Nigeria Faces Economic Risks Amid U.S. Trade Policies, Think Tank Warns

Agora Policy has raised concerns that Nigeria could face lower foreign exchange (FX) inflows and higher inflation due to recent economic policies enacted by the United States government.

On February 2, U.S. President Donald Trump signed sweeping economic orders imposing significant new tariffs on Canada, Mexico, and China. According to the administration, these measures aim to curb the inflow of drugs and undocumented immigrants. However, experts argue that the broader economic ripple effects could impact nations far beyond the direct targets Nigeria included.

In a report titled ‘How the Impending Trade Wars May Impact Nigeria’, Agora Policy cautioned that Nigeria, alongside other African nations, is not insulated from the consequences of U.S. economic policies.

The report noted that while the direct impact on Nigeria’s trade relations with the U.S. may be minimal, indirect repercussions could significantly affect the country’s economy. In 2022, the U.S. accounted for 6.95% ($4.4 billion) of Nigeria’s exports and 5.57% ($3.4 billion) of its imports. Given Nigeria’s diversified export partners—mainly in the oil sector—the country may not face direct trade restrictions. However, broader economic shifts could present serious challenges.

Agora Policy highlighted two key areas where Nigeria might feel the brunt of these tariffs: oil prices and inflation.

With Nigeria’s economy heavily dependent on crude oil and natural gas—comprising 90% of its exports—any downturn in global oil prices could significantly reduce FX inflows and government revenue. The report warned that a U.S.-China trade war could slow economic growth in both nations, reducing global demand for crude oil and exerting downward pressure on prices. This scenario would inevitably strain Nigeria’s foreign exchange reserves and budgetary allocations.
Trade restrictions tend to increase production costs, leading to higher consumer prices worldwide. Nigeria, already grappling with inflation, could face further price hikes due to imported inflation, as disruptions in global supply chains drive up costs. Agora Policy likened this potential situation to the inflationary pressures seen during the COVID-19 pandemic when supply chain disruptions led to global price spikes.

Despite these risks, the think tank suggested that the ongoing trade disputes could also create opportunities for Nigeria. As global trade patterns shift, countries are likely to seek alternative trading partners to mitigate risks associated with over-reliance on dominant economies.

“This presents opportunities for third-party countries like Nigeria to increase their participation in the global trade arena,” the report stated. However, it emphasized the need for Nigeria to establish itself as a reliable and capable trading partner beyond the oil sector.

Agora Policy urged the Nigerian government to take proactive steps to integrate more deeply into global supply chains, leveraging the country’s strategic location and large domestic market.

“The significant changes likely to come to the global trading environment present Nigeria with a complex mix of challenges and opportunities,” the report concluded. “However, if the country can position itself strategically, it could turn these global shifts into an advantage, fostering economic diversification and reducing its vulnerability to external shocks.”