The Nigerian economy faces a potential slowdown in its projected 3.4% GDP growth for 2025, primarily due to the newly imposed 14% reciprocal tariff by the United States on Nigerian imports, as revealed by a PwC report. This tariff, part of the US “Liberation Day Tariffs,” aims to rectify trade imbalances, but its implementation has been temporarily paused for 90 days. While there is speculation that the tariffs might be permanently shelved due to their potential negative impact on the US economy, particularly given America’s debtor status and reliance on creditor nations like Nigeria, the uncertainty poses a significant threat to Nigeria’s economic outlook. The potential impact on Nigeria’s agricultural exports, a key sector, is particularly concerning, with industry estimates projecting a potential loss of N2 trillion annually.
This new trade barrier comes at a precarious time for Nigeria, as the future of the African Growth and Opportunity Act (AGOA) hangs in the balance. AGOA, a preferential trade program, has been instrumental in facilitating duty-free access for thousands of Nigerian products to the US market. In 2024, Nigeria was the second largest exporter to the US under AGOA, with exports totaling $1.76 billion, largely comprising oil and agricultural products. The proposed tariff threatens to erode this advantage, rendering Nigerian exports less competitive and potentially leading to decreased demand and lower earnings for Nigerian farmers and exporters. The combined impact of reduced agricultural exports and potential declines in oil demand, driven by increased US domestic production, could significantly dent Nigeria’s foreign exchange earnings.
The 14% tariff is anticipated to make Nigerian agricultural products more expensive for American consumers, leading to a decline in demand. This, coupled with the potential loss of AGOA benefits, poses a significant threat to Nigeria’s agricultural sector and overall export revenue. Even if the oil and gas sector remains exempt from the reciprocal tariff in the short term, long-term prospects are clouded by projections of increased US domestic oil production, which could diminish American reliance on Nigerian crude. This double blow to both oil and non-oil exports could severely restrict Nigeria’s ability to generate foreign exchange, a critical factor in its economic stability.
Furthermore, Nigeria’s status as an import-dependent nation, with imports accounting for a substantial 43.8% of total trade, makes it vulnerable to disruptions in global supply chains caused by broader US trade policies. Increased costs of imported inputs, including machinery and raw materials, will likely translate to higher production and operational expenses for domestic manufacturers, further contributing to inflationary pressures within the Nigerian economy. This confluence of external trade pressures and internal economic challenges creates a complex and potentially detrimental scenario for Nigeria’s near-term economic prospects.
The PwC report outlines a ripple effect stemming from these US trade policies, ultimately impacting Nigeria’s GDP growth. Reduced demand for Nigerian exports, coupled with potential AGOA losses, could constrict foreign exchange inflows, destabilizing the Naira. The rising cost of imported goods due to US protectionist policies will further strain Nigerian businesses and exacerbate inflation. The global uncertainty fostered by these trade tensions might also discourage foreign direct investment, impacting capital inflows into emerging markets like Nigeria. This combination of factors paints a challenging picture for Nigeria’s economic trajectory.
To mitigate these potential setbacks, the report emphasizes the need for proactive strategic responses from both the Nigerian government and the private sector. Key recommendations include advocating for the extension and enhancement of AGOA benefits, diversifying trade partnerships beyond the US, and leveraging the African Continental Free Trade Area (AfCFTA) to expand export markets within Africa. Domestically, boosting non-oil exports, particularly in sectors like agro-processing, solid minerals, and light manufacturing, is crucial. This should be supported by targeted export incentives and policies that encourage local production of key inputs, reducing reliance on imports. Furthermore, attracting long-term infrastructure financing through infrastructure bonds and strengthening public-private partnerships (PPPs) are critical for fostering economic resilience and sustainable growth. These proactive measures are essential for navigating the potentially turbulent economic landscape created by the evolving US trade policies and ensuring Nigeria’s continued economic progress.
