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Trump’s Election Victory Could Worsen Nigeria’s Inflation, Oil Revenue

Published

2 months ago

Nov 8, 2024.

The return of Donald Trump as the 47th President of the United States may lead to intensified inflationary pressures in Nigeria and a potential drop in global oil prices, which would negatively impact Nigeria’s oil revenue.

This outlook was shared in an investor note from FXTM, a prominent trading platform, authored by Senior Market Analyst Lukman Otunuga.

EDITOR’S PICKS

EKO HOT BLOG reports that each in the note titled “US Elections: Trump Wins! What Does This Mean for Nigeria?”

Otunuga analyzed how Trump’s policy direction could adversely affect Nigeria’s economy. He highlighted that Trump’s anticipated policies on domestic oil production may drive down global oil prices by increasing supply.

This, combined with potential economic growth in the U.S. spurred by Trump’s policies, could increase inflationary pressure domestically, prompting the Federal Reserve to maintain higher interest rates. A strengthened U.S. dollar, resulting from these factors, could further suppress oil prices—a challenging outcome for oil-dependent nations like Nigeria.

Otunuga cautioned that Nigeria could face difficulties as it struggles with reduced oil revenues and a stronger dollar, complicating its economic landscape during an already challenging period.

He noted, “Trump’s policies could boost U.S. growth, triggering inflationary pressures. Should this prompt the Fed to keep interest rates higher for longer, a stronger dollar may drag oil prices lower, impacting major oil producers who rely heavily on oil revenue. For Nigeria, lower oil prices and a stronger dollar could add to its economic woes.”

The PUNCH reported a surge in the dollar and a record high for Bitcoin following Trump’s projected win, as traders anticipated policies that would support tax cuts and inflation.

The dollar appreciated by 1.5% against the yen, reaching its highest point since July, and by over 1% against the euro, with a notable rise of more than 3% against the Mexican peso. Bitcoin similarly reached a historic high of $75,330.88.

S&P500 futures also jumped by 1.4%, signaling a strong opening for U.S. markets, with traders optimistic about the potential for corporate tax cuts and regulatory ease under Trump. FXTM’s weekly market report described these prospects as favorable for U.S. equity bulls, with assets tied to the “Trump trade,” like the USD and Bitcoin, expected to benefit.

Otunuga emphasized that Trump’s re-election could shape market dynamics for years to come, as investors remember the market volatility of his previous term (2017–2021) marked by unpredictable policy moves and tariff conflicts, especially with China. During Trump’s last tenure, market volatility spiked by over 60%, as reflected in the VIX index, before dropping about 10% under President Joe Biden’s administration.

The analyst warned of fresh global volatility should Trump return, particularly due to proposed tariffs on European and Chinese imports, which could heighten trade tensions.

Trump Nigeria Inflation

If these tariffs drive up consumer prices in the U.S., the resulting inflation might lead to even higher interest rates, strengthening the USD further.

An appreciating dollar could negatively affect gold prices and emerging market currencies.

On the geopolitical front, Trump has pledged to “stop wars” and bring a swift end to the Ukraine conflict, yet any major policy shifts could heighten global risk aversion.

Otunuga’s analysis indicates that Trump’s policies could introduce significant challenges for Nigeria’s economy, emphasizing the global ripple effects of his leadership style and trade strategies.