Trump tariffs stoke renewed pressures for naira, equities

US President Donald Trump's aggressive new global trade policy has sent shockwaves across global stocks, economies, and oil prices, with experts expressing concerns about its impact on investment flows, exchange rates, and economic growth in Nigeria. Victor Aluyi, Co-Managing Partner at Aztran Global Investments, provided insights on the ongoing trade tensions and their implications for Nigeria during a discussion on CNBC Africa. The current market volatility, reminiscent of the aftermath of the global financial crisis and the COVID-19 pandemic, reflects the uncertainty surrounding the tariff situation. The key question revolves around the end game of the tariffs: Are they aimed at negotiating fair trade deals, generating revenues, or addressing fiscal gaps? The market is now at a standstill, waiting to see who will make the first move - Donald Trump reconsidering tariffs, China coming to the negotiation table, or the Federal Reserve adjusting interest rates. Unlike previous crises where rate cuts provided relief, the current situation poses challenges for the Fed in managing inflation amid tariff threats. In Nigeria, the impact is felt through renewed pressures on the Naira and capital markets. The country's economic team faces limited options as global shocks, particularly in crude oil prices, significantly affect the nation's economy and currency. The benchmark oil price of $75 a barrel set in the budget is at risk due to the tariff-induced oil price decline. As a result, fiscal authorities may resort to increased borrowing to bridge revenue shortfalls. Monetary policy in Nigeria needs to adapt to global economic conditions as inflation and interest rates may be influenced by external factors. Trade policy, on the other hand, underscores the importance of leveraging the African free trade agreements to shield the continent from global shocks. The upcoming meeting of African trade ministers signals a proactive stance towards enhancing regional integration to foster trade partnerships amid increasing global trade tensions. The potential withdrawal of Sahel countries from the ECOWAS treaty highlights the need for cohesive regional integration efforts within Africa to strengthen trade relationships and boost economic growth. In light of the evolving trade landscape, Nigeria's budget may require adjustments to align with changing economic realities, especially concerning oil price assumptions. While potential revisions are possible, the government may need to prepare for increased borrowing to offset revenue shortfalls. The future trajectory of the Naira remains uncertain, with the possibility of further devaluation depending on oil price fluctuations and the duration of the trade dispute. Despite earlier expectations of Naira appreciation, current market conditions pose challenges to maintaining currency stability. As Nigeria navigates the intricate web of global trade tensions, strategic fiscal and monetary measures will be essential to mitigate economic risks and foster sustainable growth amidst external uncertainties.