The Bank of England (BoE) has raised alarms over a potential “AI bubble,” warning that high valuations and debt-fuelled spending in artificial intelligence could pose significant risks to financial stability. The cautionary note, highlighted in the BoE’s December 2025 Financial Stability Report, compares the current surge in AI-focused equities to historic market peaks, including the early-2000s dot-com bubble.
According to the report, many AI firms are relying heavily on external borrowing to fund infrastructure and research, with estimates suggesting that global AI investment could surpass $5 trillion over the next five years, with half of that financed through debt. Should these valuations collapse, the BoE warns, there could be a wider credit market correction, potentially impacting lenders and investors worldwide.
For Nigeria, the immediate risk appears limited. The country’s banking sector is not directly exposed to UK AI startups, and local investors generally hold minimal positions in global AI equities. As such, the nation’s financial institutions are unlikely to face immediate shocks from overseas AI-related market turbulence.
However, indirect effects cannot be discounted. A sudden collapse in AI valuations could influence global investor sentiment, potentially reducing capital flows into emerging markets like Nigeria. Local tech startups seeking international funding may see valuations tempered, while broader financial market volatility could affect foreign exchange rates and investment in the Nigerian economy. Ai in Nigeria
Analysts suggest that while Nigeria is largely insulated from direct exposure, investors should remain cautious. Diversification, focusing on fundamentals, and avoiding speculative global tech hype are recommended strategies to mitigate potential indirect effects from global market corrections.
In conclusion, the BoE’s warning serves as a reminder of the risks inherent in rapidly growing sectors such as AI. For Nigeria, vigilance and prudent investment strategies will be key in navigating any ripple effects from global financial markets, even if the immediate threat remains low.
Bank of England Warns of AI Bubble Risk: Should Nigeria Be Concerned?