By Clem Aguiyi
Email: totalpolitics@ymail.com
Tell: 0804747898
The United States president recently imposed what may be characterised as global tariffs on goods and services accross the world , both on foes and allies. Trump’s action didn’t even spare poor countries like Lesotho where he targeted with 50% tarrif. The math didnt just add up. Already experts have warned ,that the new tarrif could destabilise global economy and cause recession.
Nigeria exports nothing of significance to the US except crude oil. On that singular product, the US imposed 14%, which means Nigeria’s crude oil could cost more. The shock instantly affected the value of the Naira as it suffered massive depreciation.
The implications of Trump’s new tariffs on Nigeria’s economy could still be more significant despite the country’s relatively diversified trade network. Here are some potential effects:
Reduced Exports*: Nigeria’s exports to the US, primarily crude oil, may decline due to the 14% tariff imposed by the US. This could lead to a loss of revenue for the Nigerian government, as American buyers might turn to domestic suppliers or other countries with more competitive pricing. Nigeria’s oil exports to the US have been declining, and Trump’s tariffs could accelerate this trend.
Increased Import Costs:
Although Nigeria hasn’t announced retaliatory taxes, imports could become more expensive due to tariffs applied to components used in production. This might lead to higher prices for goods such as electronics, cars, building materials, clothing, and other products.
Weaker Naira: The tariffs could slow down international economic activity, potentially reducing global demand for oil and forcing oil prices downward. This would decrease Nigeria’s foreign exchange earnings, weakening the naira and making imports more expensive. To ensure the technical capacity of CBN to absorb the tariff shock ,the Federal Government has approved a $10m loan from the World Bank for the CBN.
It is expected that the new tariff war may lead to Lower Foreign Direct Investment. The uncertainty surrounding the global economic climate might deter international investors from pouring money into Nigeria’s economy, instead opting for safer, more established markets. Trump, for instance, wants businesses to remain in the US. Some big businesses are already recalibrating their business plan to invest in the US to avoid the tariff.
Some mitigating factors include:
*Diversified Trade Network*: Nigeria’s trade network is relatively diversified, which could help shield the country from the worst effects of the tariffs.
Strong Global Demand for Crude Oil: The global demand for crude oil remains high, allowing Nigeria to redirect its oil exports to other buyers if US demand declines.
Limited Economic Impact: According to Renaissance Capital Africa, a 10% tariff on Nigerian exports to the US would have a limited economic impact, potentially reducing Nigeria’s GDP by approximately 0.1% if exports decline by 5%.
Overall, while the implications of Trump’s tariffs on Nigeria’s economy are uncertain, the country may experience some challenges due to reduced exports, increased import costs, and potential depreciation of the naira.
So far, the CBN has taken appropriate measures to save the Naira from total collapse. The $10m loan approval given by the Federal Government to ensure capital capacity of CBN to manage the effects of the tariff will become handy in the medium term.
