As the global economy positions to withstand the emerging threat emanating from tariff war initiated by the United States government under President Donald Trump, the implications of the decision from the White House in Washington DC have become issues of serious concern to many economies and Nigeria is not an exception.
While experts have offered various options as to how the country can navigate the challenges posed by the ongoing trade tariff war, moves by the Federal Government to secure fresh debt remain a thorny issue amidst lack of trust.
The threat becomes more evident when the nation’s main source of foreign exchange earnings, crude oil benchmark on $75 per barrel in the 2025 budget, has fallen behind $70 in recent times. This has raised questions on how the country can handle the critical issues of balance of payments.
However, the onus definitely seems to lay in the hands of policy makers to now think out of the box to steer the economy to a safe shore and make history for themselves.
JP Morgan warns against decline of crude price
Last week, JP Morgan Chase, a global financial services firm, raised the alarm that the continuous decline in oil prices poses a serious challenge to the country’s economy, stressing that if the commodity’s price falls below a break-even of $60 per barrel, it will push the country’s current account balance into deficit, if sustained for a few months.
The investment banking firm, in a report titled, “Frontier local market strategy: Reducing risk further,” warned that the above scenario could force the exchange rate to decline to N1, 700 to USD, pointing to the implications on trade.
“Everything that happens globally tends to affect us disproportion-ately because our economy is import dependent”
Bearing in mind, the latest announcement by the Central Bank of Nigeria which showed a record improvement as the Balance of Payments surplus of $6.83 billion was achieved in 2024, it makes a turnaround from deficits of $3.34 billion in 2023 and $3.32 billion.
Expressing concerns over the prospective impact of the Trump administration on the Nigeria’s trade, the JP Morgan report stated that, “Although the Nigeria carry trade had been one of our highest conviction trades in frontier local markets over the past year, we close our newest iteration of the trade at a loss as the global backdrop has changed since US administration imposed global trade tariffs last week and expectations of global recession increased.”
While commending the CBN for its proactive response to the foreign exchange market in the last week, the investment bankers expressed concerns over the apex bank’s ability to further intervene in the face of falling oil prices as it remains the country’s main source of dollars.
“Given the FX markets significant dependence on CBN flows, the Central Bank has had to increase its dollar sales interventions in order to avoid convertibility risks and limit a disorderly move higher,” it noted.
In simple terms, JP Morgan Chase is warning of potential economic recession and the need for the managers of the economy to take proactive measures to salvage the nation.
World Bank offers $1.08bn facilitate
Meanwhile, recent development shows that despite the numerous policy initiatives aimed at growing the country’s revenues, the government is still finding it difficult to fund human capital and infrastructure development.
To overcome this, getting loans from financial institutions such as the World Bank has become a necessity.
Only last week, the Washington DC financial institution announced the approval of a facility totaling $1.08 billion in concessional financing for three operations in Nigeria. According to the World Bank the facility aims to enhance education quality, build household and community resilience, and improve nutrition for underserved groups.
A breakdown of the facilities shows that $500 million is an additional financing for, Community Action for Resilience and Economic Stimulus (NG-CARES) Program, $80 million for Accelerating Nutrition Results in Nigeria (ANRIN 2.0), and $500 million for Hope for Quality Basic Education for All (HOPE-EDU).
“The NG-CARES Program will support the Nigerian government in expanding access to livelihood support, food security services, and grants for poor and vulnerable households and communities. The financing for ANRIN aims to increase the utilization of quality and cost-effective nutrition services for pregnant women and lactating mothers, adolescent girls, and children under five in select areas. The new financing for HOPE-EDU will focus on improving foundational learning, access to basic education, and strengthening education systems in the participating states,” the bank stated.
Commenting, World Bank’s Country Director for Nigeria, Dr. Ndiama Diop said, “Investing in human capital is critical for Nigeria as it offers the best opportunity to unlock the enormous potential of Nigeria. These new set of programs will help Nigeria to accelerate education quality and support to vulnerable citizens. The HOPE -EDU program will enable better education outcomes by implementing bold reforms and making the right investment to equip the fast-growing young population with foundational skills and knowledge necessary for rapid and inclusive economic growth.
“Fitch expects the impact of US tariffs on Nigeria’s trade position with the US to be limited, amid the exclusion of oil-related exports, which accounted for about 92 per cent of total exports”
“Nutrition intervention from ANRIN will enhance household access to micronutrient rich foods and nutrition services at primary healthcare level, improve dietary diversity, and provide essential nutritional support to vulnerable populations, mitigating the immediate risk of malnutrition and food insecurity. The NG-CARES additional financing will support the Nigerian government in transitioning from responding to and recovering from the COVID-19 crisis to building household and community resilience.
On his part, an economist and financial analyst, Chief Economist and Partner, at SPM Professional, Dr. Paul Alaje, says the money if well deployed will do a lot in uplifting the economy.
“This money can make a huge impact if deployed into infrastructure development, for instance, the Lagos State Purple Line Rail or the NRC’s Ibadan to Abuja or Kano to Katsina or light – rail from Jos to Abuja.
“The money will be deployed for the establishment of farm hubs with selected local governments across the country focusing on their areas of competitiveness.
“It will have more impact if deployed towards enhancing primary education and equipping hospitals,” he said.
He emphasized that, “these are the much needed gaps to be fixed in Nigeria among others.”
‘Trade war poised to have far-reaching consequences for Nigeria’
The ongoing trade war between the United States and China is poised to have far-reaching consequences for Nigeria, a distinguished economist and global trade analyst, Prof. Ken Ife, has warned.
Prof. Ife shed light on how the rising tariffs between the two economic giants could disproportionately affect African nations, particularly Nigeria.
“China has responded to America by raising their tariff to 85%, and Donald Trump has further inflicted an additional 50%, now raising U.S. tariffs to 125%. And that is going to continue to go on because China says ‘Bring it on,’” Prof. Ife stated.
He emphasised the relentless nature of the trade war, predicting further tensions as both sides maintain their retaliatory measures.
Prof. Ife also pointed out the severe disruption to global trade, citing preliminary estimates from the World Trade Organization.
“The WTO has mentioned that both the trade between China and America could melt down by as much as 90%,” he explained.
He warned that the resulting shockwaves would be felt worldwide, adding, “African economies, particularly Nigeria, which are import dependent, will be disproportionately affected.”
Urging a shift in trade priorities, Prof. Ife advocated for intra-African trade as a sustainable solution. “I believe that 80 to 90% of whatever any African country wants to import abroad can be sourced in Africa. When you source in Africa, you can utilize the AfrExim Bank Pan Africa Payment Settlement System so that no dollar comes into this,” he suggested.
Prof. Ife also pointed to the need for African countries to reduce excessive borrowing to finance imports, noting, “This excessive borrowing to pay for imports and all of that is just not sustainable.”
As the US-China trade war continues, Prof. Ife stressed the urgency for Nigeria to take proactive measures. “Everything that happens globally tends to affect us disproportionately because our economy is import dependent,” he remarked, calling for strategic efforts to strengthen intra-African trade and boost regional economic growth.
Africa must focus on investment – Adesina
In his opinion, the President of African Development Bank, Dr Akinwumi Adesina, thinks Africa leaders have to change their approach towards issues of economic development to survive the future.
Adesina said this in his speech as the special guest Lecturer at 14th Convocation lecture of National Open University of Nigeria in Abuja on Friday, warning that the era of aid and free money is gone; hence African leaders must focus on achieving fast-paced growth and development.
He said, “African countries must now learn to develop via investment discipline; countries can no longer rely on aid for growth or count it as part of government revenue, as has been the case for decades. Benevolence is not an asset class.
“More aggressive measures are needed for countries to expand domestic resource mobilisation. This needs to go beyond simply increasing taxes. Countries must have stricter and more transparent management and accountability over the vast natural resources on the continent. This must include fair pricing of assets, the payment of the right values for royalties and taxes by international cooperations, as well as reducing leakages via inefficiencies, corruption and illicit capital flows.”
Addressing the implication of the higher US tariffs imposed on African countries, he said 47 out of 54 African countries were placed on higher tariffs and that there will be significant reduction in exports and foreign exchange availability.
“This will send other shock waves through African economies. Local currencies will weaken on the back of reduced foreign exchange earnings. Inflation will increase as costs of imported goods rise and currencies devalued against the US dollar. The cost of servicing debt as a share of government revenue will rise as expected revenue declines.
“These global tariffs will also have significant indirect effects on Africa as its exports to developed countries such as China and others in Europe and Asia will buy goods from Africa, which will affect Africa’s export revenues,” he said.
Adesina advised Africa leaders not to get into tariff war with the US, insisting that, “What is needed is more trade with Africa from the US.
“The current dynamics call for a recalibration of the trade and investment opportunities between the US and Africa,” he noted.
Nigeria can make global impact – Prof Ekekwe
On his part, Chairman, Tekedia Capital, US based Prof Ndubuisi Ekekwe, sees the current global situation as an avenue to leapfrog the Nigerian economy into global limelight.
Writing on his official X, formerly Twitter handle, Prof. Ekekwe emphasized the importance of the country’s large population and how it can be harnessed.
“The world needs markets and a large population is strategic,” he stated.
Citing examples of countries that have taken advantage of their population to advance their economy, he wrote, “Many centuries ago, India was the world’s most dominant economy. Then, China came on and ruled the earth economically.
“In the last 10 centuries, China has run the show at least six times. The Tang dynasty. The Song dynasty. All transformed currency and the core principle of mercantilism. That we do not know the dominance of China and India centuries ago is largely because in Africa, Britain and France wrote the books we used in secondary schools!
“China made mistakes and lost its global positioning. But later, it reconnected and the rest is history. I have written extensively on China and the lessons for Africa in Harvard Business Review: “In its attempts to industrialize, Africa has looked toward China’s success. China designed and executed a policy that shrank the industrialization process in a mere 25 years — something many economies took at least a century to do. That redesign has brought immense dislocation in global commerce and industry, enabling China to become one of the world’s leading economies.
“African leaders have been pursuing policies designed to mimic China’s path. But despite these efforts, Africa has yet to advance in its industrialization at the same speed China did. Put simply, the things that worked for China will not work for Africa. Africa must change its focus: …”
He noted that as America re-strategizes for its future, and both Europe and China adjust, one country could make a definitive decision to become a haven of opportunity.
“Yes, Nigeria has the population and through “Contract With The World” could offer a destination for markets. That means we must find immediate solutions to the paralysis of insecurity, and deal once and for all with the turbulence of currency depreciation. Get a czar to run that “Contract with the World”, a theme for all nations with Nigeria as the nucleus,” he wrote.
“Get me: If the world loses the US market, companies will seek for new destinations. Nigeria has most of the things they need, except the purchasing power and some core stable indicators. If our leaders commit right now to reposition the nation via fundamental reforms on platforms of commerce, low flat fee for local manufacturing, a new dawn will emerge. This is our time!”
However, a political/economist, Prof Joseph Ohwogbona thinks Prof Ekekwe grossly overinflated the wits and patriotism of Nigerian politicians who are in-charge of governance.
“Our politicians aren’t motivated by nobility; they only seek that which can immediately gratify their own pockets. Whatever the cost, they’re willing to pay. It’s so bad that their dignity is the starting price.”
He added that for the country to attend the lofty height of achieving economic development, “Leadership and rule of law is key, with the quality of leaders in Nigeria, the best we will have is a lot of individual efforts which might not be harnessed properly because of poor leadership.”
How Nigeria will cushion Trump’s tariffs, by Minister
Last week, Nigeria’s Trade, Industry and Investment Minister Jumoke Oduwole, highlighted how the Federal Government plans to cushion the effects of the trade policies being introduced by United States President Donald Trump.
Oduwole, who assured that Nigeria, has the wherewithal to respond to the new tariffs listed while advancing a fresh export drive targeting the African Continental Free Trade Area and women-led MSME of some of the strategies.
Oduwole acknowledged that while the United States remains a vital trading partner particularly through the African Growth and Opportunity Act (AGOA) some Nigerian industries, including fertilizers, could face significant disruption due to shifting global trade dynamics.
“We have to also think about our second-largest fertilizers URA lead. Those are businesses that have been growing in market share. This gives them uncertainty, this gives them disruption to their operations, so we are working with those types of businesses,” she said.
Impact of 14% US tariff imposed on Nigeria will be limited, says Fitch
Meanwhile, Fitch Ratings has upgraded Nigeria’s Long-Term Foreign-Currency Issuer Default Rating to ‘B’, from ‘B-’, with a stable outlook.
According to the rating commentary issued late Friday, “The upgrade reflects increased confidence in the government’s broad commitment to policy reforms implemented since its move to orthodox economic policies in June 2023, including exchange rate liberalisation, monetary policy tightening and steps to end deficit monetisation and remove fuel subsidies.
“The Stable Outlook reflects Fitch’s expectation that the macroeconomic policy stance will sustain improvements in the functioning of the FX market and support the move to lower inflation, although it will likely remain far higher than rating peers. Additionally, we anticipate a continued reduction in external vulnerabilities through further easing of domestic FC supply constraints, while renewed energy sector reforms should help sustain current account surpluses.”
While commending the increased transparency in the FX market, Fitch projected a modest depreciation of the naira in the short term.
The statement further read, “Greater formalisation of FX activity, including the Central Bank of Nigeria’s recent introduction of an electronic FX matching platform and a new FX code to enhance transparency and efficiency, along with monetary policy tightening, has led to a greater rise in FX liquidity and general stability in the FX market after a 40 per cent depreciation in 2024, closing the spread between the official and parallel exchange rates.
“Net official FX inflows through the CBN and autonomous sources rose by about 89 per cent in 4Q24, compared to an eight per cent rise in 4Q23. We expect continued formalisation of FX activity to support the exchange rate, although we anticipate modest depreciation in the short term.”
On the impact of the 14 per cent US tariff imposed on Nigeria, Fitch said the effect would be limited.
“Fitch expects the impact of US tariffs on Nigeria’s trade position with the US to be limited, amid the exclusion of oil-related exports, which accounted for about 92 per cent of total exports (nearly two per cent of GDP) to the US in 2023. Lower oil prices pose a bigger risk, as they would weaken external buffers and fiscal metrics and test the new policy framework. Nevertheless, greater policy flexibility enhances Nigeria’s ability to deal with shocks.”
