The U.S. has triggered a seismic break from decades of trade liberalisation dogma, imposing sweeping tariffs – baseline of 10% globally and reciprocal levies (paused for 90 days) escalating to as high as 145% on Chinese goods – under the guise of rectifying “unfair” practices. This protectionist pivot risks fracturing global supply chains, rerouting capital flows, and redefining economic alliances. For Nigeria and other emerging economies, the policy shift presents substantial opportunities and significant risks, necessitating a recalibration of long-term trade strategies.

Figure 1: U.S. Tariff Rates Vs. U.S. Discounted Tariffs of Selected African Countries

Source: Aljazeera.com

Heightened recession fears are weighing on global stocks, bonds and commodities as the VIX index – Wall Street’s fear gauge – spiked to pandemic-era levels, breaching the 60-point threshold before closing at 46.98 on April 7, 2025 – its highest close in five years. U.S. import tariffs and an unexpected OPEC+ decision to accelerate the unwinding of production cuts has triggered a plunge in oil prices to $64 per barrel on April 8, 2025 – levels unseen since 2021.

A Precarious Balancing Act – Oil Price volatility, Fiscal Strains and Naira Stability

For Nigeria, an economy historically tethered to crude oil & gas (72% of exports in 2024), this slump, once again, highlights its age-long vulnerability to global oil price volatility and the complex trade-offs that it faces. With oil prices falling significantly below the ambitious $75 per barrel benchmark set for the 2025 budget, compounded by production hovering near 1.5 million barrels per day (mbpd) against a 2.06 mbpd target, substantial revenue shortfalls are now inevitable. This not only hampers budgetary commitments but also constrains the Central Bank of Nigeria’s (CBN) capacity to effectively intervene in the foreign exchange market, given slower foreign reserves accretion, or even depletion. The naira is already exhibiting signs of volatility – depreciating 2.88% in March 2025 to ₦1,536.82/$, in spite of the CBN’s $668.8 million intervention. With another 4.98% depreciation in the first week of April, 2025 to ₦1,611.55/$, a sustained period of low oil prices is likely to further weaken the naira and pose a significant threat to the country’s macroeconomic stability.

The Double-Edged Sword of Oil Price Swings and Eurobond Market Exclusion

While a global oil slump might superficially lower petrol and diesel prices (easing transport costs), the naira’s depreciation unleashes a broader inflationary surge. Import costs for essentials – raw materials, medicines, and wheat – spike in local currency terms, eroding household purchasing power. This inflationary tide risks eclipsing any fleeting relief at the pump. Compounding this, fiscal desperation could drive the government toward inflationary financing, such as excessive CBN borrowing via Ways and Means advances, a tactic that flooded the system with ₦23 trillion pre-2023, fuelling inflation. The result? A net acceleration of inflation, worsening Nigeria’s cost-of-living crisis even as fuel prices dip.

Investor flight from riskier assets amid global trade turbulence has effectively closed Nigeria’s access to affordable external financing. Its $1.25 billion 2051 Eurobonds plummeted 7% to 66.5 cents on the dollar, with yields spiking 44 basis points to 12.29% – a stark indictment of eroding confidence. While near-term Eurobond maturities are limited (unlike Kenya or Côte d’Ivoire), these punitive rates signal long-term sustainability risks. With external markets effectively closed, Nigeria faces a grim choice: costly domestic borrowing (crowding out private sector credit) or austerity measures that stifle growth.

Figure 2: Nigeria’s non-oil exports to the U.S in 2024 ($’ Million)

Source: United Nations Comtrade Data

AGOA’s Collapse and Africa’s Trade Reckoning

As the African Growth and Opportunity Act (AGOA) nears its September 2025 expiration date, Nigeria’s duty-free access for 6,700+ exports to the U.S. now hangs in the balance. This uncertainty is compounded by fresh 14% tariffs on key sectors like textiles and agriculture, which are almost certain to constrain exports to the U.S. ($5.7 billion in 2024, of which $385.74 million is non-oil) and also complicates long-term strategic planning. Historically reliant on crude oil & gas (over 70% of exports in 2024), Nigeria is now confronted with a shift that undermines the competitiveness of its non-oil sectors and the looming collapse of a two-decade preferential trade framework.

The implications are profound. Tariffs negate AGOA’s advantages prematurely, signalling a broader shift in U.S.-Africa relations from partnership to transactional engagement. For Nigeria, the immediate threat lies in pricing its goods out of the U.S. market, while the long-term risk is systemic – continued overreliance on volatile commodity exports. Policymakers must urgently pivot, balancing short-term mitigation (e.g., subsidies for affected sectors) with structural diversification.

While non-oil exports face rising U.S. tariffs, crude oil – exempt from new duties – remains Nigeria’s most immediate buffer. Yet, this poses a critical question: can oil production be scaled up at this time to offset lost revenues and export earnings? Given persistent crude theft, aging infrastructure, and Nigeria’s OPEC+ quota (1.5 mbpd), sustainably increasing output by even 200,000–300,000 bpd in the short term appears unlikely without urgent reforms and substantial capital injection.

Strategic Adaptation: Nigeria’s Path Forward

In response to escalating global protectionism and the impending AGOA expiration, Nigeria requires a sophisticated, proactive economic strategy. A critical imperative is diversifying trade relationships, deepening ties with the EU and Asia while vigorously leveraging the AfCFTA to unlock intra-African potential and mitigate U.S. market reliance. Europe’s energy security concerns, exacerbated by Russia’s reduced gas supply due to geopolitical tensions, have heightened demand for alternative sources. Nigeria’s abundant natural gas reserves, estimated at 206.5 trillion cubic feet, position it as a viable supplier. By accelerating investments in liquefied natural gas (LNG) facilities and exploring transcontinental pipeline partnerships, Nigeria can cement its role in Europe’s decarbonisation and diversification agenda, while generating critical foreign exchange revenues.

Simultaneously, enhancing domestic competitiveness is fundamental. This entails significant infrastructure investment, elevating product quality to international standards, and driving value-addition, particularly through modernised agro-processing for commodities like cocoa, sesame, and cashews to target emerging markets like China and India. Attracting targeted Foreign Direct Investment (FDI) is crucial, utilising incentives within Special Economic Zones like Lekki and Calabar for manufacturing and renewables, potentially luring firms diversifying from China. Streamlining trade via policy reforms like the National Single Window initiative and expanding SME support through grants like the Export Expansion Grant (EEG) will further bolster competitiveness. This integrated approach fosters resilience and positions Nigeria advantageously within a shifting global economic landscape.

Charting a Course in a Protectionist Era

The U.S. tariff offensive signals a seismic shift in global trade – one where protectionism collides with entrenched vulnerabilities. For Nigeria – currently immersed in structural reforms and facing both oil-dependent fiscal fragility and the impending expiration of AGOA’s preferential access – these tariffs amplify an urgent imperative: diversify its economic base or risk an inevitable decline in global competitiveness. The message is clear: In a world retreating behind tariff walls, Nigeria’s survival hinges on strategic agility. By transforming vulnerability into opportunity, it can secure its place in the fractured global trade hierarchy – not as a passive casualty but as a resilient contender.