The Trump effect: What a second coming could mean for Nigeria’s economy
Onome Amuge
Donald Trump’s return to the White House as the 47th President of the United States of America, riding on the promise of “Making America Great Again!”, is anticipated to usher in a second era of America First governance, characterised by a neo-mercantilist trade policy and strict immigration restrictions.
Under this new policy regime, Trump’s administration, as projected by his political and economic stance, is set to prioritise exports, disincentivise imports, regulate capital movement, and centralise currency decisions, all in the pursuit of strengthening the domestic economy and prioritising American interests.
Despite the Trump administration’s ‘America First’ policy potentially strengthening the nation’s economic might and global standing, analysts aver that overlooking Nigeria, a critical U.S. trading partner and Africa’s most populous black nation, could prove detrimental.
Given that the two-way trade volume between the U.S. and Nigeria exceeded $10.6 billion in 2022, according to data from the U.S. Department of State, experts believe that fostering Nigeria’s economic growth will prove mutually beneficial for both countries.
Amid the America First agenda that marks Trump’s return to power, experts remain keenly aware of Nigeria’s crucial role in Africa and, by extension, for the U.S. As such, they anticipate the administration’s commitment to promoting economic growth and stability in Nigeria, which is essential for America’s own economic and geopolitical interests.
According to Areoye Olusola Oyeniku, head of corporate strategy at Keystone Bank, there have been extensive discussions about Trump’s protectionist policies and their potential implications.
However, he pointed out that Nigeria’s relationship with the U.S has historically been primarily transactional, focused on trade relations. Oyeniku postulated that Trump’s aim in introducing protectionist policies is to implement a trade policy that will effectively balance the U.S’ trade relationships.
Oyeniku further observed that, as a result of Trump’s trade policies, investors seeking higher returns may be inclined to explore emerging markets like Nigeria. This, in turn, could potentially lead to increased capital inflows, which could positively influence Nigeria’s foreign reserves and boost the value of the Naira against the dollar, particularly as it relates to oil exports, a key component of Nigeria’s economy.
Given that Nigeria’s oil receipts might not be at their optimal level under a Trump administration, resulting in a wider budget deficit, Oyeniku underscored the importance of exploring strategic initiatives to boost oil production and increase Nigeria’s oil revenue.
While acknowledging the potential impact of Trump’s trade policies on Nigeria’s economy, the economy analyst dwelled on the importance of a holistic view that considers the impact on the country’s exports.
According to him, considering that the U.S accounted for $4.86 billion of Nigeria’s exports in Q1 2024, representing 6.8 percent of the total, the majority of which was mineral oil and fuel, at $4.53 billion, it is clear that any disruption in exports to the US will significantly affect Nigeria’s export receipts.
“So, we need to look more into the non oil revenue side of influence. And as such, that would really impact whatever we are doing and policies that the government put in place. But I believe that the monetary to fiscal authorities are also aware of all this, and I believe they are putting in place certain measures and some policies to influence whatever we have now, and also to expand our hold in our non oil receipt so that we can benefit from whatever it is that will come out of this,” he stated.
Assessing the potential implications of Trump’s second term for the market, Oyeniku observed that, based on the previous experience, a continuation of the loose monetary policy under Trump is expected. This, he noted, would be favourable for economic growth due to lower interest rates, while mortgage loan holders would also see a positive impact from this environment.
Oyeniku recalled his previous observation about the policy rate under Trump, which dropped from 2.5 percent in 2018 to near zero in Q1 2021. This, according to Oyeniku, demonstrated Trump’s unwavering support for economic growth and domestic production, with a concomitant emphasis on exports.
He expressed his belief that, in light of this past policy stance, the market is anticipating a continuation of the same accommodating monetary policy under Trump’s second term, which could support economic growth and bolster domestic production and exports.
Oyeniku predicted that with Trump’s re-election, investors will likely shift their attention to optimizing their investment gains, leading to an inverse relationship between the markets. While investors seek shelter in safe havens, robust earnings growth in the near to mid-term, coupled with economic resilience, could fuel equity market appreciation, he added.
Oyeniku further posited that the anticipated fund flows from the U.S. into markets with stable policies and attractive assets could spill over into emerging economies like Nigeria, offering a potential boost to the stock market. He argued that investors would naturally seek out markets with a stable policy environment and promising returns, and that this search could favor Nigeria’s stock market if the country continues to make strides in policy reform and economic stability.
In order to maximize the potential capital inflows from investors in the U.S. and other developed markets, Oyeniku emphasized the need for Nigeria to focus on improving its business environment and policies.
He underscored the importance of maintaining a stable exchange rate environment, which would provide investors with the confidence and comfort they need to make informed investment decisions. With a stable policy framework and an accommodating business environment, Oyeniku believes that Nigeria could become an increasingly attractive destination for foreign capital, strengthening the country’s economic growth and financial markets.
Oyeniku also underlined the relevance of effective inflation management policies that produce tangible results in lowering inflation rates. As he noted, high inflation can erode the value of investments, which in turn can deter potential investors and limit economic growth.
“I believe we also need to map out investment friendly policies that will boost confidence and also interest in our capital markets,” he added.
Taking into consideration the annual diaspora remittance from the U.S., which has averaged around $20 billion over the past five years, Oyeniku asserted that calibrating Nigeria’s foreign policy objectives and its relationship with the U.S. under Trump’s presidency would be crucial for optimising the value of these remittances and other economic benefits.
He also emphasised the importance of actively engaging with the U.S. to ensure that Nigeria’s interests are represented and understood, rather than passively accepting the consequences of American policies.
Victor Okhai, a public affairs analyst and president of the Directors Guild of Nigeria, expressed a sense of optimism that a second Trump presidency might create a more favourable context for Nigeria.
Okhai, while acknowledging the perceived adverse effects of a second Trump presidency, proposed that the U.S. administration’s agenda might paradoxically prove advantageous for Africa, particularly Nigeria.
Okhai, in a television interview, contended that with the U.S.’s focus pivoted internally, Africa and Nigeria could seize the opportunity to shift their attention towards self-sufficiency and pursue their own domestic interests without the constraints of external influence, potentially fostering greater innovation and independence.
“For too long we have been reliant on foreign aid,” he said. “I think in Trump’s presidency, Africa will be more favourable, especially in Nigeria . A Trump presidency will give us an opportunity for growth because then we can look at where our priorities are,” he said.
As observed by Folawiyo Olajoku, an expert on governance, policy, and strategy, the history of US-Nigeria relations has been marked by periods of fluctuation, influenced largely by the ruling party in the United States.
Olajoku pointed out that during Republican administrations, US-Nigeria relations have typically been characterised by more strategic and targeted engagement, with a focus on promoting trade and investment opportunities. On the other hand, Democratic administrations have traditionally placed more emphasis on issues such as democracy, human rights, and foreign aid for development.
Olajoku noted that during Trump’s first presidency, Nigeria enjoyed increased support from the U.S. in the areas of military cooperation and counterterrorism efforts. Olajoku expects that these areas of bilateral engagement might continue to receive attention under Trump’s new administration.
A cautiously optimistic Olajoku stated, “On the economic front, Trump’s transactional approach to foreign policy may lead to increased trade and investment between the US and Nigeria, particularly in sectors like oil and gas. Nevertheless, his administration’s stance on climate change and global health may have far-reaching consequences for Nigeria’s development.