{"id":12509,"date":"2025-02-16T13:08:09","date_gmt":"2025-02-16T13:08:09","guid":{"rendered":"https:\/\/thenewsnow.org\/?p=12509"},"modified":"2025-02-16T13:08:10","modified_gmt":"2025-02-16T13:08:10","slug":"trump-effect-on-the-nigerian-economy","status":"publish","type":"post","link":"https:\/\/thenewsnow.org\/index.php\/2025\/02\/16\/trump-effect-on-the-nigerian-economy\/","title":{"rendered":"TRUMP EFFECT ON THE NIGERIAN ECONOMY"},"content":{"rendered":"

BY DR. MUDA YUSUF<\/b><\/p>\n

The inception of <\/span><\/span>the <\/span><\/span>Trump administration in the United S<\/span><\/span>ta<\/span><\/span>tes of America <\/span><\/span>has<\/span><\/span> remarkably <\/span><\/span>chang<\/span><\/span>ed<\/span><\/span> the dynamics of <\/span><\/span>global <\/span><\/span>trade, <\/span><\/span>global <\/span><\/span>economic<\/span><\/span> outlook<\/span><\/span> and geopolitical <\/span><\/span>trajectory<\/span><\/span>. \u00a0The US economy is <\/span><\/span>also experiencing<\/span><\/span> a<\/span><\/span> recor<\/span><\/span>d<\/span><\/span> disruption in its economic<\/span><\/span>, trade <\/span><\/span>and political <\/span><\/span>governance<\/span><\/span> systems. These developments have <\/span><\/span>multi<\/span><\/span>–<\/span><\/span>dimensional<\/span><\/span> implications for the Nigerian economy<\/span><\/span>. <\/span><\/span><\/p>\n

There are <\/span><\/span>immediate<\/span><\/span> and <\/span><\/span>remote<\/span><\/span> consequences<\/span><\/span> for<\/span><\/span>energy prices, trade relations, economic diplomacy, macroeconomic stability<\/span><\/span>, donor funding and capital flows<\/span><\/span>. These are <\/span><\/span>evolving <\/span><\/span>outcomes of th<\/span><\/span>e<\/span><\/span> T<\/span><\/span>rump presidency <\/span><\/span>which would impact the outlook for <\/span><\/span>Nigerian economy<\/span><\/span> in the near term<\/span><\/span>.<\/span><\/span><\/p>\n

\n

IMPLICATIONS FOR ENERGY PRICES<\/span><\/span><\/p>\n

\u2022 <\/span>The <\/span><\/span>United States of America [<\/span><\/span>USA<\/span><\/span>]<\/span><\/span> has been<\/span><\/span> the largest <\/span><\/span>oil producer globally for the past six years. In 2023, for instance, the USA produced an average of 21.91 million barrels per day, which is about 22% of the global oil production. The USA is, therefore,<\/span><\/span> in a good position to influence global oil output and prices. <\/span><\/span><\/div>\n
\u2022 <\/span>The <\/span><\/span>T<\/span><\/span>rump administration has committed to increasing oil output <\/span><\/span>to<\/span><\/span> reduce <\/span><\/span>energy<\/span><\/span> prices<\/span><\/span> in the USA <\/span><\/span>and globally. <\/span><\/span>The country also has the global diplomatic<\/span><\/span> clout <\/span><\/span>to <\/span><\/span>get OPEC to boost oil production. <\/span><\/span>To this end, President <\/span><\/span>Trump<\/span><\/span> has signed <\/span><\/span>an Executive Order creating a <\/span><\/span>National Energy <\/span><\/span>Dominance Council to drive th<\/span><\/span>e country\u2019s<\/span><\/span>energy <\/span><\/span>dominance <\/span><\/span>agenda.<\/span><\/span><\/div>\n
\u2022 <\/span>Additionally, the Trump administration is committed to moderating the current global geopolitical tension, especially the <\/span><\/span>Russian-Ukraine<\/span><\/span> war<\/span><\/span>,<\/span><\/span> and <\/span><\/span>possibly <\/span><\/span>the <\/span><\/span>Israeli<\/span><\/span> Hamas<\/span><\/span> war. <\/span><\/span><\/div>\n
\u2022 <\/span>If Trum<\/span><\/span>p<\/span><\/span> succeeds<\/span><\/span> in ending the war, especially the <\/span><\/span>Russian-Ukraine<\/span><\/span> war, <\/span><\/span>the prospects for growth in global oil output would be considerably heightened <\/span><\/span>as Russia <\/span><\/span>supplies<\/span><\/span> about 10 mbd<\/span><\/span> of oil<\/span><\/span> to the global oil market. There is also a good chance that the current sanctions on Russia by <\/span><\/span>the USA may be lifted thereafter<\/span><\/span> as <\/span><\/span>the <\/span><\/span>relationship between the two countries <\/span><\/span>normalizes<\/span><\/span>. <\/span><\/span><\/div>\n
\u2022 <\/span>In light of these, t<\/span><\/span>he <\/span><\/span>scenario <\/span><\/span>of<\/span><\/span> a <\/span><\/span>weakening of<\/span><\/span>crude oil <\/span><\/span>prices<\/span><\/span> in the near term is therefore very high.<\/span><\/span> \u00a0<\/span><\/span>In this context, the c<\/span><\/span>rude oil price benchmark of $75 per barrel <\/span><\/span>in the 2025 budget <\/span><\/span>may not hold. \u00a0This would impact the outlook for government revenue and foreign exchange earnings in 2025. \u00a0<\/span><\/span><\/div>\n
\u2022 <\/span>The decision of President Trump to opt out of the Climate change agreement<\/span><\/span> [<\/span><\/span>the Paris Accord<\/span><\/span>]<\/span><\/span> also<\/span><\/span>has far reaching <\/span><\/span>consequences <\/span><\/span>for the global oil market. \u00a0This signals less commitment to climate change concerns and the <\/span><\/span>acceleration <\/span><\/span>of<\/span><\/span> more investment in fossil <\/span><\/span>fuels<\/span><\/span> by the USA.<\/span><\/span>\u00a0<\/span><\/span>Additionally, the <\/span><\/span>sweeping<\/span><\/span> imposition of trade tariffs on major US trading partners may weaken <\/span><\/span>the <\/span><\/span>global <\/span><\/span>economic <\/span><\/span>growth <\/span><\/span>outlook<\/span><\/span>, dampen <\/span><\/span>global <\/span><\/span>oil demand<\/span><\/span> and<\/span><\/span> depress oil prices.<\/span><\/span><\/div>\n
\u2022 <\/span>However, the upside is that energy prices would drop <\/span><\/span>globally <\/span><\/span>\u2013 the price of diesel, PMS Jet fuel, gas etc. <\/span><\/span>This<\/span><\/span> would gladden the <\/span><\/span>hearts<\/span><\/span> of <\/span><\/span>many economic <\/span><\/span>players<\/span><\/span> in the country. \u00a0The transmission effect would be very fast because of the deregulated regime of the oil<\/span><\/span> and<\/span><\/span> gas sector.<\/span><\/span><\/div>\n

\n

IMPLICATIONS FOR GLOBAL TRADE<\/span><\/span><\/p>\n

\u2022 <\/span>The <\/span><\/span>T<\/span><\/span>rump administration ha<\/span><\/span>s demonstrated an unequivocal commitment to<\/span><\/span> the ideology of economic nationalism, protectionism, <\/span><\/span>deglobalization<\/span><\/span>, unilateralism<\/span><\/span> and<\/span><\/span> reciprocity<\/span><\/span>. <\/span><\/span>and<\/span><\/span>fragmentation of the global economy. \u00a0<\/span><\/span>Th<\/span><\/span>is has <\/span><\/span>unleashed <\/span><\/span>a flurry of <\/span><\/span>retaliatory<\/span><\/span> trade policy actions from a number of countries across a wide range of product groups<\/span><\/span>, even by the <\/span><\/span>close<\/span><\/span> allies of the United States.<\/span><\/span><\/div>\n
\u2022 <\/span>Given the current trade policy disposition of the Trump Ad<\/span><\/span>ministration<\/span><\/span>, AGOA faces<\/span><\/span> the<\/span><\/span> prospect of being terminated. Although Nigeria has very little to show for the opportunities <\/span><\/span>offered<\/span><\/span> by AGOA.<\/span><\/span><\/div>\n
\u2022 <\/span>Meanwhile, t<\/span><\/span>he tariff war <\/span><\/span>offers<\/span><\/span> some opportunities for export and investment for Nigeria taking advantage of the gaps that the trade war may create in the countries involved, to the extent that Nigeria is not a <\/span><\/span>victim<\/span><\/span> of the tariff actions.<\/span><\/span><\/div>\n
\u2022 <\/span>There is the prospect of high inflation in the USA as a result of the current tariff war. \u00a0This thus creates a <\/span><\/span>possibility<\/span><\/span> of imported inflation <\/span><\/span>from the USA for <\/span><\/span>products<\/span><\/span> imported from USA to Nigeria.<\/span><\/span><\/div>\n
\u2022 <\/span>The trade war may create export opportunities to the United States to fill supply gaps that the tariff war may create in the <\/span><\/span>United States<\/span><\/span>.<\/span><\/span> Nigerian companies could position themselves to take advantage of these imminent supply gaps.<\/span><\/span> New bilateral and multilateral trade alliances are likely to evolve <\/span><\/span>due to<\/span><\/span> the ongoing trade war.<\/span><\/span><\/div>\n
\u2022 <\/span>The trade war may <\/span><\/span>trigger<\/span><\/span> a disruption of global supply chains which may <\/span><\/span>adversely<\/span><\/span> affect <\/span><\/span>the global economy<\/span><\/span>,<\/span><\/span> especially from a cost of supplies <\/span><\/span>perspective<\/span><\/span> for imported goods.<\/span><\/span><\/div>\n
\u2022 <\/span>President<\/span><\/span> Trump perceives <\/span><\/span>m<\/span><\/span>embers of BRICS and their allies<\/span><\/span> as United <\/span><\/span>States<\/span><\/span> adversaries<\/span><\/span>,<\/span><\/span> seeking <\/span><\/span>to reverse the dominance <\/span><\/span>of the dollar<\/span><\/span> in the global financial order<\/span><\/span>. <\/span><\/span>This perception <\/span><\/span>could<\/span><\/span> shape the disposition of the Trump administration towards these countries.<\/span><\/span><\/div>\n

\n

IMPLICATIONS FOR REMITTANCES<\/span><\/span><\/p>\n

\u2022 <\/span>Diaspora remittances may be affected by the current immigration policy of the <\/span><\/span>Trump<\/span><\/span>administration. the <\/span><\/span>United States<\/span><\/span> have a huge number of diaspora <\/span><\/span>Nigerians<\/span><\/span>, estimated at <\/span><\/span>500<\/span><\/span>,000, many of which may be affected by the current immigration policy on <\/span><\/span>documentation<\/span><\/span>. <\/span><\/span><\/div>\n

\n

IMPLICATIONS FOR GOVERNMENT REVENUE<\/span><\/span><\/p>\n

\u2022 <\/span>Heightened p<\/span><\/span>rospects of <\/span><\/span>a <\/span><\/span>drop in oil <\/span><\/span>prices<\/span><\/span> would negatively impact government revenue and foreign exchange <\/span><\/span>earnings<\/span><\/span>. \u00a0This has implications for <\/span><\/span>the outlook for <\/span><\/span>revenue, <\/span><\/span>fiscal deficit, government<\/span><\/span>debt and exchange rate. <\/span><\/span>T<\/span><\/span>he <\/span><\/span>current <\/span><\/span>budget <\/span><\/span>benchmark<\/span><\/span> of<\/span><\/span> $75 per barrel may not <\/span><\/span>stand in the circumstances<\/span><\/span>.<\/span><\/span><\/div>\n

\n

IMPLICATIONS FOR EXCHANGE RATE<\/span><\/span><\/p>\n

\u2022 <\/span>The prospects of a strong dollar <\/span><\/span>are<\/span><\/span> very high with <\/span><\/span>the <\/span><\/span>current <\/span><\/span>T<\/span><\/span>rump policies. There is an inverse relationship between the <\/span><\/span>strength <\/span><\/span>of the dollar and that of the other currencies. \u00a0A stronger dollar <\/span><\/span>will<\/span><\/span>mean a weaker naira. \u00a0This may <\/span><\/span>result<\/span><\/span> in <\/span><\/span>higher<\/span><\/span>import <\/span><\/span>costs<\/span><\/span> for <\/span><\/span>domestic<\/span><\/span> investors and invariably become inflationary.<\/span><\/span><\/div>\n
\u2022 <\/span>Current tariff policies of the Trump administration would trigger inflation as costs of imports into the United States surge. \u00a0The US Federal Reserve would respond by tightening monetary policy which would create a high interest rate scenario in the <\/span><\/span>United Sates. \u00a0This could result in capital flow reversals, posing a risk to <\/span><\/span>the <\/span><\/span>naira exchange rate.<\/span><\/span><\/div>\n

SUSPENSION OF USAID INTERVENTION<\/span><\/span><\/p>\n

\u2022 <\/span>The<\/span><\/span> value of USAID intervention in Nigeria in 2023 was $1.0<\/span><\/span>2<\/span><\/span> billion. \u00a0The main areas of intervention were in health, especially HIV\/AIDS<\/span><\/span>;<\/span><\/span>water and sanitation, education, maternal and child care<\/span><\/span> and <\/span><\/span>disease prevention. \u00a0They also have programs to promote democracy and improve <\/span><\/span>governance<\/span><\/span> transparency. \u00a0<\/span><\/span><\/div>\n
\u2022 <\/span>The <\/span><\/span>suspension<\/span><\/span> and possible <\/span><\/span>termination of the entire aid programme<\/span><\/span> would create <\/span><\/span>significant<\/span><\/span>financing gaps for some government programmes<\/span><\/span>, especially in the health sector<\/span><\/span>.<\/span><\/span> Thankfully<\/span><\/span>,<\/span><\/span> the relevant agencies of government are already taking <\/span><\/span>steps<\/span><\/span> to mitigate the <\/span><\/span>steps<\/span><\/span> possible consequences of the termination of USAID programs in these sectors.<\/span><\/span><\/div>\n

\n

POLICY <\/span><\/span>IMPLICATIONS AND LESSONS FROM THE TRUMP DISRUPTION<\/span><\/span><\/p>\n

\u2022 <\/span>There is <\/span><\/span>a need<\/span><\/span> for <\/span><\/span>the <\/span><\/span>government to commit more to the policy of <\/span><\/span>self-reliance<\/span><\/span> and less import dependence in critical areas of the economy, especially energy, food, <\/span><\/span>pharmaceuticals<\/span><\/span> and security. <\/span><\/span>Excessive import dependence poses a major risk to economic and social security of a country. \u00a0<\/span><\/span><\/div>\n
\u2022 <\/span>A key lesson is from the<\/span><\/span> disruption is that no country should be too dependent on others for its <\/span><\/span>strategic<\/span><\/span> needs.<\/span><\/span> It has once again underscored the risk of overdependence on other countries. <\/span><\/span>The Covid <\/span><\/span>experience <\/span><\/span>offered<\/span><\/span> a similar lesson. \u00a0<\/span><\/span>Therefore,<\/span><\/span> there is <\/span><\/span>a <\/span><\/span>need to ensure that policies of government are geared towards ensuring economic resilience that <\/span><\/span>minimizes <\/span><\/span>vulnerab<\/span><\/span>ilities<\/span><\/span> to external shocks. \u00a0<\/span><\/span><\/div>\n
\u2022 <\/span>Supply chains should be localized as much as possible.<\/span><\/span><\/div>\n
\u2022 <\/span>The emerging new global order is progressively <\/span><\/span>leaning<\/span><\/span> towards economic nationalism, deglobalization and <\/span><\/span>economic <\/span><\/span>fragmentation. \u00a0Domestic economic policies must be framed within the context of this reality. <\/span><\/span>Nigeria’s<\/span><\/span> trade and industrial policies <\/span><\/span>a<\/span><\/span>re very critical to achieving this resilience.<\/span><\/span><\/div>\n
\u2022 <\/span>The government must <\/span><\/span>deepen<\/span><\/span> backward <\/span><\/span>integration<\/span><\/span>through stronger intentionality to promote domestic production of go<\/span><\/span>o<\/span><\/span>ds and services <\/span><\/span>as well as export development.<\/span><\/span> The current economic reforms are already on course to ensure strategic structural shifts towards reducing dependence on imports. <\/span><\/span><\/div>\n
\u2022 <\/span>There should be a special emphasis on food security, energy security, health security and internal security, leveraging largely domestic resources. <\/span><\/span><\/div>\n
\u2022 <\/span>The government<\/span><\/span> should urgently address current productivity shortcomings in the real sector to make domestic production competitive domestically and internationally. \u00a0 <\/span><\/span><\/div>\n
\u2022 <\/span>Current global develo<\/span><\/span>pments <\/span><\/span>reinforce<\/span><\/span> the need to protect domestic industries against unfair competition from imports.<\/span><\/span><\/div>\n

\n

DR MUDA YUSUF<\/span><\/span><\/p>\n

DIRECTOR\/CEO<\/span><\/span><\/p>\n

CENTRE FOR THE PROMOTION OF PRIVATE ENTERPRISE [CPPE]<\/span><\/span><\/p>\n

1<\/span><\/span>6<\/span><\/span>TH<\/span><\/span> FEBRUARY 2025<\/span><\/span><\/p>\n

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BY DR. MUDA YUSUF The inception of the Trump administration in the United States of America has remarkably changed the<\/p>\n","protected":false},"author":1,"featured_media":12510,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[11],"tags":[],"class_list":["post-12509","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-from-the-grassroots"],"_links":{"self":[{"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/posts\/12509","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/comments?post=12509"}],"version-history":[{"count":1,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/posts\/12509\/revisions"}],"predecessor-version":[{"id":12511,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/posts\/12509\/revisions\/12511"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/media\/12510"}],"wp:attachment":[{"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/media?parent=12509"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/categories?post=12509"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thenewsnow.org\/index.php\/wp-json\/wp\/v2\/tags?post=12509"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}