Constructing geopolitical risk index for Nigeria

We focus on computing the geopolitical risk index (GPRI) for Nigeria, the largest economy in Africa. The country has faced crises, including Boko Haram insurgency, banditry, kidnapping, EndSARS, and regional secession, affecting trade relationships with other countries. Existing GPR indices do not include Africa, hence the need for this effort. The proposed index considers eight prominent Nigerian newspapers and relevant keywords on a daily basis from Jan 1, 2012, to June 19, 2023. We evaluate the predictability of the index by examining its relationship with Nigeria's currency and stock markets. Our findings reveal a remarkable positive relationship between the rising geopolitical tensions and the volatility of the currency and stock markets. Curbing geopolitical tensions in Nigeria is crucial for financial market stability.