How the US election could shake Nigeria’s stock and bond markets

As Americans head to the polls, the world holds its breath—and nowhere is this tension felt more acutely than in emerging markets like Nigeria.

The showdown between Donald Trump and Kamala Harris could leave a lasting mark on Nigeria’s financial landscape, potentially triggering a wave of reactions in stock markets and bond prices.

Market jitters and Nigerian stocks

As the US election approaches, investors are increasingly nervous, causing stock markets around the world to shift unpredictably. In Nigeria, the stock market—already sensitive to foreign investment—feels this tension.

If Trump wins, some believe his growth-focused policies might boost global stocks in the short term, possibly benefiting Nigerian stocks as well. However, a Harris win could bring a more cautious approach to US spending, which may reduce investor interest in riskier markets like Nigeria.

“Nigerian policymakers are likely bracing for aftershocks, especially if the election disrupts investor confidence in emerging markets.”

Oyekan Idris, a capital market analyst, explains that a hawkish economic stance from Harris could further drive yields up in the US, making American assets more attractive.

“If US yields rise, we could see investors preferring the relatively safer, higher-return US assets over Nigerian investments,” Idris said. This shift in capital flows could draw funds away from Nigerian markets, adding pressure on local stocks.

Recalling the market reaction to Trump’s election in 2016, investors saw a temporary drop followed by a quick recovery.

A similar scenario could play out again: if the US election ends with a clear result, markets may stabilise, potentially helping Nigerian stocks in the short term.

Michael Brown, Senior Research Strategist at Pepperstone London, echoes this view, noting that “markets crave certainty,” and a clear outcome could ease anxieties, allowing investors to refocus on growth.

Read also: Five days to the US election, Harris, Trump in neck-to-neck polls

Safe bets and Nigerian bonds

With all the unpredictability, investors tend to rush toward “safe” assets like US Treasury bonds. Yet, under either a Trump or Harris presidency, US Treasury yields could rise due to inflation fears or high government spending.

This increase in US bond yields could make Nigerian government bonds less appealing, leading to higher borrowing costs if investors pull back from emerging markets.

As Idris emphasises, Nigeria’s reliance on foreign capital means that any rise in US yields could divert investments, putting added strain on Nigeria’s bond market. If Trump’s policies boost inflation, as some economists predict, US bond rates could spike.

Alternatively, a Harris victory might nudge yields higher through spending increases, albeit at a slower pace, adding further pressure on Nigerian bonds.

A sharp rise in US bond yields would force Nigeria’s bond market to adjust, potentially pushing up yields and costs for the government. Such a development could lead to higher financing costs for infrastructure and public programs, intensifying the country’s economic challenges.

What’s next for Nigeria’s economy?

The US election’s impact on Nigeria underscores the interconnectedness of global economies. Nigerian policymakers are likely bracing for aftershocks, especially if the election disrupts investor confidence in emerging markets.

With strategic planning and efforts to diversify revenue sources, Nigeria could strengthen its resilience against such external shocks.

Brown believes that a clear election result—regardless of who wins—would be the best-case scenario for markets.

If investors see stability, even temporarily, they might gain enough confidence to take on more risks, which could help drive Nigeria’s stock market back up.

However, as election day approaches, uncertainty lingers, and the world watches, waiting for the outcome that could shape market dynamics well beyond US borders.

Oluwatobi Ojabello, senior economic analyst at BusinessDay, holds a BSc and an MSc in Economics as well as a PhD (in view) in Economics (Covenant, Ota).