By Lukman Otunuga, Senior Market Analyst at FXTM
On Wednesday 9th April, US reciprocal tariffs go into effect on numerous countries including Nigeria.
Washington has slapped 14% tariffs on the country’s exports, but Nigeria’s government has decided to stand down on any retaliation. It remains to be seen whether this was a strategic move to prevent further tariffs from the United States. Nevertheless, these tariffs may impact growth given how Nigeria’s exports to the US have ranged between $5-6 billion annually.
One could argue that Nigeria is somewhat insulated given how over 90% of exports are comprised of crude oil and gas products. Nevertheless, growing concerns around Trump’s trade war tipping the global economy into a recession is a major risk for emerging markets.
Beyond trade developments, Nigeria remains exposed to volatile oil prices. Last week, Brent and WTI both recently logged their steepest weekly losses in over a year. Oil prices remain pressured by deepening trade tensions and OPEC+ announcing an unexpectedly large supply boost. Crude oil has shed over 13% this month, dragging year-to-date losses closer to 15%. Such a development may complicate the government’s ability to implement the 2025 budget based on oil prices at $75 a barrel.
The sharp selloff in oil could mean more pain for the Naira which is among the worst performing emerging market currencies. Naira has shed 4% year-to-date versus the dollar and may extend losses if lower oil translates to falling foreign exchange reserves.
On the data front, Nigeria will reveal its latest inflation figures in mid-April. Back in February, the annual inflation rate dropped to 23.2% to its lowest level since June 2023 while food inflation also cooled to 23.5% - its lowest rate since September 2022. While the decline in CPI has been attributed to a technical adjustment, further signs of cooling price pressures could spark discussions around potential CBN rate cuts in the second half of 2025.
