by Dr Muda Yusuf
The inception of the Trump administration in the United States of America has significantly altered the dynamics of global trade, economic outlook, and geopolitical trajectory. These shifts have also led to disruptions within the U.S. economic, trade, and political governance systems. As these changes unfold, they bring multi-dimensional implications for the Nigerian economy, affecting energy prices, trade relations, economic diplomacy, macroeconomic stability, donor funding, and capital flows. This essay explores the various ways in which the Trump presidency may shape Nigeria’s economic outlook in the near term.
Implications for Energy Prices
The United States has been the largest oil producer globally for the past six years. In 2023 alone, the country produced an average of 21.91 million barrels per day, accounting for 22% of global oil production. With this level of output, the U.S. is well-positioned to influence global oil prices.
The Trump administration is committed to increasing oil production to lower energy prices both domestically and globally. President Trump’s Executive Order creating a National Energy Dominance Council underscores this commitment. Additionally, his administration is working towards moderating geopolitical tensions, particularly the Russian-Ukraine war and possibly the Israeli-Hamas conflict. If these efforts succeed, they could lead to increased global oil output, especially given Russia’s significant contribution of 10 million barrels per day to the global market. This could also result in the lifting of U.S. sanctions on Russia, further increasing supply and potentially weakening crude oil prices.
A decline in oil prices poses risks for Nigeria, given the country’s heavy reliance on oil exports for government revenue and foreign exchange earnings. The $75 per barrel benchmark set in the 2025 budget may no longer be sustainable. However, a drop in energy prices could benefit Nigerian consumers and industries by lowering costs for diesel, PMS, jet fuel, and gas, thanks to the deregulated nature of the oil and gas sector.
Implications for Global Trade
The Trump administration has pursued policies of economic nationalism, protectionism, and deglobalization. These policies have triggered retaliatory trade actions from U.S. trade partners and may lead to disruptions in global supply chains.
The African Growth and Opportunity Act (AGOA), which provides preferential access to the U.S. market for African countries, could face termination under Trump’s trade policy. While Nigeria has not fully capitalized on AGOA, its cancellation would eliminate any future potential benefits.
Despite these challenges, Nigeria could find opportunities within the trade war by filling supply gaps created in the U.S. market. However, rising inflation in the U.S. due to tariff wars may lead to higher prices for American goods imported into Nigeria, resulting in inflationary pressures domestically.
Trump’s stance against BRICS countries and their efforts to challenge U.S. financial dominance could also impact Nigeria’s trade dynamics. Nigeria must strategically navigate this evolving global trade landscape by forging new trade alliances and exploring alternative markets.
Implications for Remittances
The Trump administration’s restrictive immigration policies may negatively impact diaspora remittances to Nigeria. The United States is home to an estimated 500,000 Nigerians, many of whom send money back home. Stricter documentation requirements and potential deportations could reduce remittance inflows, which play a crucial role in Nigeria’s economy.
Implications for Government Revenue
A potential drop in global oil prices would significantly impact Nigeria’s government revenue and foreign exchange earnings. This would exacerbate fiscal deficits, increase government debt, and put pressure on the exchange rate. The revenue shortfall could force the government to reassess its fiscal strategies, possibly leading to increased borrowing or expenditure cuts.
Implications for Exchange Rate
Trump’s policies are likely to strengthen the U.S. dollar, which could lead to a depreciation of the Nigerian naira. Since there is an inverse relationship between the strength of the dollar and other currencies, a stronger dollar would make imports more expensive for Nigeria, increasing inflationary pressures.
Furthermore, the U.S. Federal Reserve’s likely response to tariff-induced inflation—raising interest rates—could trigger capital flow reversals from emerging markets like Nigeria. This could further weaken the naira and add to macroeconomic instability.
Suspension of USAID Intervention
In 2023, USAID contributed approximately $1.02 billion to Nigeria, funding critical areas such as health, education, water and sanitation, maternal and child care, and governance transparency. The potential suspension or termination of this aid under Trump’s administration would create significant financing gaps, particularly in the health sector. Fortunately, Nigerian government agencies are already exploring alternative funding sources to mitigate the impact.
Policy Implications and Lessons from the Trump Disruption
Given the shifts in global economic policies under Trump, Nigeria must prioritize self-reliance and reduce its dependence on imports in critical sectors such as energy, food, pharmaceuticals, and security. Excessive reliance on foreign supplies increases vulnerability to external shocks and economic disruptions.
To achieve economic resilience, Nigeria must:
- Localize supply chains wherever possible.
- Adapt domestic economic policies to align with the global shift towards economic nationalism and deglobalization.
- Strengthen backward integration by promoting local production and export development.
- Enhance food, energy, health, and internal security using domestic resources.
- Address productivity shortcomings in the real sector to make Nigerian goods and services more competitive.
- Protect domestic industries from unfair competition by ensuring robust trade and industrial policies.
Conclusion
The Trump administration’s policies have far-reaching implications for Nigeria’s economy. From energy prices to trade relations, remittances, and exchange rates, the potential disruptions necessitate proactive policy responses. By focusing on self-reliance, economic resilience, and strategic trade alliances, Nigeria can navigate these challenges and position itself for sustained economic growth despite the uncertainties of global economic policies.
Dr Muda Yusuf is the Director/CEO of The Centre For The Promotion of Private Enterprise [CPPE]
