Donald Trump’s US presidency may fuel inflation and global oil price drops, affecting Nigeria’s economy and oil revenue.
Donald Trump’s return to the White House as the 47th President of the United States is projected to heighten economic pressure on Nigeria, with potential impacts on inflation and oil revenue.
An investor note from FXTM, authored by Senior Market Analyst Lukman Otunuga, outlined how Trump’s policies could ripple through Nigeria’s economy, especially in the oil sector, amid broader global financial shifts.
Also read: Nigeria’s oil imports fall by 35% amid policy shifts and economic adjustments
The FXTM report, titled “US Elections: Trump wins! What does this mean for Nigeria?” warns that Trump’s victory could suppress oil prices if his administration prioritises increasing US oil and gas production, resulting in a higher long-term supply.
With oil being a critical export for Nigeria, any significant drop in global prices could strain the nation’s revenue.
“A stronger dollar may drag oil prices lower as a result,” Otunuga said, adding that this “could be bad news for major oil-producing countries like Nigeria.”
The report also highlights that rising inflation and possible Federal Reserve rate hikes could trigger a stronger US dollar. Nigeria, as a dollar-dependent economy, might face increased pressure as oil prices fall.
Given Nigeria’s reliance on oil exports for revenue, any sustained price drop could challenge its fiscal stability, particularly during an already challenging economic period.
This economic landscape unfolded as the dollar surged following Trump’s victory, with the US dollar climbing 1.5% against the Japanese yen and more than 1% against the euro.
Bitcoin also reached a record high, hitting $75,330.88 as investor confidence soared in response to Trump’s win and expectations for tax cuts, tariffs, and other market-friendly policies.
FXTM noted that US equities are expected to rally, with futures on the S&P500 index rising by 1.4%.
Otunuga noted that “Trump’s proposed tariff increases in Europe and China could spark a global trade war.”
Such actions may raise consumer prices in the US, possibly fuelling inflation, which could, in turn, lead to higher interest rates and a strengthening US dollar.
The appreciation of the dollar is anticipated to pressure both gold prices and emerging market currencies, including Nigeria’s naira, which could weaken further against a stronger dollar.
The report suggests that Trump’s presidency will likely bring heightened volatility to global markets, reminiscent of the sharp movements in the VIX index during his previous term from 2017 to 2021.
Market volatility spiked over 60% during Trump’s initial term, while it decreased by approximately 10% under President Joe Biden.
Investors can expect renewed market fluctuations with Trump’s return to office.
On the geopolitical front, Trump has vowed to ‘stop wars’ and swiftly end the ongoing conflict in Ukraine.
Analysts note that any substantial changes in US foreign policy could potentially increase global tensions, prompting risk-aversion in financial markets.
The FXTM report underscores that Nigeria must prepare for these shifts as it navigates the complex landscape under Trump’s administration, facing the dual challenge of managing inflationary pressures and reduced oil revenue amid global economic uncertainties.
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