Weak Dollar Despite Trade War Could Benefit Nigeria – Experts

Financial experts have predicted that the weakening of the US dollar due to ongoing trade tensions could bring economic benefits to Nigeria and other emerging markets. The latest round of tariffs imposed by former US President Donald Trump on China, Canada, and Mexico has sparked economic uncertainty, leading to a possible slowdown in US growth.

Experts suggest that this situation could result in capital moving out of the US, which would weaken the dollar and create opportunities for countries like Nigeria.

READ ALSO: Naira vs Dollar: What To Expect This Week (3rd-8th, March 2025)

Trade War and Dollar Weakness

Trump’s decision to impose a 25% tariff on Mexican and Canadian goods, along with 20% duties on Chinese imports, has triggered strong reactions. China responded by increasing tariffs on US goods, including key agricultural products such as pork, soybeans, and beef. The trade war has raised concerns about the US economy, with financial analysts predicting a slowdown in US growth relative to other global markets.

Speaking on the Drinks and Mics podcast, Samson Esemuede, MD and Chief Investment Officer of Zrosk, explained that a weaker dollar could benefit emerging markets. According to him, the capital outflow from the US could lead to an appreciation of other currencies, which would help developing economies.

“There will be a relative deceleration in US growth, while markets like China and Europe, which have underperformed post-COVID, may see an upward turn,” he said. “This shift could weaken the dollar, and a weaker dollar is generally positive for emerging markets like Nigeria.”

How Nigeria Stands to Benefit

A weak dollar could benefit Nigeria in several ways. One of the most significant advantages is improved commodity prices. Nigeria, like other commodity-exporting nations, relies heavily on oil revenue. A weaker dollar typically results in higher global commodity prices, which would increase Nigeria’s export earnings.

Arnold Dublin-Green, Chief Investment Officer at Cordros Capital, also emphasised this point. “A weak dollar means better commodity prices. Countries like Nigeria, Ghana, and South Africa, which depend on commodity exports, stand to gain. This is a positive trend for Africa.”

Another key benefit is debt servicing. Many developing countries, including Nigeria, have significant external debt denominated in dollars. A weaker dollar would make it easier for Nigeria to service its foreign debt, reducing the financial burden on the country.

Dublin-Green added, “With a weak dollar, external debts become easier to manage. This is why many investors are now looking at emerging markets for opportunities.”

Possible Risks If US Economy Slows Further

Despite the potential benefits, experts warn that the situation could change if the US economy enters a recession. Esemuede cautioned that a deep economic downturn in the US could lead to a stronger dollar as investors seek safe assets.

“If the US goes into a recession, global markets could suffer because investors would rush to the dollar for safety. That would cause the dollar to strengthen, reversing the current trend,” he explained.

The risk of a US recession has grown due to uncertainty over Trump’s policies. Esemuede noted that while the probability of a recession was once low, recent developments have increased the likelihood to around 30% to 35%. If a recession occurs, it could negatively impact emerging markets, including Nigeria.

China’s Role in the Global Shift

China has also been adjusting its economic strategies in response to the trade war. Chinese Premier Li Qiang recently announced increased defence spending, indicating that China is prepared for long-term economic competition with the US.

Beijing has positioned itself as a stable economic force, contrasting the US, which remains entangled in global conflicts. China may also try to strengthen economic ties with other nations affected by Trump’s trade policies, such as Canada and Mexico.

Outlook for Nigeria

For Nigeria, the weakening of the dollar presents both opportunities and risks. If the dollar continues to decline, the country could benefit from increased export earnings and reduced debt pressure. However, if the US economy enters a recession and the dollar strengthens, it could lead to financial instability in emerging markets.

Experts recommend that Nigeria take advantage of the current situation by strengthening its trade policies and diversifying its economy to maximise potential gains from the weaker dollar.