US tariffs may spur local production, AfCFTA push – Analysts

Market watchers have said that the Federal Government may need to drive the pace of local production and participation in the African Continental Free Trade Agreement following the imposition of a 14 per cent tariff on exports from Nigeria to the United States of America.

Last Wednesday, US President Donald Trump announced the tariff as part of broader trade measures affecting 185 countries. Nigeria, whose key exports to the U.S. include crude oil, gas, agricultural products, and manufactured goods, faces a direct threat to its trade earnings, which has already been confirmed by the Minister of Trade, Dr Jumoke Oduwole.

The newly introduced 14 per cent tariff marks a significant shift in U.S.-Nigeria trade relations, with the U.S. government citing an ongoing trade imbalance. According to the Trump administration, Nigeria imposes a 27 per cent tariff on U.S. exports, a disparity the U.S. claims has long been detrimental to American businesses and consumers.

Reacting to the tariffs, analysts at Meristem Securities in the weekly market report noted that the move would “shrink export revenues, raise costs for Nigerian exporters, and deter U.S.-bound trade, especially for non-oil goods trying to gain global market share.

It stated, “This may strain export revenues and FX inflows in the short term”; however, it anticipates that the government would “drive to localise production, scale non-oil exports, and reduce overdependence on traditional markets like the US. This could deepen engagement with the African Continental Free Trade Area and push policymakers to fast-track structural reforms that enhance trade resilience and industrial competitiveness.”

Expressing concern about the newly imposed tariffs, experts at Cowrywise Asset Management Limited said, “As global trade dynamics shift under this new wave of U.S. protectionism, the resilience of Nigeria’s economy will be put to the test. We think that President Trump’s 14 per cent reciprocal tariff has cast a shadow over the stability of this trade partnership. While the move is framed as a strategy to safeguard American industry, it risks triggering broader friction, especially if Nigeria responds by exploring alternative trade alliances with China, the European Union, or BRICS countries.

Beyond trade, U.S. investment in Nigeria spans vital sectors including oil, technology, and finance. American giants such as Chevron, ExxonMobil, and Microsoft maintain a strong presence in the Nigerian market. But growing trade tensions could dampen investor confidence and strain diplomatic ties unless carefully managed.

 “From a macroeconomic perspective, the imposition of the tariff threatens to exacerbate Nigeria’s existing vulnerabilities. Reduced export earnings, particularly from non-oil sectors, could diminish foreign exchange inflows, heightening pressure on the naira. This could deepen Nigeria’s foreign exchange liquidity crisis, potentially forcing the Central Bank to deplete its already stretched reserves or tighten currency controls. Inflation is also likely to accelerate, as Nigeria may be compelled to source critical imports like wheat, pharmaceuticals, and industrial machinery from more expensive markets. This would elevate input costs, worsen food inflation, and erode purchasing power.”

On the geopolitical front, the analysts said that the tariff may prompt Nigeria to recalibrate its foreign policy, which may include strengthening ties with alternative partners such as China, the European Union, and the BRICS bloc.

“It may also look inward, seeking stronger regional cooperation within ECOWAS and the African Union to establish new trade corridors and collective negotiation frameworks,” the analysts said in their report.

At the heart of the concerns over the tariffs lies the African Growth and Opportunity Act, which since 2000 has granted duty-free access to the US market for eligible Sub-Saharan African countries, including Nigeria. The newly imposed tariffs place the future of this trade framework in jeopardy. Nigeria, a major AGOA beneficiary, has used preferential access to expand its exports in apparel, agricultural produce, and select manufactured goods. Now, that progress stands threatened.

The Minister of Industry, Trade, and Investment, Dr Jumoke Oduwole, in a statement on Sunday, admitted that the policy would undermine the competitiveness of Nigerian goods, especially in sectors reliant on market access and price competitiveness.

She also noted that smaller businesses, particularly SMEs, that rely on the African Growth and Opportunity Act exemptions would feel the brunt of the new tariff, with rising costs and uncertain buyer commitments likely to make market access even more difficult.

Meanwhile, Renaissance Capital Africa, in a report titled ‘The African Continent is (relatively) Immune to Trump’s Tariffs’, suggests that African countries, including Nigeria, may be less impacted by the US tariffs due to their diversified trade networks.

According to the report, Nigeria, Algeria, and Angola could feel some effects of the tariffs due to their oil exports.

The report read, “The US does not trade much with Africa. It imported $39bn of goods in 2024, which is roughly what it imports from Mexico or Canada in just over a month. The US imports more in 24 hours from either of them (over $1bn a day) than it imports in a year from about 40 African countries.

“The biggest exceptions are South Africa and, to some extent, Nigeria, which account for over half of everything the US imports from the continent.”

It further disclosed that Nigeria alone represents 14 per cent of African exports to the US. Despite this, the US remains a minor trading partner for Nigeria, with only nine per cent of the country’s total exports heading to the US market.