Nigeria’s exports to the United States account for approximately 2% of the country’s Gross Domestic Product (GDP).
This is according to a recent report by Renaissance Capital Africa titled “The African Continent is (relatively) Immune to Trump’s Tariffs”.
In the report, Renaissance Capital Africa suggests that African countries, including Nigeria, might be relatively insulated from the effects of these tariffs, given their diversified trade networks.
The report indicates that Nigeria, Algeria, and Angola could be somewhat affected due to their oil exports. However, unlike manufactured goods that may struggle to find new markets, crude oil remains in global demand and can be redirected if the US market becomes less viable.
The commodity experts noted that the US runs the largest trade deficits with Africa’s biggest commodity exporters.
Over half of South Africa’s exports to the US consist of precious metals, diamonds, jewelry, and platinum. On the other hand, Nigeria, Algeria, and Angola primarily export oil to the US.
Renaissance Capital Africa estimates that a 10% tariff on Nigerian exports to the US would have a limited economic impact.
If such tariffs led to a 5% drop in exports, the effect on Nigeria’s GDP would be approximately 0.1%. This impact is relatively minor compared to other African countries.
For instance, Lesotho, whose exports to the US account for 10% of its GDP, would see a 0.5% GDP reduction under similar conditions. South Africa, with a 4% GDP exposure to US exports, would face a 0.2% GDP drop.
Moreover, the report notes that US retailers and affected exporters might mitigate the impact by cutting their margins by 2-3%.
A potential currency depreciation of around 5% against the US dollar could further offset the negative effects.
One critical factor that mitigates the impact on Nigeria is the flexibility of oil exports.
Unlike niche manufactured goods that may have fewer alternative markets, crude oil is widely traded and can be sold to other countries if the US reduces its purchases.
This global demand for oil helps cushion the potential economic blow from US tariffs.
Also, oil-exporting countries like Nigeria typically have multiple trade partners, allowing them to quickly redirect shipments when faced with trade restrictions. As global energy demand remains robust, the report suggests that Nigeria’s economic stability would not be significantly threatened.
The report also touches on the potential indirect effects of US tariffs on global trade. Should the US impose higher tariffs on China or the European Union, the resulting slowdown in global trade could reduce energy demand, pushing oil prices down.
The report also touches on the potential indirect effects of US tariffs on global trade. Should the US impose higher tariffs on China or the European Union, the resulting slowdown in global trade could reduce energy demand, pushing oil prices down.
However, the report highlights that global trade often adapts to such changes, as seen in previous instances where China replaced US soybeans with imports from Brazil despite longer shipping routes.
The Trump administration’s strategy to impose tariffs on commodity-rich countries could have unintended consequences, but the Renaissance Capital report maintains that Nigeria’s diversified oil export network and the global demand for crude oil minimize the risk of significant economic disruption.