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In this issue:
Global economic policy changes and implications for Nigeria
This report explores how rising global uncertainty, driven by new US tariffs, tighter immigration policies, ongoing US-China trade tensions, and a general decline in foreign aid, is likely to impact Nigeria’s economy in 2025.
Rising global uncertainty, driven by new US tariffs, tighter immigration policies, ongoing US–China trade tensions, and a general decline in foreign aid, is likely to affect Nigeria’s economy in 2025.
This report analyses the implications of these global shocks, offering strategic recommendations for both government and businesses to navigate the current uncertainty.
Key insights from the report:
- Nigeria’s current economic context
- Implications of key external policy shocks
- Scenario-based outlooks
- Strategic recommendations
Nigeria’s current economic context
Despite recording a 3.4% growth rate in 2024, Nigeria continues to grapple with inflation, naira depreciation, and high interest rates. Fiscal strain persists, marked by rising public debt and declining FAAC allocations.
Implications of key external policy shocks
The report identifies significant global policy changes, including US trade tariffs, cuts to development assistance, strict immigration policies, and planned increases in domestic oil production. These changes are expected to profoundly impact Nigeria’s economy. For instance, the 14% tariff on Nigerian exports to the US could reduce export demand, negatively affecting foreign exchange inflows. Additionally, the reduction in US aid, which totaled $U0.77 billion in 2024, may pressure Nigeria’s social development programs. Furthermore, the surge in US domestic oil production may lead to lower global oil prices, further diminishing Nigeria’s export revenues, which constituted 71.4% of total export earnings in 2024. These policies are expected to exacerbate fiscal pressures and slow GDP growth.
Scenario-based outlooks
The report outlines three potential scenarios for 2025:
- Status quo scenario: Nigeria faces rising inflation, pressure on the naira, and weaker GDP growth due to protectionist US policies and lower remittance inflows.
- Targeted scenario: Harsher tariffs, disrupted exports, and reduced capital flows trigger economic contraction and currency depreciation.
- Favourable scenario: Improved trade terms, restored aid, and relaxed immigration rules boost Nigeria’s foreign exchange earnings, lower inflation, and support stronger GDP performance.
Strategic recommendations
- To navigate the challenges posed by global policy changes, the government should focus on strengthening trade competitiveness through regional agreements like African Continental Free Trade Area (AfCFTA), ensuring fiscal discipline to control inflation and reduce deficits. The government should also implement policies that support non-oil exports and maintain flexibility in response to global challenges.
Businesses must prioritise securing local supply chains to manage costs and currency risks effectively. Investing in digital transformation will enhance operational efficiency.
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