There’s a popular saying: “When two elephants fight, it’s the grass that suffers.”

In this case, the elephants are the United States and China, while Nigeria, like many other nations, finds itself amongst the grass that may bear the brunt of the escalating trade war. To what extent could this conflict impact Nigeria’s foreign exchange market?

On April 2nd, 2025, as part of intensifying trade tensions, U.S. President Donald Trump imposed tariffs of up to 145% on Chinese imports. In retaliation, China responded with tariffs of 125% on American goods. The U.S. administration went further, announcing a 10% tariff on goods from most other countries, including Nigeria.

As a result, Nigeria now faces a 14% tariff on its exports to the U.S. However, due to the market disruption caused by the announcement, implementation has been delayed by 90 days.

Why Is Nigeria Facing a 14% Tariff?

Look at it this way, imagine your landlord increasing your rent by 14% because you refused to buy the beef, pork and certain pharmaceuticals being sold by his wife, sound unfair right? This is all tied to Trump’s “America First” trade policy.

According to U.S. officials, Nigeria has been involved in “unfair trade practices” that hurt American exporters, like our bans on beef, pork, and certain medicines. Also, since 2000, most of Nigeria’s exports have gone into the U.S. without paying any tariffs, thanks to the African Growth and Opportunity Act (AGOA). But on the flip side, Nigeria charges around 27% in tariffs on U.S. goods. That’s a big gap, hence the reciprocity.

The tariffs were supposed to take effect on Wednesday, April 9th, but in a dramatic last-minute twist, Trump announced a 90-day pause. Why? Because even America started feeling the heat. U.S. stocks were falling, Treasury bonds were being dumped, and the crypto market also took a hit. The moment the pause was announced, the markets bounced back and turned green again.

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What Does the US Tariff Mean for Nigeria’s Foreign Exchange Market?

1. Indirect Negative Impact on Oil Export:

Oil and gas, which account for about 90% of our foreign exchange earnings, are totally exempt from the 14% tariff.

But here’s where it gets tricky: the bigger issue is the global panic this trade war is causing. It’s shaking up the world economy and that’s dragging oil prices down.

Since the April 2nd announcement, crude prices have fallen to a four-year low, now hovering around $60 per barrel. That’s a problem because our 2025 national budget of $37 billion (already running an $8 billion deficit) was built on the assumption that oil would sell at $75 per barrel.

2. FX Reserve and Naira Under Pressure

With Nigeria’s FX inflow directly tied to the volume of the FX reserve and in turn, tied to the value of Naira, there is an imminent strain on the FX reserve. The Naira is already weak, and the tariff increase imposed on Nigeria could make matters worse, particularly as foreign exchange earnings from the US decline due to the tariff.

Less dollar inflow, more Naira strain.

3. Non-oil Exporters in

Last year, Nigeria exported non-oil goods worth N323.96 billion to the U.S. under the African Growth and Opportunity Act (AGOA), which let many Nigerian products enter the U.S. market tariff-free. Products like urea (fertiliser), cocoa beans, refined lead, soya meals, and natural rubber. Even cashew nuts, aluminium, and rubber products made the list. But now, with this new 14% tariff, those same exports just got a lot more expensive and less attractive to U.S. buyers.

The tariffs themselves might seem to affect only people importing and exporting, but the ripple effects touch everyone.