THE Centre for the Promotion of Private Enterprise (CPPE) has suggested ways to mitigate the impact of United States (US) President Donald Trump’s policies on the Nigerian economy.
In a statement on Sunday, February 16, by its director/chief executive officer, Muda Yusuf, the CPPE posited that the Trump administration was having a remarkable change in the dynamics of global trade, global economic outlook and geopolitical trajectory.
The U.S. economy is also experiencing a record disruption in its economic, trade and political governance systems, said the organisation.
It submitted that the developments would have multi-dimensional implications for the Nigerian economy.
“There are immediate and remote consequences for energy prices, trade relations, economic diplomacy, macroeconomic stability, donor funding and capital flows,” it said.
The firm maintained that the evolving outcomes of the Trump presidency on Nigeria’s economy in the near term would be felt, including in the government revenue, crude oil budget benchmark, foreign exchange earnings, and inflation.
The CPPE explained that the heightened prospects of a drop in oil prices would negatively impact government revenue and foreign exchange earnings.
“This has implications for the outlook for revenue, fiscal deficit, government debt and exchange rate.
“The current budget benchmark of $75 per barrel may not stand in the circumstances,” it stated.
According to the organisation, the prospects of a strong dollar are very high with the Trump policies.
“There is an inverse relationship between the strength of the dollar and that of the other currencies. A stronger dollar will mean a weaker naira.
“This may result in higher import costs for domestic investors and invariably become inflationary,” he said.
It argued further that the current tariff policies of the Trump administration would trigger inflation as the costs of imports into the United States surge, and the U.S. Federal Reserve could respond by tightening monetary policy, which would create a high interest rate scenario in the United States.
This could result in capital flow reversals, posing a risk to the naira exchange rate, it added.
Lesson for Nigerian government
Stressing that the Trump administration policies would disrupt Nigeria’s economy, CCPE suggested the need for the government to commit more to the policy of self-reliance and less import dependence in critical areas of the economy, especially energy, food, pharmaceuticals and security.
Excessive import dependence poses a major risk to the economic and social security of a country, it warned.
“A key lesson from the disruption is that no country should be too dependent on others for its strategic needs. It has once again underscored the risk of overdependence on other countries. The COVID experience offered a similar lesson.
“Therefore, there is a need to ensure that policies of government are geared towards ensuring economic resilience that minimises vulnerabilities to external shocks.
It said supply chains should be localised as much as possible, asserting that the emerging new global order was progressively leaning towards economic nationalism, deglobalisation and economic fragmentation.
Domestic economic policies must be framed within the context of this reality, the CPPE said, urging the government to deepen backward integration through stronger intentionality to promote domestic production of goods and services and export development.
It believes the current economic reforms are already on course to ensure strategic structural shifts towards reducing dependence on imports.
“There should be a special emphasis on food security, energy security, health security and internal security, leveraging largely domestic resources.
“The government should urgently address current productivity shortcomings in the real sector to make domestic production competitive domestically and internationally,” it said.