Trump’s tariff policy may reduce investment inflows to Nigeria, other countries in Africa, says SAMTL
Analysts at SAMTL research have said that President Donald Trump’s tariff policy may lead to reduced investment inflows to Nigeria and among other African economies.
The firm added that the tariff may also lead to higher import costs, and volatility in commodity prices, among African economies
SAMTL in a report titled, “the return of President Trump: implication for global economy and Nigeria,” stated that although Trump’s tariff policy may create opportunities for African countries to capture market share if the region can increase competitiveness, it may also have the disruption in trade relations, and currency depreciation for Nigeria, other African countries.
According to the report, most African countries are likely to hold interest rates this month to assess the potential impact of Trump’s tariff policy on their economies.
On February 1, 2025, executive orders signed by President Trump introduced a 25per cent tariff on goods from Mexico and Canada and a 10per cent tariff on imports from China.
The decision to raise tariffs stemmed from concerns over the growing U.S. goods trade deficit, which reached $1.2 trillion in 2024.
Based on the aforementioned and the need to monitor how Trump’s policy will play out, SAMTL projected that the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is to hold its Monetary Policy Rate at 27.50 per cent come March 2025.
The MPC meeting that was scheduled for Feb 2025 was postponed till March 2025 following delays in the release of the rebased Consumer Price Index (CPI) report by the National Bureau of Statistics (NBS).
NBS had reported that the year-on-year (YoY) general price level increased largely due to
festive season demand, which exerted upward pressure on core inflation, leading to a 0.53per cent rise from 28.75per cent in the previous month.
The report by SAMTL noted that the YoY average inflation in 2024 was approximately 33.18per cent which is 8.66per cent higher than the average of 2023.
“Despite the increase in inflation YoY, the growth rate eased by 0.52per cent due to a decline in food prices, which fell to 39.84per cent from 39.93per cent in the previous month,” the report stated.
SAMTL attributed the drop in food prices to :relative stability of the exchange rate, PMS price reduction, and efforts of the government to boost food supply.
“”These factors moderated the increase in festive/holiday spending and resulted in a decline in month- on-month (MoM) inflation,” the report added.
Despite increase in PMS prices and Increase liquidity in the system, In the month of January, the report stated that inflation is expected to drop in Nigeria due to: relative stability in the exchange rate since the last MPC meeting, Conscious effort of government to increase food output and the dynamics of the inflation rebasing will play significant role in inflation reduction.
On Naira, the report said that although speculative activities could affect the exchange rate, CBN’s efforts to curb speculation and increase transparency may help support stability in the coming month.
“Measures such as the introduction of an online FX trading platform, the Nigeria Foreign Exchange Code, and the extension of the FX access deadline for Bureau de Change (BDC) operators to May 2025 aim to enhance price discovery and improve market confidence.
“Additionally, reduced post-holiday import demand in January and lower forex demand ahead of the fasting period could further support exchange rate stability,” the report explained. It further hinted that intervention in the FX market resulted in the external reserve which hits $40.92 billion in early January to decline to $39.72 billion dollar as of the end of January.
“Another factor that depletes reserves is the need to meet debt obligations, such as servicing international debt. As at the end of January, reserves has declined by 2.8per cent from $40.88 as of the end of December 2024,” the report stated on foreign reserves.
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