A strong U.S. dollar under President Donald Trump’s leadership poses a threat to the naira and foreign investments, analysts say.
As the dollar continues to strengthen, concerns are mounting over its potential impact on the Nigerian economy, particularly on the stability of the naira and the attractiveness of the country to foreign investors.
President Trump had, during his inaugural speech, said, among other things, that, “The inflation crisis was caused by massive overspending and escalating energy prices. And that is why today I will also declare a national energy emergency. We will drill, baby, drill.”
Abiola Rasaq, former economist and head investor relations for United Bank for Africa Plc, told BusinessDay that “this would mean oil price would be lower going forward.”
Trump said, “America will be a manufacturing nation once again, and we have something that no other manufacturing nation will ever have: the largest amount of oil and gas of any country on Earth. And we are going to use it. We will bring prices down, fill our strategic reserves up again, right to the top, and export American energy all over the world. We will be a rich nation again. And it is that liquid gold under our feet that will help to do it.
“With my actions today, we will end the Green New Deal and we will revoke the electric vehicle mandate, saving our auto industry and keeping my sacred pledge to our great American autoworkers. In other words, you’ll be able to buy the car of your choice. We will build automobiles in America again at a rate that nobody could have dreamt possible just a few years ago. And thank you to the auto workers of our nation for your inspiring vote of confidence. We did tremendously with their vote,” Trump noted.
The concern now, according to Rasaq, is how Trump’s moves will affect Nigeria’s fiscal revenue and the naira.
“What will Trump’s immigration policy mean for remittances from Nigerians in the United States and how would changes in global trade dynamics affect Nigeria, especially from an economic perspective?” he asked.
Read also: Here’re three threats to naira stability
Muda Yusuf, chief executive officer, Centre for the Promotion of Private Enterprise (CPPE), explained two major ways in which the Trump presidency can impact the Naira.
“The first is his policies are likely to strengthen the dollar because, from all indications, investment in the U.S. is likely to improve. Employment is also likely to improve.
“We’ve already seen indications of that in the stock market. So, investor confidence generally is on the rise. And once you know that this will impact the strength of the currency.
“And the stronger the dollar, the weaker will be our own currency. I think that is the first major impact that it will have. The second one is that because the economy is recovering, we are likely to see an increase in interest rates in the U.S because some of the policies of Trump, especially trade and tariff policies are likely to trigger a surge in inflation.
“If we have that surge in inflation, the natural response of monetary authorities in the U.S. will be to hike interest rates. And if they hike interest rates, then it will adversely affect the naira in terms of the reversal of portfolio flows. Portfolio flows may begin to reverse.
“And that will trigger pressure on the naira and weaken the currency. For now, I think those are the two. Then the third point is the impact of Trump’s presidency on energy costs.
“Trump has indicated that there will be a significant increase in energy output in the United States. And he also has influence on OPEC, Saudi Arabia, and all of that. So, he’s likely to push for a general reduction in energy prices through reduction in crude oil prices.
“And if that happens, our earnings from crude, from oil exports, may also decline. So, these are the major ways in which Trump’s presidency may affect the Naira.”
While the naira still maintains stability against the dollar, there are fears that Trump’s immigration policy and other policies might weigh negatively on inflows (especially petrodollar revenue), with dire impact on the stability of the naira.
Market watchers still see Nigeria’s economy improving on increased oil production, which will mute the Trump’s effect on the stability of the local currency.
Olatunde Omolegbe, managing director/ CEO, Arthur Stevens Management Limited, said: “Economic growth in the 2025 fiscal year is expected to remain robust, with both the oil and non-oil sectors contributing to expansion.”
He said that higher production from new oil fields, improved investments, and enhanced security measures are projected to drive growth in the oil sector. “Meanwhile, the non-oil sector is expected to benefit from stronger performance in the services sector.
“We anticipate that domestic crude oil output may rise due to government initiatives to improve security measures to prevent oil theft while also promoting accountability and openness in the oil industry. The Audit of Upstream Measurement Equipment and Facilities (AUMEF) and Advance Cargo Declaration Solution (ACDS) were rolled out and are expected to increase domestic oil output,” Omolegbe said.
Ayokunle Olubunmi, head of financial institution ratings at Agusto Consulting, said “It’s still early days, let’s give him some time.”
He said Trump’s plan to ramp up crude oil production and the peace in the Middle East will adversely impact crude oil price.
The movement toward de-dollarisation is gaining momentum, with some countries reaching mutual agreements to move away from the US dollar in trade transactions. These nations have opted to use their local currencies for cross-border exchanges, aiming to reduce dependence on the dollar. This shift reflects the desire of emerging economies to bolster their local currencies and enhance their standing in the global foreign exchange markets.
BRICS nations, which include Brazil, Russia, India, China, and South Africa, led this cause and gave it momentum.
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