fragmenting world, they want to be spread across many.

The mechanics reinforce the mood. For Japanese and other Asian institutions, hedging US Treasuries back into home currency now wipes out most of the yield, which makes local Asian bonds structurally more attractive than they were.

Emerging market debt was yielding around 6.9% in February, against roughly 4.2% for US bonds and 3.6% globally. Rising Treasury yields have narrowed that gap since, but not closed it.

The pull side is the story of a decade of quiet plumbing work. Emerging economies have built domestic capital pools deep enough to reduce their dependence on foreign money altogether.

Local currency sovereign bonds outstanding totalled roughly USD 13 trillion by the end of 2024, against about USD 1.4 trillion of international hard currency sovereign debt, according to research from JP Morgan and UBS. Large economies, such as Brazil and South Africa, now fund themselves overwhelmingly at home, in their own currency, from their own pension funds and insurers.

That changes the physics of a shock. When foreign investors sell, domestic institutions are on the other side of the trade. Fund managers describe the result as an absence of the liquidity crunches that used to define emerging market sell-offs. Prices fall, but the market does not gasp.

Positioning is the third leg. After what Bank of America’s head of emerging market fixed income strategy David Hauner, speaking to Reuters, called the ‘valley of tears’ running from roughly 2015 to 2025, a stretch of strong dollar, US exceptionalism, and serial defaults, global investors are still structurally underweight.

Emerging economies hold about 60% of the world’s population and produce around 40% of global output, yet account for barely a tenth of the MSCI All Country World Index. Several months of inflows barely dent a decade of under-investment.

There is a risk buried in the composition of the money, and the IMF flagged it in April. Portfolio flows to emerging markets have risen eightfold since the global financial crisis to about USD 4 trillion in cumulative terms.

Portfolio debt liabilities now average around 15% of GDP, against roughly 9% in 2006. About 80% of that capital comes from non-banks, twice the share of twenty years ago, and non-bank money is faster money.

Private credit in emerging markets, opaque by design, has grown fivefold in a decade to somewhere between USD 50 billion and USD 100 billion. Deeper markets have not abolished the sudden stop. They have changed who would cause one.

Safe haven, or simply the least crowded trade

The safe haven question deserves a careful answer, because the marketing departments have got ahead of the evidence.

A true safe haven does two things. It holds value when everything else falls, and it stays liquid when liquidity vanishes. Emerging market assets do neither reliably. What they have done in 2026 is something narrower and still significant. They have offered diversification at a moment when the traditional refuges look compromised.

Look at the split inside the flows. While USD 214.4 billion went into debt, roughly USD 86 billion came out of emerging market equities in the same seven months, nearly ten times the outflow at the same point in 2025. This is not a wall of money buying an asset class. It is a discriminating reallocation into yield, and away from concentrated technology risk.

The performance record is similarly mixed. The JP Morgan GBI-EM Global Diversified index of local currency debt lost 2.25% in the first quarter as the dollar strengthened on safe haven demand, then gained 3.85% in the second.

An index of inflation linked emerging market local currency government debt has returned 11.3% this year, against 1.5% for the broader local debt index, and a small loss for the Bloomberg Global Aggregate. The winners are specific, not general.

Currencies tell the same story. Emerging market currencies erased their 2026 gains by the start of July as speculation about higher US rates revived the dollar. Capital Economics’ aggregate currency risk indicator has nonetheless stayed near multi-year lows, which is the more interesting fact. Currencies weakened without anyone fearing a crisis.

The deepest evidence for a structural shift comes from official reserve managers rather than fund managers, though it needs reading carefully. The dollar’s share of global reserves has fallen from roughly 71% in 1999 to 57.1% in the first quarter of 2026.

That latest reading, however, was up from 56.4% three months earlier, and the IMF is at pains to point out that much of the recent movement reflects exchange rate valuation effects rather than central banks actively selling dollars.

Intent shows up more clearly in what reserve managers say and in what they buy instead. In the World Gold Council’s 2026 survey, 74% of central banks expected the dollar’s share to be moderately or significantly lower within five years.

Official gold buying ran at an estimated 244 tonnes in the first quarter, ahead of both the previous quarter and the five-year average, with Poland the largest single purchaser.

Central banks are not calling emerging markets a haven. They are calling the ‘Old Haven’ crowded, and looking for anything neutral. Emerging market debt is one beneficiary of that search. Gold is the bigger one.

Professional investors are behaving accordingly. Several large houses, BlackRock’s investment institute among them, have cooled on emerging market equities and hard currency debt even as flows continue.

Managers describe themselves as highly selective, ignoring benchmarks, avoiding countries with debt problems and skipping those where yields no longer compensate. That is not haven behaviour. It is careful, well-paid risk taking.

What the institutions are actually saying

The IMF’s July update describes an economy pulled by two crosscurrents, a war shock that punishes energy importers and vulnerable states, and an AI investment boom that lifts anyone plugged into the technology value chain.

Global disinflation has stalled. Headline inflation is expected to rise from 4.1% in 2025 to 4.7% in 2026 before easing to 3.9% in 2027, with energy and food doing the work.

The Fiscal Monitor adds the geopolitical arithmetic. IMF staff estimate that a one standard deviation shock to their geopolitical fragmentation index is associated with public debt ratios rising about 1.5 percentage points of GDP over the medium term. Fragmentation is not an abstraction. It has a price, it is paid in borrowing costs, and it is being paid now.

The World Bank supplies the development warning. Its June report is explicit that emerging economies unable to build the ecosystem and policy environment for wide AI adoption risk falling further behind, and that private investment growth in developing economies has been declining since the 2000s even as public balance sheets improve.

The US Energy Information Administration expects Brent to average USD 87 a barrel across 2026 and does not see Middle East production returning to near pre-conflict levels until early 2027.

The IEA has warned of the widest global supply deficit in five years. For oil importing developing economies, that is another eighteen months of imported inflation.

Fund managers add the risk nobody controls. The threats most often named to the flow story are not war headlines but food prices, fertiliser costs, and El Nino. A drought does more damage to a frontier sovereign’s fiscal position than a missile does.

The next shock is already priced, badly

If the world has survived geopolitics, artificial intelligence (AI) is the test that has not yet started. And the strange thing about emerging markets in 2026 is that they are simultaneously the most exposed and the least prepared.

Start with the index. As of July 31, information technology accounted for 40.8% of the MSCI Emerging Markets Index. Taiwan is the largest country weight at 26.6%, China 21.4%, and South Korea 20.3%.

Taiwan and Korea together are almost half the benchmark. In January those weights were 21% and 15.7%, with technology at 30.3%.

India, meanwhile, has slid from roughly 20% of the index in mid-2024 to under 12%. Its equities are down around 5% in local currency terms this year, with the Sensex at 77,728 on August 17, having lagged badly through the first half before a July rally that pulled about USD 1.6 billion of foreign money back in. Expensive crude and a weaker rupee did most of the damage.

The emerging market equity benchmark is now, to a first approximation, a leveraged bet on the AI semiconductor cycle.

That has been enormously profitable. It also means every boom and bust in AI sentiment transmits straight into an asset class marketed as diversification. Korea’s Kospi moving 3.7% in a single session on AI earnings is not an emerging market story at all. It is a Silicon Valley story with a Seoul postcode.

Then there is the labour market, where the exposure runs the other way. IMF research puts around 40% of global employment in occupations exposed to AI, rising to 60% in advanced economies but sitting at 40% in emerging markets and 28% in low-income countries.

The fund’s 2026 work on new job creation finds AI related skills appearing in almost 5% of US job postings by 2025, with incidence in emerging economies roughly half that.

The comfortable reading is that developing economies face less immediate disruption. The correct reading is that they face less immediate disruption because they have fewer of the cognitive jobs that AI both threatens and rewards, and they are much less equipped to capture the productivity gains.

The IMF’s AI Preparedness Index, which covered 174 economies when it was published in 2024, places India at 0.49 against 0.77 for the US and 0.80 for Singapore. Bangladesh scores 0.38.

For countries whose development model runs through services exports, business process outsourcing, back-office work, entry level coding and customer support, this is the central strategic question of the next decade, and it is barely being discussed in the same rooms where capital flows are celebrated. Cheap labour was the comparative advantage. AI attacks precisely the tasks that made it valuable.

The economies best placed are the ones already inside the hardware chain, Taiwan and Korea above all, along with the handful of middle-income economies drawing data centre investment on the strength of cheap power. The ones most at risk are populous middle-income countries with young workforces, thin digital infrastructure, and social safety nets designed for a different century.

What to watch out for

The bull case for emerging markets rests on three things holding. That the Fed does not have to raise rates. That Hormuz reopens before food inflation does structural damage to importing sovereigns. That the reallocation away from American assets is a strategic decision rather than a carry trade wearing a strategic costume.

The first two are out of the hands of finance ministries from Accra to Jakarta. The third is not. Governments that use this window to extend maturities, deepen domestic investor bases, and build the digital and educational infrastructure that AI adoption requires, will look, in five years, as though they earned something.

Those that simply enjoy the cheaper borrowing will find out that the oldest rule in global finance was not repealed in 2026. It was merely suspended.

The post The world is on fire and the money is going South appeared first on International Finance.

So forceful has the bonanza been that it is turbocharging the share prices of stocks with fundamentals and those without them alike, in several cases to heights never before seen.

It was thanks to that optimism in Nigerian stocks that the benchmark index of the country’s equity market hit its all-time pinnacle in August, when year-to-date yield reached 59.7%, pushing market capitalisation to $117.5 billion.

In the banking sector, big-cap equities, like First HoldCo, Zenith and Ecobank Transnational Incorporated, stand out in terms of their year-to-date yields, which stood at 169%, 93.2%, and 66.5% in that order as of August 26.

First HoldCo, the only one of the three to have released its half-year financial results, reported an annual net profit growth rate of 85.4% for the six months to June. It emerged in recent weeks as Nigeria’s most capitalised stock with a valuation of 5.87 trillion naira as of August 26.

Demand pressure in the stock has been driven by its top shareholder and billionaire tycoon Femi Otedola, who has splurged millions of dollars this year to increase his stake in the company.

Generally, the valuation of bank stocks, which have yielded 63.2% since January, has accelerated sharply on the back of the positive market sentiment created by a recently concluded recapitalisation, which raised 4.7 billion naira (USD 3.5 billion) from local and international investors.

What is driving demand?

One of the reasons why stock prices may jump faster than valuation is when ‘a major investor is acquiring more shares, which could signal to the broader market that there could be something in store for the company’, Abeeblahi Rufai, senior analyst (research and strategy) at Lagos-based multi-asset investment management firm CardinalStone, told International Finance.

That was the case with First HoldCo, where Otedola, who has a huge social media following and is seen by many as a charismatic investment role model, has been buying shares since 2021, when he became the top shareholder.

In the oil & gas sector, Aradel Holdings, part of the consortium that acquired Shell onshore operations in 2025, has been the top-performing stock this year, yielding 105%. In comparison, its half-year net profit grew by 30% above the level seen a year ago.

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The major spur, analysts said, is the optimism that soaring oil prices from the US-Israel war against Iran is generating among investors, making the yield on energy stocks, at 85.6%, the highest of the five sector indexes tracked by the NGX.

“What has propelled prices within that space is the global oil price shock because of the war between the US and Iran,” Benedict Egwuchukwu, investment research associate at Afrinvest West Africa told International Finance. “That is affecting how people are seeing the oil and gas sector within Nigeria because there is a lot of profit to be made from this.”

In the cement sub-sector, an acute housing deficit and an infrastructure shortage in Nigeria, Africa’s biggest country by population, are stoking a construction boom that is driving up the demand for cement.

That has led to spikes in cement prices, which, in turn, have boosted interest in cement stocks.

HBM Nigeria, the local unit of Chinese-based Huaxin Cement, is the biggest gainer this year at 148% as of August 26. Its half-year net profit growth rate of 57% significantly trails that.

Sector giant Dangote Cement, owned by Africa’s richest man Aliko Dangote, reported a 22% jump in after-tax profit at half year. The stock, one of the most capitalised on the exchange at 17.4 trillion naira (nearly USD 13 billion), has yielded 69.8% this year.

BUA Cement, majority owned by Abdulsamad Rabiu, Africa’s third richest man according to Forbes Billionaire Ranking, posted a modest 12.4% jump in post-tax profit in the six months to June, compared to a year ago. Its market value, however, has enlarged by 77% this year as of August 2026.

Speculative excess?

Beyond these favourable industry factors, other catalysts, notably speculative excess, are also making stock valuations advance at a swifter pace than profits.

Nigeria has a bandwagon culture when it comes to the flavour of the moment in business and investment securities as though a gravitational or supernatural force no one can resist is pulling everybody in one direction, sometimes prompting newbie investors to ignore caution. The boom owes its debt in part to that.

Intervention by authorities

Recognising the harm that could do, the Securities and Exchange Commission stepped in this June to bar the promotion and marketing of a yet-to-be-approved IPO of Dangote Refinery, the world’s biggest single-train oil refinery owned by Dangote.

The frenzy around the $5 billion public share sale, touted as Africa’s largest-ever IPO and now slated for October, was so huge that people that knew next to nothing about equity investment were reported to be opening trading accounts with brokers ahead of key regulatory approvals.

ALSO READ | Powered by oil boom, Nigerian economy expands at its fastest pace in five years

The SEC’s intervention was timely, given that a similar flurry of interest in Nigerian stocks birthed a bubble before equities tanked eighteen years ago, making Nigeria one of the markets worst hit by the 2008 global financial crisis.

Power of optimism

That massive optimism from retail local investors is stoking a prolonged market-wide rally across all sectors of the stocks listed on the Nigerian Exchange (NGX).

It mirrors how domestic participation has steadily grown to be the pivot of all the major surges the market has recorded since 2021, when international investors, who until then were the driving force, exited the country in droves after pandemic lockdowns spurred a far-reaching dollar squeeze.

Latest market data shows foreign participation in equity trading stood at 5.6%.

That was way weaker than pre-pandemic levels. The figure for September 2019, for instance, three months before the pandemic broke out, was as high as 66.8%.

Such factors have broadly lifted most companies’ valuations this year, a number of which have accelerated at a far more rapid pace than their net profits. Curiously, loss-making firms feature among stocks that are the best performers since the start of the year.

Obscure Companies Lead Nigeria’s World-Beating Rally

Seven little-known companies emerged in August as the best-performing stocks year to date on the 147-company strong bourse.

All but one are penny stocks – a class of stocks that have been noted by analysts as particularly susceptible to share price manipulation – which has necessitated an urgency for regulators and watchdogs to subject trading in such equities to rigorous surveillance and scrutiny.

Penny stocks ‘are easily manipulated because of their volatility and exposure to speculators’, Rufai told International Finance.

“Manipulating penny stocks, too, could probably not bring as much attention or scrutiny as blue-chip stocks, as they’re not held by a lot of investors. Hence, it could easily go under the radar, making it easier to manipulate,” he added.

The entry of Zichis Agro Allied Industries, the second biggest gainer this year, into the market is a case in point. Its market capitalisation, which was N1.1 billion ($765,511) at listing, had ballooned to N10.1 billion ($7.2 million) barely a month after.

The company, which is involved in oil palm, poultry and fish farming as well as animal feed production and crop cultivation, posted an 859.1% gain in less than five weeks after its listing on the NGX, prompting analysts and the SEC to raise eyebrows.

In the last week of February, the regulator suspended trading in the stock and opened an investigation into its market activities.

Olufemi Shobanjo, head of the regulation arm of the NGX, said at the time, “Our primary responsibility is to maintain a level playing field where market participants can trade with confidence, backed by timely and accurate information.

“This advisory is a routine communication, reinforcing that sound fundamentals, not speculation, remain the foundation for sustainable investment outcomes.”

Muktar Mohammed, finance analyst and non-executive director at Lagos-based Blue Marina Securities, told local TV News Central that a dramatic upward price trajectory in so short a time is unprecedented.

“It has never happened in the history of the exchange to see a stock gain 772%” just one month from its listing, he said.

“When we talk about listing by introduction, there is a certain flow that you will make available for the public. And what we’ve seen over and over is that some of this flow is not made available. Then the demand is high, the supply is low. Definitely the price will go up.”

He was alluding to the NGX’s free float rule, which requires the investors who are insiders to hold at least a certain percentage of a company’s stock, 15% in the case of Zichis.

Its most recent financial report covering the first half of this year showed post-tax profit quickened by 502% to N457 million from a year ago. That compares to its valuation, which, as of August 25, had been up by 754% since listing.

In a market bulletin issued in March, the NGX stated that it ‘has concluded its investigation into the trading activities in the company’s shares and has implemented corrective measures to safeguard market integrity’.

Fortis Global Insurance (formerly Standard Alliance Insurance), which has been technically insolvent for more than five years as its liabilities have consistently outstripped liabilities, is miraculously this year’s top performer.

Since the first quarter of 2025, the insurer has been heaping up losses, with loss after tax for the half-year 2026 standing at N2.6 billion, 158.3% higher than a year ago.

Yet, it has gained 925% this year, outperforming the market by more than sixteen times.

Until January, the underwriter had been under a trading suspension on account of its failure to publish its corporate accounts for years.

Between August 2021 and April 2025, Fortis Global Insurance did not publish the reports until it started doing so on April 11, 2025.

In the first week after trading resumption, it gained 65%.

Fortis Global owed its overnight share price turnaround in part to a share consolidation it executed in July.

The 1-for-4 share consolidation was a major contributor to the spell of strong gains it recorded between July and August as the move cut back its outstanding shares by 75%.

The market capitalisation automatically surged by 260.6%, reflecting the boost that the prices of stock typically receive from such share reduction.

But the major driver of its sharply higher valuation has been the impact of buy pressure on its share price ever since the consolidation, with the availability of its tradable shares now far lower than before, consequently boosting its share price.

SCOA Nigeria, a low-liquidity stock, is the third best performer, having added 365% from the start of the year to August 26. Meanwhile, profit after tax tumbled 54.7% to N147.9 million in the first half of the year.

The company, which is involved in the sales, maintenance and leasing of vehicles, is a subsidiary of Paris-based investment holding company SCOA International S.A.

Until July 1, 2025, Lebanese-American Massad Fares Boulos was the MD of SCOA Nigeria. At present, Massad Fares Boulos is a senior advisor to US President Donald Trump on Arab and African affairs.

SCOA Nigeria is majority-owned by Michel Zouhair Fadoul, who, according to the New York Times, is the father of Boulos’s wife, Sarah. Interestingly, their son Michael is married to Tiffany, Trump’s daughter.

SCOA Nigeria has been reticent about its corporate activities and key decisions. No corporate disclosure document about the firm is available for the whole of 2015, 2016, 2019 and 2023 on the NGX, leaving the market and potential investors in the dark at the best of times.

Only one of such documents has been released this year, just two throughout 2025, one in 2024, one in 2022, two in 2021, and one in 2020.

The company didn’t hold its annual general meeting for six years in a row (2019-2024), all under Boulos’s leadership. It secured a court order to do so in September 2025, two months after Boulos exited the company.

The post At NGX, Share Prices Rise Faster Than Profits appeared first on International Finance.

Back in 2023 the Congressional Budget Office had pencilled in 2028 for that milestone. It arrived two years early, and barely five months after the debt passed USD 39 trillion.

The number itself is symbolic. What is not symbolic is the price investors are now charging to hold American paper. The 30-year Treasury bond has been yielding around 5.25%, a level last seen before the 2008 financial crisis, and the 10-year has pushed close to 4.7%.

Treasury Secretary Scott Bessent surprised markets on August 19 by at least doubling the size of the department’s buyback operations in longer-dated debt. Yields dropped for a few hours, then climbed straight back. That reversal is the story in miniature. Washington still has technical tools. It is running short of ones that convince anybody.

Dollar hovered ​near multi-month lows on August 24, as the market got unsettled by the Treasury’s promise to buy back more long-dated ‌bonds. Apart from traders’ anxious wait on the Trump administration’s Iran sanctions package, trade tensions with Canada emerged as a big factor as well.

While Washington imposed 50% tariffs on Canadian goods after the failed negotiations between Washington and Ottawa, Uncle Sam’s biggest trade partner in the North America has promised to retaliate in kind.

A decade of doubling

The debt has doubled in less than ten years, and neither party can claim the high ground. Gross federal debt stood at USD 19.95 trillion in January 2017. It rose by about USD 7.8 trillion across Donald Trump’s first term, with more than half of that piling up in the final nine months as the pandemic response ran through the Treasury.

It rose by a further $8.4 trillion under Joe Biden. Since Trump returned in January 2025 it has added about USD 3.8 trillion more, taking the total accumulated across his two terms to roughly USD 11.6 trillion.

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Roughly a third of the entire increase since 2017 is attributable to the two years of emergency borrowing after Covid-19 arrived, and that borrowing was bipartisan.

The remainder is the product of choices made in calmer conditions, which is what worries the ratings agencies and the bond desks far more than the pandemic bill ever did.

Two parties, two spending styles

The pattern of the borrowing differs even where the totals do not. Trump’s first term opened with the Tax Cuts and Jobs Act of 2017, which lowered the corporate rate to 21% and reduced federal revenue by close to USD 2 trillion over a decade. Then came the CARES Act in March 2020, worth $2.2 trillion, and a further $900 billion package that December.

The Biden years front-loaded transfers and then pivoted to industrial policy. The American Rescue Plan of March 2021 was worth USD 1.9 trillion. The Infrastructure Investment and Jobs Act followed in November that year with USD 1.2 trillion headline value and roughly USD 550 billion in genuinely new money for roads, rail, ports, water systems and broadband.

The CHIPS and Science Act of August 2022 committed about $280 billion, including USD 52.7 billion in direct semiconductor subsidies. The Inflation Reduction Act, passed the same month, carried an official clean energy price tag near USD 390 billion, though its uncapped tax credits pushed later estimates considerably higher. The political argument for all of this was that the outlay would pay for itself through factories, chips and cheaper power. The fiscal reality was that it was borrowed.

Trump’s second term produced its own landmark in the “One Big Beautiful Bill Act.” The Congressional Budget Office originally scored it at USD 3.4 trillion of added deficits over 2025 to 2034. Its most recent outlook, which accounts for economic effects and the extra debt service, puts the impact at USD 4.7 trillion from 2026 to 2035.

The Committee for a Responsible Federal Budget reckons the figure climbs past USD 5.5 trillion if the temporary provisions are made permanent, as sponsors have signalled they intend. In the near term the law is adding around $500 billion to the fiscal 2026 deficit alone.

Why the cuts never landed

Trump’s second term began with an explicit promise of retrenchment. The Department of Government Efficiency (DOGE) was set up to find savings, and Elon Musk initially spoke of USD 2 trillion.

That target was halved, then cut to USD 150 billion, then quietly abandoned. DOGE closed on July 4 2026 without issuing a final report. The Government Accountability Office later found that it could not verify 96% of the grant savings the body had claimed, covering some USD 110 billion.

What actually reached the statute book was a USD 9 billion rescissions package aimed at public broadcasting and foreign aid, plus a pocket rescission of around USD 5 billion.

Congress rejected the great bulk of the discretionary cuts the White House proposed for fiscal 2026. Of thirty programmes the administration wanted slashed or scrapped, one was eliminated. The 2026 appropriations bills spend more than the 2025 ones did.

Then came the revenue shock. On February 20 2026, the Supreme Court ruled six to three that the International “Emergency Economic Powers Act” does not give a President the power to impose tariffs. Roughly USD 166 billion already collected became refundable, and more than USD 100 billion had gone back out of the door by July.

Net customs receipts turned negative for three consecutive months. The CBO now expects fiscal 2026 customs revenue to come in about USD 250 billion below its February projection, and estimates the ruling opens a hole of around USD 900 billion over the decade once lost duties and extra interest are counted.

The administration has been rebuilding a tariff wall through Section 122 and Section 301 authorities, but at lower rates and with a lag.

Where the money goes now

Strip out the politics and the arithmetic is dull and immovable. In the first ten months of fiscal 2026 federal spending rose by USD 309 billion, or 5%. Medicare accounted for USD 131 billion of that increase, a 16% jump driven by enrolment and payment rates. Veterans’ benefits rose USD 51 billion, also 16%.

Social Security added USD 71 billion, Medicaid $45 billion and national defence USD 46 billion. Homeland Security has become a genuine growth item, with the fiscal 2026 request running to USD 178 billion and the bulk of the increase directed at immigration enforcement, border technology and detention capacity.

Above all sits the interest bill. Net interest reached USD 963 billion in ten months and the annual figure is now around USD 1.1 trillion, roughly 15% of all federal spending. In fiscal 2025 debt service overtook the Pentagon for the first time.

This year it has overtaken Medicare, leaving Social Security as the only line item larger. About 19% of federal tax revenue is now consumed simply by servicing what has already been borrowed. That is the compounding trap. Every dollar of new deficit raises the interest bill, which raises the deficit again.

What the Treasury can and cannot do

Bessent’s toolkit is real but narrow. The department can change the maturity mix of what it issues, and it has leaned heavily on short-term bills, taking advantage of a three-month yield near 3.8 % against a long bond above 5%.

It can buy back illiquid long-dated securities, which is what it did in August, lifting operations from USD 2 billion to at least USD 4 billion. It can adjust the quarterly refunding schedule and coordinate with the Federal Reserve on liquidity facilities.

None of this reduces the debt. It changes who holds it and for how long, and it can smooth a disorderly market for a few sessions. It also carries a cost. Tilting the stock towards bills means a larger share of the debt reprices whenever rates move, so any future tightening feeds through to the budget almost immediately.

Jefferies described the surprise buyback expansion as shot from the hip, a pointed criticism of a department whose reputation rests on being regular and predictable. Bessent has confirmed that a broader fiscal consolidation plan is coming, drawn up with budget director Russ Vought, and argues the deficit has probably peaked. Markets are waiting for the detail.

There is not much. About two-thirds of federal spending is mandatory, and the three programmes driving the increase are the three that no administration facing midterms will touch.

Discretionary cuts have already been tried and largely rejected by a Republican Congress. Tariff revenue, the one new income stream the administration built, has been struck down and only partially rebuilt. Tax increases are off the table by design, and the pressure inside the party runs towards making the expiring cuts permanent, which costs more.

Bessent’s own benchmark, a deficit of 3% of GDP, sits against a fiscal 2026 gap of about USD 2.1 trillion, close to double that target. He has said there is nothing magic about the USD 40 trillion number, and technically he is right. The magic, if that is the word, is in the interest line.

Inflation and the Fed

Monetary policy is now working against the fiscal position rather than cushioning it. Consumer price inflation ran at 3.4% in July, easing for a second month but still well above the 2% target, with core at 2.5%. The energy shock from the conflict with Iran is fading but gasoline remains around a quarter higher than a year ago.

The Federal Open Market Committee, now chaired by Kevin Warsh, held rates at 3.5% to 3.75% in July on a nine to three vote, with the three dissenters wanting an increase. Markets put meaningful odds on a hike before the year is out.

For the Treasury that is an uncomfortable combination. Mild inflation erodes the real value of existing fixed-rate debt, which flatters the ratio, but it also lifts the coupon demanded on every new issue and on the enormous stock of bills being rolled over.

Long yields have risen since June on a mixture of deficit worry, sticky inflation and a wave of corporate borrowing tied to artificial intelligence investment, all of it competing for the same pool of savings.

The rise is largely term premium, the extra compensation investors want for holding American duration risk. That is a judgement on fiscal credibility, and no buyback programme can argue with it.

The post The debt bomb: America’s USD 40 trillion reckoning appeared first on International Finance.

When renowned economist Javier Milei won Argentina’s presidency in late 2023, he came armed with a chainsaw. Not a literal one, though he had famously wielded one on the campaign trail. The chainsaw was a metaphor for what he promised to do to the Argentine state: cut it down, fast and without mercy.

Nearly two-and-a-half years into his presidency, that chainsaw has done real damage to government spending. Whether the cuts have healed the patient or simply reduced the bleeding while leaving deeper wounds untreated is the central question facing Argentina today.

The honest answer is, both things are happening at once. At the national accounts level, Argentina looks better than it has in years. Investors are calmer. The currency has stabilised. The government is, for the first time in almost two decades, spending less than it earns. But zoom in from that altitude, and a different picture emerges.

Factories are running at half capacity. Small businesses are filing for bankruptcy at record rates. Ordinary Argentines are putting groceries on credit cards because their wages have not kept pace with prices. The country is experiencing a split reality, and understanding that split is essential to understanding where Argentina goes from here.

The Surplus and What It Cost

For most of its modern history, Argentina spent more than it collected in taxes. The gap was filled by printing money, which fed inflation, which eroded savings, which triggered crises. The most devastating of these came in 2001, when a rigid currency peg to the US dollar, years of fiscal deficits, and a mountain of foreign debt combined to produce the largest sovereign default in history at the time.

Banks froze deposits overnight. Five presidents came and went within two weeks. The economy contracted by nearly 11%. Recovery came slowly, driven largely by a commodity boom and debt restructuring, but the institutional scars ran deep. Milei’s government decided that ending this cycle required fiscal discipline above all else, which meant that the government must not spend more than it earns.

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By that measure, the policy has worked. In the first four months of 2026, Argentina ran a primary fiscal surplus equivalent to roughly 0.5% of GDP. Including interest costs, the country still managed a positive financial balance of around 0.2% of GDP. April 2026 marked the fourth consecutive monthly surplus of the year.

Before Milei took office, Argentina had not managed a full-year financial surplus since 2008.

These numbers came primarily from cutting spending rather than raising taxes. In fact, tax revenues have been falling in real terms for months. The government eliminated 211 public programmes across various ministries, saving roughly two billion US dollars. Public sector wages were cut in real terms. Subsidies were slashed. Infrastructure investment was curtailed. The state was made smaller, fast.

The outside world noticed. Argentina’s sovereign risk premium, which measures how much extra interest investors demand to hold Argentine debt, fell below 500 basis points for the first time since 2018, and has held roughly there since. The IMF completed its second review of a 21 billion dollar lending arrangement in May 2026, releasing a further billion dollars, and bringing total disbursements to nearly 16 billion dollars.

Restoring credibility in international markets is a genuine achievement, and a lower risk premium eventually means lower borrowing costs for businesses and households alike.

The Factory Floor is Dark

The problem is that the path to fiscal balance has run straight through the country’s productive economy, and the damage there is severe.

Argentina’s industrial sector has been contracting for over a year. The Argentine Industrial Union tracks factory performance through a monthly index where a score above 50 signals expansion, and below 50 signals contraction.

In January 2026, that index stood at 36.5 points, its fifteenth consecutive month below the neutral threshold. Industrial capacity utilisation fell to 53.8% by the end of 2025, down from 65.6% two years earlier. In the automotive sector, factories are running at just 31.2% of capacity. In textiles, rubber, and plastics, conditions are at historical lows.

What does this look like in practice? Machines sit idle. Workers are sent home early. Shifts are cut. Companies that cannot pay their bills enter legal proceedings to restructure their debts before going bust entirely.

Filings for concurso preventivo, the Argentine legal process allowing a struggling company to restructure before formally going bankrupt, have risen by more than 130% compared to the same period last year, now exceeding the levels recorded during the worst months of the Covid-19 pandemic.

Daniel Rosato, President of Industriales Pymes Argentinos, did not mince words while describing what his organisation is witnessing on the ground, “We had warned that this year we were going to arrive at the closure of more than 1,000 SMEs, but the rhythm we see in the degradation of the local economy and the presentations of concursos preventivos demonstrates that the damage to the productive framework is much worse. There is no time to debate ideologies, only to save companies and their workers, who are the ones harmed by so much inaction.”

Industry associations have petitioned Congress for emergency support through temporary freezes on debt enforcement, tax payment deferrals, and extended restructuring timelines. Without intervention, they warn, the wave of factory closures will accelerate.

The asymmetry between large and small firms is significant. Large and medium-size companies are suffering, but they have access to lawyers, financial advisors, and bank relationships that help them manage the crisis. Micro and small enterprises, which form the backbone of Argentine manufacturing and retail employment, have almost none of those buffers. Their production and sales figures are deteriorating nearly twice as fast as those of larger competitors.

The Credit Card Kitchen Table

The industrial downturn has a human face, and it sits at the kitchen table.

Argentine wages have fallen by 20% in real terms since 2018, the steepest drop of any country in Latin America over that period. By comparison, Mexican workers saw real wages rise by more than 22% over the same period. The Latin American average was a modest gain of 2%.

Under Milei, public sector workers have seen their real wages fall by more than 17% since the administration took office. Private sector workers have fared somewhat better, losing around 1.5 per cent in real terms. For households already stretched by years of wage erosion, even small additional losses are deeply felt.

The response has been to borrow. Credit card debt has doubled relative to historical averages, with delinquency rates at their highest in more than 20 years. What makes this particularly troubling is not the amount of debt itself but what it is being used for. Credit cards in Argentina were once primarily used to buy televisions or refrigerators. Now, an estimated 75% to 80% of households are using credit to buy basic food. Around 60 per cent are using debt to pay electricity and gas bills. Nearly half are borrowing to cover basic healthcare. This is not consumer finance. This is survival on credit.

Retail sales confirm the picture. Real retail volumes fell by 13.3% in March 2026 compared to the same month a year earlier. Nominal sales grew slightly, purely because prices are still rising, but the actual volume of goods purchased is shrinking steadily across nearly every category.

The Feedback Problem

Here the story gets structurally complicated, because the collapse in domestic activity is now threatening the very fiscal programme it was meant to support.

Argentina’s tax system is heavily dependent on domestic economic activity. When factories produce less and people buy less, those tax bases shrink. In April 2026, national tax revenues fell by around 4 per cent in real terms compared to April 2025, the ninth consecutive month of real decline.

Independent analysts estimate that roughly 97% of this fall is due to depressed domestic activity, not deliberate tax cuts. Export duties on beef and grains, cut in July 2025, compounded the shortfall, with receipts from those levies falling by more than 34% in real terms in April 2026.

The government’s response to falling revenues has been to cut spending further. But each additional round of spending cuts reduces economic activity, which reduces tax revenues, which requires further spending cuts.

This self-reinforcing spiral is not unique to Argentina. Many countries that pursued aggressive austerity during debt crises, including Greece in the early 2010s, found themselves trapped in precisely this loop. Argentina is living that lesson in real time.

Where the Money Goes

When Milei launched Phase 3 of his economic programme in early 2025, it liberalised the foreign exchange market significantly, removing restrictions on companies paying dividends to foreign shareholders.

Before the liberalisation, foreign companies were remitting an average of about 24 million dollars per month in profits. By early 2026, that figure had risen to an average of 333 million dollars per month, peaking at 882 million dollars in March 2026.

Between December 2023 and early 2026, Argentina generated a trade surplus of 47 billion dollars, and received foreign financing of 46 billion dollars. Yet, net international reserves rose by only about 14.7 billion dollars. The remainder was absorbed by private capital flight, debt interest payments, and profit remittances.

To attract and retain capital, the central bank must maintain high domestic interest rates, but those same rates raise borrowing costs for businesses and households, depressing the activity needed to generate tax revenues.

The Mining Future

To compensate for the contraction in domestic industry, the administration is betting on large-scale resource extraction. The Large Investment Incentive Regime, known as RIGI, offers substantial tax advantages to investors committing more than 200 million dollars. By early 2026, over 27 projects had been submitted, representing commitments exceeding 30 billion dollars, including Rio Tinto’s 2.5 billion dollar lithium project in Salta, and a 15 billion dollar copper joint venture between BHP and Lundin Mining in San Juan.

A bilateral trade agreement signed with the United States in February 2026 embeds RIGI as the primary channel for American investment in Argentine critical minerals. Over a 100 explicit legal obligations in the agreement bind Argentina to specific actions, including accepting American technical standards and modifying environmental and agricultural laws.

American commitments are largely aspirational rather than binding. Whether this arrangement allows Argentina to process raw minerals domestically rather than export them unprocessed remains a serious open question.

The Poverty Numbers and Their Limits

In March 2026, Argentina’s official statistics agency announced that the national poverty rate had fallen to 28.2% in the second half of 2025, down from a peak of 52.9% in the first half of 2024. Independent researchers have urged caution. The official measure does not reflect sharp rises in deregulated energy and healthcare costs, treats credit-financed consumption the same as wage-financed consumption, and conceals the fact that quarterly data shows poverty rising back to 32.5% in the final three months of 2025.

Community kitchens receiving public food supplies were cut from roughly 4,000 to 5,000 annually, down to 1,552 by mid-2025, worsening real food insecurity without affecting the monetary statistics. The Catholic University’s Social Debt Observatory estimates that 53.6% of Argentine children live in poverty, with 28.8% experiencing food insecurity.

The Question Ahead

Argentina in mid-2026 is a country in genuine tension with itself. The macro numbers are better than they have been in years. The micro reality, for millions of households and hundreds of thousands of small businesses, is one of sustained hardship.

Juan Pablo Filippini, an economist and PhD candidate in finance at IESE Business School, captures the distinction precisely, “Progress is not the victory lap. Argentina’s reserves are rising, sovereign risk is falling, and fiscal discipline is returning. But recovery is not measured by headlines alone. The real test is durability: stronger institutions, sustained reserve accumulation, tax compliance, and employment that catches up with growth.”

The administration has demonstrated that fiscal discipline is achievable even in a country with Argentina’s turbulent history. What it has not yet demonstrated is that fiscal discipline alone can generate the broad-based recovery that would make the hardship sustainable rather than indefinite. The path forward runs through targeted relief for small and medium businesses, a credible rebuilding of household purchasing power, and a strategy for converting booming mining revenues into domestic jobs and industrial capacity rather than profits remitted abroad.

However there is hope.

Javier Milei, said in his inaugural address at Buenos Aires on December 10, 2023, stated: “It will not be easy. One hundred years of failure cannot be undone in one day, but one day begins, and today is that day.”

Many Argentinians are clinging to this hope that the austerity measures will revive their economy to the golden age of early 20th century, when Argentina rivalled the United States of America as an economic powerhouse.

The post Argentina’s Chainsaw Balance Sheet at a Crossroads appeared first on International Finance.

Interim President Delcy Rodriguez has asked IMF Managing Director Kristalina Georgieva for access to $5 billion in special drawing rights (SDRs) that Venezuela holds. This would be used for infrastructure, electricity, and water improvements.

The new administration has also opened the energy sector to foreign investment. Shell will develop the Loran field, which had been abandoned for 23 years, and comprises seven natural gas deposits, with six of them straddling the maritime border with Trinidad and Tobago. As per Rodriguez, the project would allow Venezuela ‘to take a very important step forward in its gas development, and also as a gas exporter’.

After taking over Venezuela’s reigns post the US-staged arrest of controversial president Nicholas Maduro, the Rodriguez government has identified the Latin American country’s huge energy reserves as one of the routes to help the nation escape its economic abyss. Agreements have been signed with several of the world’s leading oil companies, including Britain’s BP and Spain’s Repsol.

Chavismo: A period of mixed opportunities

The 1999–2013 phase under Hugo Chavez was all about a massive, oil-fuelled expansion of social spending and poverty reduction, coupled with the erosion of long-term economic stability through nationalisations, rigid price controls, and extreme dependence on petroleum exports.

Under Chavez, Venezuela benefited from a historic surge in global oil prices, which skyrocketed from roughly $11 per barrel in 1998 to over $100 by the late 2000s. The influx of petrodollars allowed the administration to double domestic social spending. It heavily subsidising food, healthcare, and education, which significantly reduced poverty and income inequality during his presidency.

The Chavez administration nationalised major industries. In 2003, it brought forward stringent currency and exchange controls to prevent capital flight from the Latin American nation, alongside strict price controls on basic goods.

However, it missed a trick, by not using its oil wealth to diversify the domestic economy. By the end of Chavez’s term, petroleum accounted for 95% of Venezuela’s export revenues, and about half of all government income.

The move of purging state-run enterprises of experienced workers, and replacing them with political loyalists was another blunder, as the move hindered productivity. By the time of Chavez’s death in 2013, the foundation of the economy was critically damaged by rampant inflation, chronic shortages of basic goods, and an overvalued currency.

Chavez must be credited for sharing Venezuela’s vast oil wealth with the poor and disenfranchised. Chavismo (the term that defined the Chavez-led left-wing populist movement in Venezuela) witnessed the percentage of Venezuelans living below the poverty line falling to 36.3% in 2006 from 50.4% in 1998.

Infant mortality fell from 20.3 per thousand births when Chavez came to power, to 12.9 by 2011. The access to education was another massive plus for the country, with the number of children enrolled in secondary education rising from 48% in 1999 to 72% in 2010.

However, ‘Chavismo’ came at a cost, as the Latin American country had to reduce state-run oil company PDVSA to the status of a ‘piggy bank’, in order to sponsor the government’s social security projects, while neglecting oil infrastructure and production.

Maduro rule: The abyss kicks in

However, the real downfall happened in March 2013, as Nicholas Maduro took over the administration’s reigns immediately after Chavez’s death.

The domestic economy shrank 71% between 2012 and 2020, while inflation topped 130,000%. Its oil production, the beating heart of the country, dropped to the unthinkable less than 400,000 barrels a day.

Between 2013 and 2025, as per the World Bank and the IMF, approximately 80% of the country’s GDP evaporated, a figure that dwarfs what happened to the United States in the Great Depression (29%), and to the Soviet Union during its collapse.

Along with the structural fragility, Venezuela missed the opportunity to utilise sovereign wealth funds to sterilise the liquidity generating from its trade. Even though the Latin American nation had an entity called Macroeconomic Stabilization Fund (FEM), by 2014, the fund held less than $3 million.

As crude prices collapsed, Venezuela faced a choice between fiscal austerity or monetary expansion. As per Iranian freelance journalist Amirreza Etasi, a keen observer of Maduro’s economic missteps, the administration attempted to plug a fiscal gap, approaching 15% of GDP, not by cutting spending, but by expanding the monetary base.

As inflation ticked upward, the government attacked the symptom (prices) rather than the cause (liquidity). The 2014 ‘Fair Prices Act’ capped profit margins, and mandated sales below replacement cost.

“The economic result was a textbook negative supply shock. Manufacturers, unable to cover marginal costs, halted production lines. The scarcity index for basic goods skyrocketed to over 80%. To manage the fallout, the government militarised food distribution (CLAP), shifting from a market economy to a clientelist rationing system prone to massive corruption,” Etasi said.

Simultaneously, the Central Bank of Venezuela (BCV) was stripped of its autonomy, with Maduro government turning the entity as a printing press for the Ministry of Finance. This triggered hyperinflation (technically defined as monthly inflation exceeding 50%) in November 2016. By 2018, annual inflation hit an astronomical 130,060%, though IMF estimates were higher.

To mask the collapse of the currency’s value, Venezuela engaged in serial redenomination. In 2008, three zeros got removed. In 2018 and 2021, the number stood at five and six, respectively. In total, 14 zeros were removed from the currency in 13 years.

Post the 2002–03 PDVSA strikes, the executive branch of the oil company fired over 18,000 technocrats (geologists, reservoir engineers, and managers) stripping the company of its institutional memory. They were replaced by political loyalists.

“In the capital-intensive oil industry, failure to invest in depreciation and amortization (D&A) is fatal. PDVSA stopped injecting water and gas into aging wells to maintain pressure. Result: production freefall from three million barrels per day (bpd) to a nadir of under 700,000 bpd by 2020. The collapse was sealed by the physical failure of the power grid. The March 2019 nationwide blackout, caused by brush fires and neglected transmission lines at the Guri dam, paralysed the country for days. Without electricity to power the upgraders in the Orinoco Belt, the heavy crude turned into sludge in the pipes, causing permanent damage to the infrastructure. This event alone cost the economy an estimated $2.9 billion in GDP,” Etasi remarked.

By 2019, price controls were abandoned, and the US dollar was allowed to circulate freely (de facto dollarisation). While the move stopped the hyperinflationary bleeding, it bifurcated the nation into two distinct economies.

The dollar economy (20%) was a segment fuelled by remittances, illicit gold exports to Turkey/UAE, and government contracting. On the other hand, emerged the bolivar economy (80%): Public sector workers and pensioners earning in local currency, whose purchasing power was obliterated.

By late 2025, oil production crawled back toward 900,000 bpd, aided by specific licences for United States’ Chevron and swap deals with India’s Reliance Industries involving naphtha for crude. However, with a credit-starved banking sector (due to 73% reserve requirements) and decimated public utilities, sustainable growth remained mathematically impossible.

The Gini coefficient, on the other hand, rose from 40.7 in 2014 to 53.9 in 2024, making Venezuela the most unequal country in the Americas. In 2025, Venezuelan inflation soared to 475% in 2025, the highest in the world.

On 2019, Washington imposed full blocking sanctions on the government of Venezuela, freezing all its assets in the United States, and cutting off state-owned oil company PDVSA from the American financial system.

Facing the heat, Maduro did implement a series of economic measures in 2021 that eventually ended Venezuela’s hyperinflation cycle. He paired the economic changes with concessions to the US-backed political opposition, including negotiations for what many had hoped would be a free and democratic presidential election in 2024.

However, in April 2024, the then Joe Biden government allowed the primary oil and gas waivers to expire, citing a failure by the Maduro government to uphold the democratic commitments made in the 2023 Barbados Agreement.

Delcy Rodriguez: Administrator facing a daunting task

Delcy Eloina Rodriguez Gomez, daughter of the Venezuelan guerilla leader and politician Jorge Antonio Rodriguez, wears multiple hats: lawyer, diplomat, and politician. The third is the one she is wearing now. Her promotion from vice-president to President came in January 2026, immediately after Maduro’s arrest.
She has inherited an economically fragile country that needs more than miracle to become ‘great’ again (going by Trump’s immediate reaction on her appointment). The American sanctions on the Venezuelan Central Bank (BCV) have been lifted, and Luis Perez-Gonzalez, deputy of former BCV President Laura Guerra, has been handling the institution’s leadership role since April this year.

It was the same BCV that remained a mere spectator when multiple zeros got stripped from the bolivar after one of the longest hyperinflationary episodes in modern history. Also, the central bank, during Maduro’s time, became notorious for not publishing key economic data. And when it started publishing stats, they were incomplete, forcing IFM and World Bank to stop cooperation with Venezuela in 2019.

The task of converting BCV from a mere spectator of government-sponsored economic miscalculations to the lead actor of Venezuela’s transformation will be a painful task. In the near term, the effects of sanctions relief will likely be most visible in exchange rate auctions, with greater transparency and reliability in these operations potentially helping reduce the gap between the official and the black market rates.

This would directly affect people’s daily life, by reducing price distortions, and helping stabilise inflation expectations. It would also reopen the door to multilateral institutions and international markets, particularly renewed engagement with the IMF, a necessary step toward debt restructuring and access to credit.

However, BCV 2.0 should be independent from political pressures, apart from possessing the ability to communicate a coherent monetary policy. This will satisfy Venezuela’s economic discourse, apart from attracting investment. BCV should be the first ‘government institution’ in the post-Maduro era, that should be capable enough to challenge the administration’s economic narratives.

Despite having abundant natural resource, the state-sponsored mistakes of blocking manufacturing development and industrial diversification have resulted in long-term stagnation and inequality.

Wages in the Venezuelan labour market, based on a mix of public sector, state-owned companies, private activities and a very extensive informal economy, are insufficient to cover basic needs. Being a formal employee no longer guarantees an acceptable standard of living, pushing many public servants to take on side jobs, or turn to the parallel economy.

580,000: the exact number of active businesses, that have been destroyed in Venezuela since early 2000s. The tally of 830,000 from the beginning of the 21st century now stands at less than 250,000 today.

With real GDP collapsing by more than 75%, along with hyperinflation, the country has shifted into a de facto dollarisation, where the sovereign bolivar (VES) coexists with the US dollar, which has become the standard for salaries and prices.

More than 7.5 million Venezuelans have left the country since 2015, about 22.5% of the population. Between 2012 and 2017, 22,000 doctors emigrated, as did more than 167,000 teachers. This exodus has created skill shortages in many sectors, while further weakening education, healthcare, and administration.
Reforms: Key weapon for Rodriguez administration

Rodriguez has brought new laws and regulations reversing Chávez’s nationalisation drive, by reopening key sectors, like hydrocarbons and mining, to private investment.

She has formed a ‘Commission for the Evaluation of Public Assets’, that will audit state ownership in other economic areas, such as agriculture, manufacturing and infrastructure.

Another commission has been formed, consisting representatives from the state, business sector, active workers, and pensioners to ‘review labour conditions, address precariousness, and strengthen the social security system’.

An increase in the so-called ‘integral minimum income’ to the equivalent of $240 per month has been implemented for public sector workers. The amounts are set in US dollars but paid in bolivares at the day’s official exchange rate set by the central bank.

The latest adjustment involved an increase of the ‘economic war bonus’ from $150 to $200 a month, alongside a $40 monthly food bonus. The economic war bonus for pensioners has been raised from $58 to $70 a month, and for public sector retirees from $130 to $168.

There will be a new, one-time ‘professional and academic recognition’ bonus, ranging between $60 and $120, aimed at strategic sectors, such as security, education, and healthcare. Labour inspectorates have been told to address workers’ demands regarding employment conditions.

Venezuela’s National Economic Council has been tasked with designing a more ‘efficient’ tax model aimed at making the Latin American country ‘more competitive’.

The Law on Streamlining and Optimization of Administrative Procedures have been enacted, with the goal of modernising public administration by reducing bureaucracy and incorporating digital tools. The law grants the executive authority to eliminate procedures, shorten timelines, and improve coordination between institutions.

Another mixed commission will evaluate which state-owned assets have ‘strategic’ importance, potentially opening some to private investment. However, the hydrocarbons sector will remain under state control.

The energy sector reform

The partial reform to the ‘Organic Hydrocarbons Law’ has now brought more flexible taxation, apart from lowering royalty baseline rates, and repealing previous restrictive levies to incentivise investment.

On the other hand, the electricity sector has been thrown open to private investment, allowing the creation of joint ventures. The sector, under Maduro administration, earned the infamy of lacking both investment and maintenance. Large parts of the country used to endure hours-long electricity outages, affecting water and telecommunications services.

GE Vernova Venezuela recently signed a Memorandum of Understanding (MoU) with the Venezuelan government to add at least 1 GW of electrical capacity to the National Electric System (SEN) within 24 months. The broader objective contemplates recovering more than 5 GW of capacity over the next four years.

As per the Financial Times, Wall Street banks and funds have now set their eyes on Venezuelan oil assets after Trump’s $100 billion investment pitch (that came in January) and recent legal reforms. Lionheart Capital and Elliott Management are among those pursuing deals, while JPMorgan and Jefferies lead investor trips to Caracas. ExxonMobil and ConocoPhillips, however, are in the ‘wait and watch’ mode, citing unresolved governance, contract, and debt issues.

US Treasury issued sanctions waivers allowing select Western firms to operate, and contract disputes can now be settled in the United Kingdom, France, or Singapore under American law. Venezuelan authorities have already revised proposals under investor pressure, removing clauses allowing government termination for ‘public interest’.

By May, Venezuelan oil production moved past one million barrels per day (bpd) for the first time in over seven years. The feat, confirmed by an OPEC monthly report (apart from measured by secondary sources), was made possible due to a massive 46,000 bpd production increase compared to the March-April period.
It has been a good comeback from the abyss of 2019, when the imposition of American sanctions and export embargo on the Venezuelan energy sector resulted in crude production plummeting under one million bpd, hitting a low of around 350,000 bpd in 2020.

The final take: Nurturing democracy

Rodríguez is not out of the woods yet. Democratic transition is another front, where the acting President will be facing tremendous heat in the coming days.

The return of opposition leader Maria Corina Machado, who the Maduro government barred from competing in the July 2024 election, is imminent. However, things have got complicated, with the comeback of Dinorah Figuera, an exiled lawmaker and elected president of the parallel opposition National Assembly that emerged after the 2015 parliamentary election, after eight years. As per the reports, she has the backing of both Trump and Rodriguez.

What kind of political economy will emerge in the Latin American country in the coming days is not clear. However, it is clear that the Latin American country is betting on its natural resources to come out of the decades-long rut.

More than the hydrocarbons, investing in and uplifting the fragile social sector will make the real difference, if the country wants to be a healthy and competitive economy in Latin America in the coming days.

The post Earthquakes Derail Venezuela’s Escape From Abyss appeared first on International Finance.

Despite the historic GCC deal, which saw the UK become the first one among the G7 (Group of Seven) to enter into a trade pact with the Middle East, the pressure on Starmer got unbearable. He ended up losing his popularity among his own Labour MPs.

The Starmer government’s struggle to improve UK’s stagnant living standards, along with the alleged mishandling of a £22 billion fiscal hole, brought the curtains down on the 63-year-old’s tenure in 10 Downing Street.

A lion’s share of the criticisms against the administration was directed towards its way of handling the stagnant British economy. Inflation, high energy prices, low productivity levels, rising unemployment and an underperforming SME, headwinds that arrested the European country’s growth.

A sector in distress

The SME sector occupies 99.9% of the overall British business landscape. Not only does it employ roughly 60% of the private sector workforce, but it also keeps the country’s growth engine chugging by contributing heavily in construction, professional, scientific and technical services, and manufacturing. Despite 68% of SMEs reportedly being profitable, many of them are facing hurdles on the scaling and cashflow fronts.

A 2025 report from Make UK, and think tanks Civitas and ERA Foundation, titled ‘The Growth Mission: A Blueprint for Scaling up SME Manufacturers’, made these discoveries: despite accounting for 99% of the 250,000 active manufacturing businesses in the United Kingdom, SMEs struggle to access finance during the ‘make or break’ seed to early growth stages of investment, a challenge which, if solved, could boost UK manufacturing investment by £9.2 billion annually.

“Almost two-thirds of these SMEs have ambitions to grow into large businesses over the next decade, which, if realised, could add £83 billion in value to manufacturing, and help propel the UK from the 12th largest manufacturing economy in the world to the seventh,” according to the report, a statement which gives a sad reflection on what could have been the story of the British SMEs had the government supported them.

To correct these issues and help SMEs scale up, the report made a number of recommendations to the Starmer administration, including the creation of an Estonia-style ‘British Business Burokratt Software’ tool to pool data collected by HMRC (His Majesty’s Revenue and Customs) and ONS (Office for National Statistics) that would help micro-target support to identified companies.

Another proposal was the introduction of a super-growth allowance (150% capital allowance), along with the formation of an enhanced Growth Enterprise Scheme (GEIS) to boost SME scale-up efforts.

In March 2026, exactly one year after, came the first-ever SME whitepaper from Lovey (formerly Love Finance), the United Kingdom’s fastest-growing SME lender and broker. Titled ‘The 2026 H1 SME Finance Outlook’, the research not only explored how SMEs accessed finance in 2025 but also examined their outlook, priorities and borrowing appetite for 2026.

The one similarity between the two studies is the discovery of the persistent financial pressure (tax burden and rising costs) on SMEs, while the lack of access to external finance results in missed scaling opportunities for these businesses.

Along with the independent creative market research agency Atomik Research, Lovey surveyed 504 British SME owners across the retail, manufacturing, hospitality and construction sectors between December 2025 and January 2026.

“The findings show that UK SMEs were entering 2026 with cautious optimism, balancing growth ambitions with economic pressures and a changing funding landscape. While confidence remains relatively strong, access to external finance continues to play a critical role in helping businesses invest, expand and respond to economic pressures,” the study observed.

While 82% of SMEs applied for external finance during 2025, 81% missed business opportunities due to a lack of finance. Despite 71% of the surveyed business bosses looking to seek external finance in 2026, tax burden (25%) and rising costs (24%) have remained the two biggest (and constant) growth barriers for them.

Why did 2025 become the year for ‘limited growth opportunities’ for British SMEs? The answers were rising costs, squeezed margins, and cash flow challenges. This unholy trinity created a situation where, due to the lack of funding, companies had to postpone or abandon expansion plans.

“Smaller SMEs were particularly affected. Among businesses with revenues between £500,000 and £1 million, 87% reported missing multiple opportunities due to lack of finance, compared with 82% of businesses with revenues between £250,000 and £500,000. Looking ahead, demand for finance remains strong across sectors. Hospitality businesses are the most likely to seek external finance in 2026 (89%), followed by manufacturing (71%), retail (66%) and construction (56%),” Lovey commented.

The research also highlighted regional disparities in access to funding. In the East Midlands, 96% of SMEs reported missing at least one opportunity due to lack of finance, followed by Wales (94%) and London (91%).

Unemployment numbers

In March, unemployment went up to 5.2%, the highest level since early 2021. More than 1.88 million people were out of work, an increase of 331,000 year-on-year.

Youth unemployment hit its five-year high of 14%, as 575,000 young people aged 18-24 remained jobless. Payrolled employees fell by 134,000 over 2025. Retail and hospitality got hit particularly, as 122,000 fewer people remained in payroll employment in these two sectors.

A month after, there wasn’t a big change. British businesses ​posted fewer job vacancies, with the Iran war starting to show its impact on the European country’s economy. Vacancies fell to 705,000 in the three months to April, the lowest number since the three months to ⁠February 2021.

Wage growth, excluding bonuses, stood at 3.4% in the first three months of 2026 compared ​with the same period in 2025, the slowest increase since 2020. The unemployment rate, a high-profile gauge of any economy’s health, ticked up to 5% for Q1, from 4.9% in the three months to February. The drop in payrolls in April 2026 also became the biggest since May 2020, at the start of the COVID-19 pandemic.

As per the ONS, lower-paying sectors like hospitality and retail saw some of the largest falls in payroll numbers and vacancies, with employers complaining that higher payroll taxes and a government ​reform to give workers more rights have ​made hiring more expensive.

In the words of Andrea Reynolds, a non-executive director for Berkshire Hathaway European Insurance, along with the CEO and founder of Swoop, a venture that simplifies the process of sourcing funding for SMEs, “Behind every redundancy, every unfilled vacancy, every shuttered shop front, there’s a small business owner who’s had to make an impossible choice.”

“From April 2025, employer National Insurance contributions rose from 13.8% to 15%, while the threshold at which employers start paying dropped from £9,100 to £5,000. For a business employing someone on £30,000, that’s an additional £866 per employee, per year, which many small businesses simply cannot absorb. Even for those that can, absorbing costs means lower profits. Lower profits mean less investment. Less growth. Fewer jobs,” she said in her article for EliteBusiness.

To complicate things further, every cycle of increase in the National Minimum Wage will make 2026 an expensive year for British businesses, amid headwinds like the Iran war and the resultant supply chain disruptions.

As per the Centre for Policy Studies, employer NICs (National Insurance Contributions) for a minimum wage employee will rise from £1,617 to £2,583 this year alone. Talking about a minimum wage increase, the latest ratio stands at £12.71 per hour for workers aged 21 and over, adding up to £900 more per year for full-time workers.

As per Reynolds, labour-intensive yet tight-margin sectors like hospitality, retail and caregiving; each wage hike cycle creates situations like job cuts, reduction in operational hours or, in the worst-case scenario, shutdown of the entire business. Her blunt advice to the Starmer administration was: if you want to tackle the growing menace of unemployment, you need to ease the cost of doing business for SMEs.

“Raise the VAT threshold. Immediately. The current threshold is £90,000, but if it were linked to inflation, it would be £103,000. Businesses are becoming VAT liable through inflation, rather than growth. The Federation of Small Businesses estimates VAT compliance adds £4,100 on average to a business’s running costs. I also know that struggling to pay the VAT bill can critically injure the cash flow of otherwise profitable businesses. So, raise the threshold and thousands of businesses will save thousands of pounds,” she stated.

Reynolds also suggested measures like reviewing employment costs.

“National Insurance, the national minimum wage, and business rates don’t exist in isolation. Each one compounds the others. Small businesses need breathing room, not a cascade of incremental tax rises that look manageable individually but are crippling collectively. Make it easier to access finance. Many SMEs are facing a cash flow crunch. They need working capital, not lectures. During Covid, government-backed schemes like CBILS and RLS improved access to alternative finance and simpler application processes. The government can pull this lever if they really want to,” she remarked.

Geopolitics poisons the cocktail

While the Iran war and the Hormuz stalemate have created one of the worst energy shocks the world has ever experienced, British SMEs will face rising energy bills as heating oil costs rise. As per The Guardian, about 7% of all small and medium-sized companies warm their properties and provide hot water using heating oil, whose price, in some cases, has more than doubled in recent weeks.

The situation has got complicated for businesses based in rural areas. Since they are not connected to the gas grid, they have to depend on heating oil. According to the Federation of Small Businesses (FSB), the material is used by about 17% of rural SMEs. And some of their members have already started rationing their fuel use to cope with the sharp rise in prices.

The FSB, which represents about 200,000 businesses and sole traders, has called on the United Kingdom’s competition watchdog to include the SME sector in its investigation into the price rise in the heating oil market. The trade body is equally apprehensive about rogue energy brokers taking advantage of the market crisis to push small companies into signing up to long-term deals on bad terms.

As per corporate restructuring specialist Begbies Traynor Group (BTG), the number of UK businesses in ‘critical financial distress’ has soared by more than a third. Hotels and leisure firms are particularly hard-hit, with mounting labour costs, increased tax burdens and now the Iran war making things difficult for them. The study came up with a disturbing ratio: a growing number of companies edged closer to collapse in Q1 2026.

Businesses considered to be in ‘critical financial distress’ surged by 36.9% to 62,193 for the period, compared with the same quarter in 2025. Concurrently, the number of businesses experiencing ‘significant’ financial distress rose by 9.6%, reaching a total of 634,867.

“Firms have contended with a series of tax increases throughout the year, including adjustments to national insurance contributions, further squeezing their finances. It also comes amid a backdrop of shaky consumer confidence, particularly affecting sectors reliant on discretionary spending habits. These challenges have been exacerbated by energy and materials inflation following the outbreak of war in the Middle East towards the end of the quarter,” BTG stated.

Recession fear

Add the S&P ‌Global’s preliminary UK Composite Purchasing Managers’ Index, which in May 2026 tumbled to 48.5 from 52.6 in April, its first reading ​below the 50.0 growth threshold since April 2025, indicating the kind of drop in activity British companies have been going through since 2025, with ‌the Iran war only piling up more problems for entrepreneurs.

Even though manufacturing firms reported a rush of orders, ‌the increase was largely due ⁠to clients trying to get ahead of possible further price increases or supply chain problems. Also, businesses are unsure about how long the energy prices will remain in the higher territory. Business owners have scaled back their hiring plans ​for the 20th month ​in a row, with expectations for future business being the lowest since April 2025.

The recession fears, especially in the SME circle, have hit their two-year high, according to iwoca’s SME Expert Index, which emerged in May.

As per the survey, 70% of participating finance brokers saw their SME clients getting worried about the rising energy prices, with over three-quarters (78%) expecting disruption to supply chains to negatively impact the business performance. Over half (54%) talked about entrepreneurs getting mentally prepared about the prospect of a recession, the highest level since Q3 2023 and up from 42% in Q4 2025.

Colin Goldstein, Chief Commercial Officer, UK, at iwoca, said, “These numbers reflect what we’re hearing from brokers – small businesses are worried, and the concerns are stacking up. Costs, inflation, supply chains: none of these have easy fixes. What SMEs can control is making sure they have the right financial backing to absorb shocks and keep moving. That’s where we come in, and it’s where we’re focused.”

Another report from the Item Club gave a harrowing stat: the UK is expected to lose around 163,000 jobs in 2026, with elevated energy costs, disrupted supply chains and squeezed household spending putting a dampening outlook on the overall economic health. The worst affected will be manufacturing and construction firms that are facing soaring operating costs.

All eyes on the Andy Burnham

Andrew Murray Burnham, a British politician who has been serving as Member of Parliament for Makerfield since June 2026, and is expected to take over from Starmer, needs to fix quite a lot of things. SMEs will be one among them.

It’s not like the Starmer administration didn’t do anything. In August 2025, it launched a scheme called ‘Backing Your Business’, under which a sweeping £4.5 billion funding package was announced to support SMEs. Then in March 2026, government departments, for the first time, set individual spending targets for SMEs to deliver over £7.4 billion a year to British businesses by 2028.

Billions were allotted separately to boost supply chains, with the goal of creating a thriving private sector that will drive GDP growth and generate wealth across the European country, apart from creating a massive number of jobs.

However, things on the ground look totally different. The SME sector looks squeezed, with recession fears kicking in among the business owners. The government wanted them to create jobs. The Item Club report says otherwise: potential loss of 163,000 jobs by this year-end.

Energy costs have continued to rise, forcing Chancellor Rachel Reeves to announce increased support for energy-intensive companies through the ‘British Industry Competitiveness Scheme’, which will be important for the UK construction and infrastructure supply chain, as it provides support for the manufacturing of steel, cement, ceramics, chemicals, glass, and heavy manufacturing.

During the peak of Iran war, Starmer promised to examine ‘every lever that’s available’ to help British households and industries cope with the crisis.

Ministers were reportedly told to work on support packages ‘that proved their worth during previous crises’. While the current energy price cap expires this summer, Starmer, in the days leading up to his shock resignation, indicated that this support would manifest as a fuel allowance for winter 2026, with the price shocks expected to continue for a good part of 2026.

To deal with the supply chain disruptions, the government is investing £100 million ($133 million) in reopening a carbon dioxide (CO₂) plant in Teesside. The facility, operated by Ensus at the Wilton International industrial site, had been mothballed since September 2025 after a trade deal with the US removed a tariff on American ethanol imports, making domestic production unviable.

While the move is going to take care of the CO₂ generation-related requirements to serve purposes like keeping packaged food fresh and carbonating soft drinks, it is also going to assist domains like water treatment, healthcare and the nuclear industry.

Elevated energy prices and supply chain disruptions will be the realities the British SMEs will have to deal with for the next few months. Burnham’s task should be a straightforward one: keep the assistance, both monetary and supply chain-wise, going, because SMEs are the nation’s growth engine.

The post Save SMEs: Labour Government’s Toughest Challenge appeared first on International Finance.

Factories on both sides of every border pass parts back and forth. A car built in Michigan contains components machined in Ontario and wiring from Monterrey. The arrangement, now formalised under the United States-Mexico-Canada Agreement, underpins roughly $1.6 trillion in annual trade between the three countries. It has made North America one of the most tightly integrated manufacturing regions on Earth.

That arrangement is now under serious strain. The second Donald Trump administration has used its opening years to challenge the foundations of the deal, deploying tariffs, legal threats, and negotiating pressure to push both neighbours toward a version of the agreement that serves American interests far more narrowly.

Formal bilateral talks between the United States and Mexico began in Mexico City on May 28. Canada has been left out of those opening rounds entirely. On July 1, the agreement faces its first mandatory review, at which all three countries must decide by consensus whether to extend it for another 16 years.
The outcome of that review will shape the economic geography of North America for decades. To understand what is at stake, it helps to start at the beginning.

How the Integrated Economy Was Built

NAFTA, signed in 1993, was the agreement that first stitched the three economies together. Earlier, each country maintained its own tariffs and trade barriers, and manufacturers largely sourced components domestically, or from global suppliers.

NAFTA changed the incentive structure fundamentally. If you could produce something more cheaply across the border, it suddenly made sense to do so. Over the following decades, supply chains reorganised themselves around that logic.

By 2024, the total value of goods and services moving between the three countries had reached an estimated $1.93 trillion annually. Canada and Mexico are now the United States’ two largest trading partners, ahead of China. The depth of integration shows up in a striking statistic.

Nearly 74 cents of every dollar of manufactured goods exported from Mexico to the United States contains value that originated somewhere within North America. For vehicles and automotive parts specifically, that figure rises to nearly 77 cents. The borders between the three countries have, in economic terms, become largely administrative lines that goods cross and recross during production.

The USMCA, which replaced NAFTA in July 2020, was meant to modernise this arrangement. It updated rules around digital trade, labour standards, and intellectual property. It also tightened the rules that determine whether a manufactured good qualifies for duty-free status, most notably in the automotive sector.

The Tariff Shock of 2025

The first major disruption to this integrated system came on February 1, 2025, when the Trump administration announced near-universal tariffs of 25% on all imports from Canada and Mexico. The stated justification was national security.

The administration claimed that illegal immigration and fentanyl trafficking from both countries constituted an emergency under a law called the ‘International Emergency Economic Powers Act’, which gives the president broad powers in genuine crises.

The move sent immediate shockwaves through integrated industries. At Port Laredo, which handles a large share of US-Mexico vehicle trade, imports of vehicles fell by $4.1 billion in the first half of 2025. Metals imports across the border dropped by more than 13%. Canada responded quickly, announcing 25% retaliatory tariffs on $30 billion of American goods, then another $29 billion.

Ottawa prepared a third package worth $125 billion. The integrated economy that had been built over three decades was suddenly operating under conditions it had never been designed for.

The administration eventually exempted goods that met USMCA’s rules of origin from the universal tariffs, meaning most trade between the three countries continued duty-free. But the tactic had demonstrated something important. Washington was willing to use the threat of comprehensive tariffs as a lever.
That lever broke in February 2026. The US Supreme Court ruled 6-3 that the International Emergency Economic Powers Act does not actually give the president authority to impose tariffs unilaterally. The court held that levying tariffs is a power reserved to Congress, and that it had not been properly delegated to the executive branch. The ruling invalidated the administration’s primary tool for rapid, large-scale trade pressure.

The administration quickly pivoted to a different legal authority, invoking Section 122 of the Trade Act of 1974 to impose a temporary 10% global surcharge on imports. But this surcharge has a hard 150-day limit built into the law, scheduling it to expire on July 24, 2026. With its main tariff weapon gone and a deadline approaching, Washington turned its attention to the USMCA Joint Review as the primary arena for extracting concessions.

The Fight Over Cars

The automotive sector sits at the centre of the current negotiations, and understanding why requires a brief explanation of how the rules work.

Under the USMCA, a vehicle qualifies for duty-free treatment only if it meets a set of regional content thresholds. At least 75% of a vehicle’s value must originate within North America. 70% of the steel and aluminium used must come from North American sources. A certain share of the vehicle’s value must be produced in facilities that pay workers an average of at least $16 per hour.

These are strict rules. The previous agreement, NAFTA, only required 62.5% regional content. When the USMCA was negotiated in 2018 and 2019, the Trump administration’s first term pushed for these tighter thresholds specifically to encourage more manufacturing to remain in the region.

The practical result has been unexpected. Because the standard US tariff on imported passenger vehicles from anywhere in the world is only 2.5%, many manufacturers have simply decided that it is cheaper to pay the tariff, and ignore the USMCA rules than to reorganise their complex global supply chains to meet the thresholds.

Between 2020 and 2025, non-compliance rates for vehicles imported into the United States quintupled. Rather than pulling manufacturing back into North America, the rules pushed some producers out of the preferential system altogether.

The labour requirement has also produced mixed results. The rule was designed to raise wages for Mexican automotive workers by requiring that a percentage of a vehicle’s value come from facilities paying at least $16 an hour. In 2024, the average Mexican automotive worker earned $5.66 per hour, compared to $30.86 in the United States. Manufacturers have mostly met the labour threshold by counting their American and Canadian operations, where wages are already high, rather than raising pay in Mexico.

Now the Trump administration is pushing for something more radical. They want a US-specific minimum content rule. This would require that a defined share of the value of every vehicle made in Mexico come specifically from the United States, not just from North America in general.

The logic is that this would force manufacturers to relocate high-value assembly and component work from Mexico to American factories. For Mexico, this is a fundamental challenge to the deal’s structure. For Canada, it is a sign of where Washington’s priorities lie.

Canada on the Outside

Canada has been excluded from the opening rounds of negotiations entirely. The current schedule runs bilateral US-Mexico talks through late July 2026 without Ottawa at the table.

This exclusion comes at an awkward moment for Canada’s new government. Justin Trudeau resigned in early 2025, and Mark Carney became Prime Minister in March of that year. Carney is a former central banker, respected internationally for his economic expertise. His government won a majority in April 2026, giving him a stronger political base. But seven months into formal trade tensions with the United States, Canada’s trade minister has managed only a single day of in-person talks with the US Trade Representative.

Washington’s demands of Canada go beyond the core trade agreement. The administration has insisted that Canada scrap its ‘Online Streaming Act’, a law that requires streaming platforms like Netflix and Disney+ to contribute a percentage of their Canadian revenue to funding domestic Canadian content.

US negotiators argue this unfairly targets American companies. Washington also wants changes to Canada’s supply management system, which uses quotas and price controls to support the domestic dairy industry, and the removal of provincial bans on American alcohol imports.

Canada abolished its 3% digital services tax in mid-2025 as a goodwill gesture. But Carney’s government has made clear it will not accept humiliating terms to preserve the deal.

Speaking directly to an American audience at the Economic Club of New York on May 28, Carney called for a re-imagination of continental trade, stating: “There should be a ‘true partnership’ that re-imagines cooperation in specific sectors challenged by global competition.”

Furthermore, upon launching his government’s Advisory Committee on Canada-US Economic Relations to tackle the crisis, his office reinforced this stance: “Canada is approaching its economic relationship with the United States with focus, discipline, and unity… Our goal is a strong economic partnership with the United States that creates greater certainty, security, and prosperity for all.”

Carney has simultaneously been pushing a domestic agenda centred on reducing Canada’s extreme dependence on the US market, advocating economic diversification into Asia and Europe. The problem is that more than three-quarters of Canada’s total goods exports go to the United States. That dependence does not disappear because a government decides to reduce it.

Mexico’s Careful Balancing Act

Mexico is in a different position. President Claudia Sheinbaum came to power in 2024 with a mandate to manage the country’s complex relationship with Washington carefully. Her approach has been to offer security cooperation in exchange for trade goodwill.

When the Trump administration threatened tariffs in early 2025, Mexico deployed more than 10,000 National Guard troops to its borders, cracked down on fentanyl labs, and extradited prominent cartel figures to the United States, including Rafael Caro Quintero, one of the founders of the Sinaloa Cartel. The message was that Mexico could deliver results that Washington wanted on the security front, and those results were worth more than a trade war.

On the trade side, Sheinbaum sought early on to anchor the coming milestone within the strict boundaries of the original text. In a press conference, she clarified her country’s legal position: “A ‘review’ of the USMCA free trade pact will take place next year rather than a ‘renegotiation’… The agreement says that.”

Following up on US political pressure later in the cycle, she maintained a pragmatic front, stating plainly: “I do not believe the US will withdraw from USMCA.”

Mexico has moved to align its own tariffs with Washington’s concerns about China. In December 2025, Mexico raised tariffs by up to 50% on goods from countries with which it does not have a free trade agreement, a measure primarily aimed at Chinese manufacturing imports. Mexico also launched investigations into hundreds of domestic firms that were importing Chinese steel through special programmes and re-exporting it to the United States, effectively using Mexico as a conduit to avoid American tariffs.

ALSO READ | Trade wars push Mexico toward Saudi Arabia

But the China problem is not easily resolved, and the reason becomes clear when you look at what some major US companies are actually doing. General Motors sold roughly 198,000 vehicles in Mexico in 2025. Of those, 64.1% were manufactured in China.

Only 11.3% were made in Mexico itself. Only 7.8% came from the United States. In other words, the American company most associated with North American manufacturing was selling vehicles in the region’s second-largest economy that were almost entirely made in China.

This is not an aberration. It reflects 20 years of decisions by American multinationals to integrate Chinese manufacturing into their global operations. Any aggressive push to decouple from Chinese supply chains does not just inconvenience Chinese companies. It disrupts the business models of General Motors, Ford, and dozens of other US corporations. That is the bind that Washington is navigating, and it makes the demand for complete decoupling considerably more complicated than the political rhetoric suggests.

Four Possible Outcomes

As the July deadline approaches, analysts see four realistic scenarios for what happens next.

The most likely outcome is what might be called the painful extension. The three countries fail to meet the July deadline, but eventually, sometime in late 2026 or early 2027, reach a new deal. Mexico and Canada accept stricter automotive content rules, tougher labour standards, and tighter restrictions on Chinese goods moving through their territory into the American market.

In exchange, Washington agrees to extend the agreement for 16 years and provides some relief on the tariffs that remain in place. Nobody is happy with the result, but the integrated economy survives largely intact.

The second scenario is – serial annual reviews. If the three countries cannot agree by July, the core mechanism laid out in Chapter 34 of the deal dictates the framework. According to Article 34.7 of the USMCA text:

“This Agreement shall terminate 16 years after the date of its entry into force, unless each Party confirms it wishes to continue this Agreement for a new 16-year term… If, as part of the joint review, one or more Parties do not confirm their desire to extend, the FTC [Free Trade Commission] shall conduct joint reviews annually thereafter…”

The deal stays technically in force under this rolling loop, but every year brings another round of negotiations and another period of uncertainty. For companies trying to decide whether to build a factory or sign a long-term supplier contract in North America, that uncertainty is costly. Investment slows. Supply chains gradually diversify away from the region.

The third scenario is a split into bilateral agreements. A US-Mexico deal and a separate US-Canada deal. This would preserve some market access for both countries but would fracture the trilateral supply chains that have made North American manufacturing competitive. Canada and Mexico would lose the leverage that comes from negotiating together, and each would be more exposed to American pressure individually.

The fourth scenario is withdrawal. Any country can leave the USMCA with six months’ notice. The Trump administration has repeatedly used the threat of withdrawal as a negotiating tactic. The risk is that the threat becomes reality, either by design or by miscalculation.

If the United States were to actually withdraw, goods from Canada and Mexico would lose their tariff-exempt status overnight, and the integrated manufacturing networks of three decades would face an immediate, severe shock.

Why It Matters Beyond North America

The agreement has functioned as a model for how wealthy economies can integrate production across borders while managing political sensitivities around jobs and wages. If that model breaks down, it signals to the rest of the world that no regional trade arrangement is secure when one large partner decides to renegotiate the terms by force.

For businesses operating across North America, the immediate concern is the certainty about the rules that determine where factories get built, where suppliers are contracted, and how supply chains are designed. The longer the uncertainty continues, the more those decisions get deferred or redirected elsewhere.

The livelihoods of millions of people depend on integrated industries that exist because the trade framework made them possible. Automotive plants, logistics networks, agricultural supply chains, technology manufacturing. All of it was built around the assumption that the rules would remain stable.

What happens in Mexico City and Washington over the next several months will determine whether that assumption remains valid.

The post NAFTA: North America’s Trade Glue Is In Turmoil appeared first on International Finance.

This mineral wealth has become the financial engine of one of the world’s most violent and complex crises. It pays the wages of military rulers who seized power in a wave of coups. It funds Russian mercenaries operating thousands of kilometres from home. It fills the war chests of jihadist groups who have turned large parts of the three countries into ungovernable territory.

Understanding how this works, and why the world has struggled to stop it, requires looking at history, geography, and the mechanics of how gold moves from a hole in the ground to a vault in Dubai.

How It Got This Bad

The three countries at the centre of this story share more than borders. They are among the poorest nations on Earth. Niger, for instance, had an average income of just $560 per person in 2023. Nearly half its population lives below the international poverty line. The average person there can expect to live to 61. They describe lives shaped by hunger, illness, and a near-total absence of the public services most people take for granted.

Yet, for decades, these same countries sat on vast mineral wealth, and a great deal of that wealth left without benefiting the people living above it. France, the former colonial power in all three nations, maintained a deeply influential role long after formal independence. One of the most resented symbols of this was the CFA franc, a shared currency tied to the euro and historically managed with French oversight. Local governments were required to park a large portion of their foreign reserves in accounts at the Bank of France, which limited how freely they could manage their own economies. Meanwhile, Western mining companies operated under generous tax arrangements that critics argued left very little behind for the host countries.

This frustration eventually boiled over. Between 2020 and 2023, military officers staged coups in all three countries, ousting elected governments that large parts of their populations had come to see as corrupt and subservient to foreign interests. The new leaders expelled French troops, tore up defence agreements with the United States and the European Union, and withdrew from ECOWAS, the regional bloc that groups 15 West African nations. In September 2023, they formalised their break by forming the Alliance of Sahel States, known by its French initials AES, and agreed that an attack on any one of them would be treated as an attack on all three.

The problem they immediately faced was money. International aid dried up. Regional sanctions bit hard. Yet, these juntas had armies to pay, insurgencies to fight, and Russian paramilitary forces arriving to help prop up their regimes. The answer, as it turned out, was sitting right beneath their feet.

Squeezing the Mining Giants

Industrial gold mining in this part of Africa had for years been dominated by large foreign corporations, mostly from Australia, Canada, and the United Kingdom. They ran sophisticated operations, employed thousands of people, and paid taxes, though the new governments were convinced they had not been paying nearly enough.

Mali moved first and most aggressively. After an audit suggested the government had lost somewhere between $500 million and $1 billion in revenue it was owed, the authorities rewrote the mining rule book. Under the new code, introduced in 2023, the state gets an automatic 10% stake in any mine for free, with the option to buy an additional 20%. Foreign companies must sell a portion of their shares to Malian investors. Old tax exemptions were abolished. The message was clear: the terms of the old relationship were no longer acceptable.

What followed was less a legal process than a corporate shakedown. The Malian government simply summoned executives, detained them if necessary, and demanded settlements. In November 2024, the CEO of Australian miner Resolute and two colleagues were arrested in the capital Bamako. They were held for over a week before the company agreed to pay $160 million to settle alleged unpaid taxes. Resolute had little choice; the mine in question, at Syama in southern Mali, accounts for more than 60% of everything the company produces.

The biggest confrontation was with Barrick Gold, the world’s second-largest gold miner, over its Loulo-Gounkoto complex in western Mali. This single site represents roughly 14% of Barrick’s revenues worldwide, and about a third of Mali’s total gold output. The government claimed the company owed $5.5 billion in back taxes. It issued an arrest warrant for Barrick’s CEO, detained local employees, and in mid-2025, had a court hand operational control of the mine to a state-appointed administrator. After Barrick pursued international arbitration, a settlement was eventually reached in November 2025. The company agreed to pay $437 million, drop its legal case, and operate under the new framework. Several employees were released and operational control was to be returned in 2026.

Other companies settled too. UK-based Hummingbird Resources paid around $31 million. Canada’s B2Gold restructured its ownership arrangement at the large Fekola mine, converting the government’s share into a preferred stake that earns guaranteed dividends, in exchange for approvals to expand underground operations worth up to 100,000 extra ounces per year.

These settlements handed the juntas a significant short-term windfall. Mali alone confirmed in late 2024 that it had secured nearly $800 million from mining companies, with more payments due. But the longer-term picture is troubling. Industrial mining requires massive upfront investment that takes years to recoup. When governments detain executives and seize assets, future investors take notice. The pipeline of new projects that would sustain these revenues over the coming decades is unlikely to materialise if companies believe their assets can be arbitrarily taken away.

The Refinery Question

The more strategically significant development is what the AES governments are building now. Both Mali and Burkina Faso have begun constructing their first domestic gold refineries.

On the surface, this sounds entirely reasonable. At present, gold extracted in these countries is mostly exported as raw ore to be refined in Switzerland or South Africa. The refining process, which turns raw material into standardised gold bars ready for the global market, adds significant economic value. Why should that value be captured abroad? Building refineries at home means jobs, income, and a bigger slice of the value chain.

Mali’s refinery, being built near the capital Bamako, is designed to process up to 200 tonnes of gold per year. Its partner in the project is Yadran, a Russian conglomerate. Burkina Faso’s facility, launched by President Ibrahim Traoré in late 2023, is projected to handle 150 tonnes annually. The governments speak enthusiastically about the employment these facilities will create, citing hundreds of direct jobs and thousands of indirect ones.

But analysts who track illicit financial flows see something else entirely. The problem is not refineries per se; it is what a refinery does to the traceability of gold. Once ore from different sources is melted down together and cast into standardised bars, it is impossible to tell where the gold originally came from. A bar that comes out of the Bamako refinery might contain gold from a legitimate industrial mine, gold extracted by Russian mercenaries from a site they seized by force, and gold that jihadist groups taxed from informal miners in territory they control. The bar looks the same regardless.

This matters enormously because the global gold market operates on the principle that you can trace where bullion came from. The London Bullion Market Association, which sets the standards for gold traded internationally, requires strict checks on provenance. Gold that fails those checks cannot legally enter the mainstream market. A Russian-backed refinery in Mali, however, can export its bars directly to the United Arab Emirates or to Russia itself, bypassing European compliance checks entirely. From Dubai, the gold enters the global supply chain, and at that point, it is virtually untraceable. European jewellers, electronics manufacturers, and banks may unknowingly be buying what researchers call ‘blood gold’.

The Artisanal Sector and the Jihadist Tax

The industrial mines run by multinational corporations are only part of the picture. Across the Sahel, hundreds of informal digging sites operate with almost no regulation. In Burkina Faso alone, an estimated 430,000 people work in this artisanal sector, supporting over a million dependents. These are people digging by hand, often using mercury and other hazardous materials, in sites that may be little more than pits in the desert. Child labour is common. The work is dangerous and the rewards are small.

These sites are also deeply vulnerable to exploitation by armed groups. Jihadist organisations, principally a network called JNIM and a local affiliate of the Islamic State, have steadily taken over large parts of the rural Sahel. As they did so, they imposed themselves on the artisanal mining economy. They do not typically dig for gold themselves. Instead, they run protection rackets. Miners who want to keep working must pay fees. Transporters moving raw gold along roads pay tolls at checkpoints. These groups levy a form of taxation on the entire informal economy of the areas they control, and the gold sector is one of their most lucrative targets.

The revenue funds their operations directly. JNIM and allied groups have used this money to blockade towns, cutting off food and supplies to force civilian compliance, and to sustain sieges of military outposts. They pay fighters, buy weapons, and recruit from communities that have been terrorised, or economically marginalised.

Once this gold has been taxed, it enters a smuggling network that stretches from the Saharan interior to the coast. Criminal middlemen aggregate illicit gold with material from legitimate sources. It crosses borders, often through Togo or Benin, and then flies out of airports in Accra, Lomé, or Bamako, frequently destined for gold markets in Dubai. The UAE has become a critical node in this system, a place where gold of uncertain origin is absorbed into the global supply chain with relatively few questions asked. Burkina Faso alone is estimated to have lost over $490 million in a single year to gold smuggling and the under-declaration of exports.

Russia’s Cut

No account of the Sahel’s gold economy is complete without examining Russia’s role. After France’s decade-long military presence in the region failed to contain the jihadist insurgency, the AES governments turned to an alternative partner. The Wagner Group, a Russian paramilitary organisation, began deploying to Mali and then Burkina Faso. After Wagner’s founder Yevgeny Prigozhin died in a plane crash in 2023 following his brief mutiny against the Kremlin, the force was reorganised and rebranded as the Africa Corps, operating under the direct command of the Russian defence ministry.

Russia’s pitch was simple. It offered security with no conditions attached, no lectures about democracy or human rights, no awkward press conferences after civilian casualties. In exchange, the Africa Corps received access to mining sites.

Since Russia’s full-scale invasion of Ukraine in 2022, the Kremlin has reportedly earned over $2.5 billion from gold operations across Mali, Sudan, and the Central African Republic. This money helps offset the impact of Western sanctions on Russia’s economy and, according to researchers, effectively subsidises the war in Ukraine.

The Africa Corps’ tactics on the ground are instructive. In February 2024, Russian mercenaries arrived by helicopter at an artisanal site called Intahaka in eastern Mali, one of the largest informal gold sites in the country, capable of hosting up to 4,000 miners. They drove out the armed group previously controlling the area and immediately began charging miners for access. They had turned a humanitarian landscape into a revenue stream.

This strategy, critics argue, is inherently self-defeating as a counterinsurgency tool. When Russian forces raze villages, kill civilians suspected of sympathising with jihadists, and displace entire communities, they hand JNIM and its allies their most powerful recruitment pitch imaginable. Researchers tracking conflict data have found that civilian deaths attributable to Russian mercenaries in Mali are significantly higher than those caused by either the Malian military or rebel groups. The Africa Corps has been linked to mass executions. The result is a cycle in which Russian brutality generates the very instability that justifies the continued presence of Russian mercenaries.

Uranium and a Nuclear Footnote

While gold dominates the Sahel’s shadow economy, Niger’s crisis has added a genuinely alarming dimension. Niger holds some of the world’s largest untapped uranium reserves, and the French nuclear energy company Orano has operated there for decades. France has historically sourced around a fifth of its reactor fuel from Niger, a fact that sits uncomfortably alongside Niger’s near-complete lack of domestic electricity access.

After the 2023 coup, the Nigerien junta revoked Orano’s operating rights and eventually seized physical control of the company’s main mine. Most alarming of all, the government took custody of approximately 95,000 tonnes of concentrated uranium powder, an act that violated an international arbitration ruling. That this highly radioactive material was then being transported through regions contested by jihadist groups gave nuclear security experts serious pause. The incident illustrated how resource nationalism, when pursued recklessly, can create risks that go far beyond corporate disputes.

The Wider Contagion

The World Economic Forum has described the Sahel as one of the most dangerous potential sources of global instability. The concern is not just what is happening inside Mali, Burkina Faso, and Niger. It is what is coming next.

Jihadist groups, funded partly by the gold economy and partly by the chaos that Russian mercenaries have deepened rather than resolved, are moving south. They have already conducted attacks in the northern regions of Benin, Togo, and are edging toward Ghana and Cote d’Ivoire. These coastal nations are more stable and more economically developed, but they are not immune. Analysts estimate that sustained spillover of violence could reduce the GDP of some coastal states by up to 5%.

Meanwhile, the AES withdrawal from ECOWAS has shattered the regional security framework that existed to manage exactly these kinds of cross-border threats. The replacement mechanisms being assembled are underfunded and slow.

What It All Means

The Sahel’s $15 billion gold economy is not simply a story about a distant conflict. It is a story about how illicit money moves through the global financial system, how Russian geopolitical ambitions are partly bankrolled by West African soil, and how everyday consumers in wealthy countries may be inadvertently connected to all of it.

Breaking this cycle would require the global gold market to take provenance far more seriously, and for intermediary hubs like Dubai to face real consequences for absorbing material of uncertain origin. It would require the international community to engage coastal West African governments with genuine economic support rather than leaving them to absorb a crisis they did not create.

Until then, the gold keeps moving, the violence keeps spreading, and the war chest keeps filling.

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