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•Foresees limited impact on Nigeria because of exemption of oil, gas exports

Dike Onwuamaeze

Professor of Economics and former member of the Monetary Policy Committee of the Central Bank of Nigeria, CBN, Professor Mike Idi Obadan, has stated the current tariff war launched by US President Donald Trump is a plot to dismantle the World Trade Organisation (WTO) and move the US toward isolationism.

Obadan, who is the chairman, Goldmark Education Academy, Benin City, and former director general of the National Centre for Economic Management and Administration, Ibadan, asserted these in his essay titled “The Trump Tariff War: Implications for Nigeria and the Global Economy.” 

He said: “What seems clear is that President Trump is using the tariffs as an instrument of power to coerce other countries to enter into deals that favour the US.

“But then, why has the US shied away from negotiating with his targeted countries within the framework of the WTO?

“Mr. Trump probably wants to gradually dismantle the WTO and unwittingly move his country towards isolationism. The gains from the gravitation towards autarky are not clear.”

According to him, Trump probably neither understands the basic economic theory relating to the impact of a tariff war nor allows trained economic advisers to speak truth to him. Otherwise, he would not have initiated the war as international trade is an acknowledged engine of growth.

His words: “A general equilibrium analysis of tariffs shows that a sustained tariff war successively reduces the volume of trade of the countries involved and the global economy.

“As the trade volumes shrink, economic growth dips, scarcities of goods prevail, inflation rises, consumers’ purchasing power reduces, welfare diminishes and hardships prevail.

“Countries lose and virtually none gains. Already, there are apprehensions that if a tariff war is sustained, a global recession is most likely.”

The professor of economics stated the tariff war would have implications for Nigeria because trade is contributing significant proportion of the country’s gross domestic product (GDP) and global economic shocks are easily transmitted to the Nigerian economy.

He however believes it might have limited direct impact on Nigeria’s economy but would provide opportunities for Nigeria to strengthen its production and trade facilitation capacity, as well as diversify products and markets, add value to export products, and help to make ECOWAS intra-regional trade schemes and AfCTA work.

Obadan said: “The US 14.0 per cent tariffs on Nigeria’s exports, as it is, may have both direct and indirect impacts on Nigeria’s economy.

“The direct effects may derive from increased prices of the exports in the US markets and reduction of export volumes and foreign exchange income.

“The indirect effects may be felt in foreign exchange volatility, the country’s budget, macroeconomic stability, among others.

“And if the economies of the other trading partners of the US are hurt by the reciprocal tariffs, the negative impact on them may be transmitted to the Nigerian economy through reduced demand for our exports and high prices of our imports from them.”

He however noted that two factors – the volume and nature of the exports – might mitigate the impact of the tariffs on Nigeria’s economy.

His words: “First, the volume of Nigeria’s exports to the US is relatively small; an average of $5.28 billion in 2023 and 2024. In 2023, for example, Nigeria’s exports to the US accounted for about 8.0 per cent of the country’s total exports out of which 90 per cent is comprised of oil and gas products, mineral fuels, distillation products.  

“The second factor is the reported decision of the US government to exempt Nigeria’s major exports, crude oil and natural gas exports from the tariffs. This aligns with the successive US presidents’ policy of ensuring cheap oil imports for their industries and consumers.

“However, non-oil exports, many of which were previously exempted from tariffs under AGOA may now be tariffed as the future of AGOA, which is expected to end in September, 2025, remains uncertain.”

He pointed out that the tariffs on non-oil exports might undermine the competitiveness of such products in the U.S.A., especially if the products from other sources are not taxed in equal measure.

He observed that, “In such a situation, exports and the corresponding foreign exchange earnings may reduce both for the individual exporters and the country with negative implications for the country’s economic stability.

“If the tariff war is generalised to involve many countries, Nigeria’s imports from other trading partners may reflect higher prices with implications for the country’s macroeconomic stability through higher inflation.

“Any recession emanating from the global economy will be transmitted to the Nigerian economy. Even if the tariff war is restricted to the US and China, as it now seems, the Nigerian economy will be adversely affected by higher import costs from China, as a major trading partner to Nigeria, and, perhaps, low demand for Nigeria’s exports by China.

“The country may also not be spared from a recession that emanates from the US and China.”