Nigeria’s trade relationship with the United States faces potential disruptions as former U.S. President Donald Trump imposes steep tariffs on imports from Canada, Mexico, and China. These new tariffs, which take effect on February 4, 2025, include a 25% levy on goods from Canada and Mexico and a 10% tariff on Canadian oil and Chinese exports.
With retaliatory measures already announced by Canada, global trade tensions are rising, and analysts fear that these policies could indirectly impact Nigeria’s imports from the U.S., potentially driving up prices on essential goods.
Key U.S. Imports to Nigeria at Risk
Nigeria relies on the U.S. for a broad range of imports, including petroleum products, automobiles, pharmaceuticals, and industrial equipment. According to the National Bureau of Statistics (NBS), major imports from the U.S. include:
- Gas oil
- Motorcycles and cycles with auxiliary motors
- Petroleum fuel
- Pharmaceutical products such as penicillins and medicaments
- Industrial machinery, including air compressors and static converters
In 2024, Nigeria’s top imports from the U.S. also included butanes, used diesel vehicles, motor spirit, and ethyl alcohol.
With increased tariffs potentially affecting global trade flows, price hikes on these essential commodities could follow, exacerbating inflationary pressures in Nigeria.
Trade Surplus Under Threat
Despite these challenges, Nigeria has maintained a trade surplus with the U.S. in recent years. In 2024, Nigeria exported $5.29 billion worth of goods to the U.S. while importing $3.88 billion, leaving a $1.4 billion trade surplus. In 2023, trade volumes stood at $8.2 billion, with Nigeria enjoying a $3.1 billion surplus.
However, trade between the two countries has declined by 73% over the last decade, largely due to the U.S. reducing its crude oil imports from Nigeria. If global trade tensions continue, Nigeria’s ability to sustain its export advantage could be further weakened.
Impact on Inflation and Cost of Living
One of the most immediate concerns surrounding the tariff hikes is their potential impact on Nigeria’s inflation rate, particularly in the automobile sector. Nigeria heavily depends on imported used cars from the U.S., commonly known as “Tokunbo” vehicles. In 2023, these imports were valued at N1.47 trillion, with N892 billion worth of used cars imported by September 2024.
Should tariffs drive up the cost of U.S. car exports, the price of vehicles in Nigeria will likely rise, making car ownership even less affordable for many citizens. This would increase transportation costs, a key component of Nigeria’s inflation, currently contributing 10.7% to the Consumer Price Index (CPI).
Additionally, fuel and petroleum-based imports, such as gas oil, lubricating oils, and motor spirit, could also become more expensive, further compounding inflationary pressures. Given Nigeria’s dependence on these imports, higher costs could lead to increased fuel prices, affecting both transportation and overall consumer goods pricing.
Dangote Refinery as a Possible Buffer
One potential cushion against rising fuel costs is the Dangote Refinery, which began operations in 2024. As Africa’s largest refinery, with a 650,000 barrels per day capacity, it is expected to reduce Nigeria’s reliance on imported fuel.
By boosting local production, the refinery could:
- Stabilize domestic fuel prices
- Reduce foreign exchange demand for petroleum imports
- Minimize the inflationary impact of U.S. tariffs on fuel-based products
Bottom Line
While Nigeria is not a direct target of Trump’s new tariffs, the ripple effects on global trade and supply chains could still affect key imports from the U.S.. With potential price hikes on vehicles, petroleum products, and industrial goods, Nigeria could experience inflationary pressures and increased costs for businesses and consumers.
However, with rising local refining capacity and ongoing economic adjustments, Nigeria may be able to mitigate some of these negative effects and navigate the shifting global trade landscape more effectively.