How Nigeria can tide over trade shocks and oil slips

The tit-for-tat tariff war sparked by US President Donald Trump two weeks ago may have already moved beyond the who-blinks-first phase to pragmatism as countries take stock of what suits them best.

For nations in the Global South like Nigeria, grappling with the fallout of the ongoing oil price crash triggered by global economic uncertainty, this is a moment of reckoning in more ways than one.

In Nigeria, where oil is a primary foreign exchange earner and grist for the economy, the global disruptions portend challenging times. Oil prices have plummeted to around US $60 per barrel — the lowest since the pandemic struck and well short of the 2025 budget projection of $75 a barrel.

Richard Bronze, head of geopolitics at Energy Aspects, underscores the gravity of the situation.

“The oil price drop we have seen over the last week has taken us into territory where, for a lot of oil-dependent economies, it’s not going to be what they need to balance their budgets – nowhere close,” Reuters quotes him as saying.

Cascading effect

The longer China and the US drag their trade war, greater the chance of collateral damage to Nigeria and other emerging economies.

Dr Yahaya Yakubu, who teaches economics at Sa’adu Zungur University in Bauchi State, explains that an economic slowdown in the US and China, major oil consumers, would likely reduce global demand and lower prices.

“One would expect the trade war to reduce consumption. The resultant price drop could further deplete Nigeria’s foreign reserves and affect fiscal stability,” he tells TRT Afrika.

Nigeria’s reliance on imports exposes the nation to another layer of vulnerability. Disruptions in global supply chains caused by the tariff war could lead to higher costs for imported goods, widening the West African nation’s trade deficit unless proactive measures are initiated.

Amid the gathering storm, experts recommend various strategies for Nigeria to mitigate the economic impact.

“Diversification of trade partners, particularly through initiatives like the African Continental Free Trade Area (AfCFTA), offers an avenue to strengthen intra-African trade and reduce dependence on global economic giants. Nigeria needs to work immediately towards balancing the risk of external shocks,” Dr Yakubu advises.

Emerging options

Like all countries tied to the global economy, Nigerian policymakers realise that there is no escaping the negative slow burn of the economic stand-off between the US and China.

Some experts believe that Nigeria could make the most of the challenge arising from the tariff war as the country also produces items like soya beans, which China currently buys from the US.

However, producing soya beans for domestic consumption is one thing, and scaling productivity to  $12.4 billion worth of the crop — the quantity the US exported to China in 2024— is different.

So, what can Nigeria realistically do to avoid being the reeds that get trampled when two elephants fight?

The first and the most obvious advice – wean itself off total dependence on oil for revenue – is the most challenging goal to achieve, if not impossible to achieve overnight. But experts suggest that now is the most opportune time to make a start.

Analysts also believe Nigeria and other African countries must reduce their dependence on imported manufactured goods to avoid panic whenever the global supply chain experiences disruption.

“Diversity in choice of trade partners can help achieve this to an extent. Once you reduce the risk of external shocks, you give yourself a better chance of rebounding when the situation improves,” says Dr Yakubu.