In less than one month, the 47th President of the United States of America will be sworn into power at an Inauguration event scheduled for January 20th, 2025
The recently concluded US Elections in November 2024 defied many political analysts’ predictions that it would be a close election.
Rather, the result was a complete blowout victory for Mr. Trump whether you look at it by popular votes (i.e. 77.3 million for Mr. Trump vs. 75 million for Mrs. Harris) or by Electoral College votes (312 vs 226).
Let’s not even speak about his degree of victory by land mass whereby only a handful of counties in coastal states did not feel the red wave.
Thus, for the first time in over 20 years (2004: George Bush Jr.), a Republican was more popular at the ballot box than a Democrat. Even more notable is that the 77.3 million votes cast for Mr. Trump is the highest number of votes received by any Republican presidential candidate ever.
To reference a word made popular in this decade by President Obama, the November 2024 US elections was a “shellacking” doled out by the Republican party, such that in January 2025, the republican party will control the US Presidency, the US Senate, and the US House of Representatives.
In summary, this was a clear message by American voters that there is overwhelming support for President Trump’s America-First message.
So, what exactly is this America-First message and what does that mean for Nigerians?
America-First
America First agenda has the stated objective of prioritizing US domestic policies which directly impact US citizens, at the expense of global objectives for international countries.
These include prioritizing both economic and political policies that favor the US domestically.
- From an economic perspective, the America-First agenda includes actions aimed at addressing domestic issues such as large US trade deficits, US Current account deficits, or excessive international demand for the US Dollar which creates monetary policy challenges for the Federal Reserve when setting interest rates or tackling US domestic inflation.
- There are multiple other subsectors of the economy that America First also desires to prioritize such as Energy independence, Technology dominance (Chips, AI, Bots, EV, et al), and Wage growth amongst others.
- From a political perspective, this includes actions such as limiting how, when & where the United States of America decides to get involved in global disputes (especially, if there is a need to send US troops into combat and or increase US budget deficits through increased defense spending), other stated areas include Borders and Immigration, Military dominance, etc
Nairametrics audience can read more here, and here. Our audience will also recall our recent webinar touched on the definition of America-First.
- The net message is that the America-First agenda believes in looking inward to foster prosperity for “Bonafide” American citizens as an immediate priority, whilst the rest of the world can take care of itself.
What does this mean for Nigeria?
Most economists are in consensus that an America-First agenda is broadly in conflict with the Globalization agenda that has been prevailing for multiple decades.
Specifically, for multiple decades, the United States has been promoting globalized and multi-nation cooperation on a variety of issues such as global security (U.N.), world heath standards (W.H.O.), global project financing (IBRD, IMF), world education (UNESCO), world poverty (UNDP) including a push for international trade (W.T.O.), et al.
Whereby from an international trade perspective, the messaging has been that countries who have a comparative advantage in producing certain goods should focus on making those goods and then export them to other nations for them to import.
- The general idea is that if each Nation focuses on its comparative advantage, this will make goods more cost-efficient to manufacture and the whole world will benefit from the manufacturing efficiencies (i.e. both exporters and importers).
The reality of that is under current scrutiny, it is arguable from US policymakers’ perspectives that the average US consumer’s insatiable desire for cheap goods has created a trade imbalance scenario whereby US imports persistently and dramatically exceed US exports (see the chart below).
This trade imbalance scenario is causing a cascading set of issues for the US, ranging from a decline in US manufacturing to a stifling effect on wage growth as well as limiting job prospects for blue-collar workers without college degrees.
Thus, causing a rising wave of dissatisfaction amongst the American populace. Read more here
As the US tries to reverse these multi-year trade imbalance scenarios, all Nations that have trade deficits with the United States need to rapidly evaluate their bilateral relationships with the US, primarily to assess what this incoming America-First ethos could mean to their nation.
Notably, Nigeria is one of about 48 countries that has trade deficits with the United States of America.
- i.e. Nigeria’s exports to the US frequently exceed our imports from the US (see below chart)
- This does not even account for other economic indicators such as Direct Investments or Donor Development Assistance (ODA) programs in Nigeria from the United States of America.
Consequently, the US-Nigeria relationship needs to be continually nurtured in the coming years to mitigate any adverse impact on the Nigerian economy
Chart 2: Nigeria Trade vs USA
So, what about “Nigeria-Next”?
From Nigeria’s perspective, evaluating our relationship with the United States of America should mean exploring opportunities to boost economic cooperation and attract more inflow of economic activities into Nigeria.
- This is because the incoming America-First ethos is anticipated to seek partners that aligns with a more transactional approach (i.e. rather than based on ideology)
The question to ask is whether there is readily available data that can be monitored to evaluate changes in the Nigeria-US relationship whether positive or adverse.
Interestingly, economists opine there are key economic indicators that can be used to assess bilateral relationships between countries. We can quickly review four (4) of these indicators
1. Capital Importation: This refers to the net difference in investments by non-residents of a country. i.e. how much are foreigners investing in Nigeria across FDI, FPI and Other Investments
- For Nigeria, readily available data further breaks this into how much capital is coming from different countries
The graph below tells us that over the past decade between 2014 to 2019, over $ 17.8 billion of capital was inflowed into Nigeria from the USA, comprising 20% of total capital import.
- This compares to recent years of 2020 to 2023 whereby only $2.1 billion of capital was imported from the US comprising a paltry 10% of total capital imported.
The incoming America-First administration has promised to reduce regulatory burdens for US companies, combined with an expected global low-interest rate environment and the need for the US to counter China’s effort in Africa should create opportunities for more capital to be allocated to sub-Saharan African nations including Nigeria and the Naira.
- This recent decline in capital importation or net foreign investment from the US obviously has an adverse effect on the Naira.
- Thus, boosting capital importation from US companies and investors will increase foreign exchange inflows and have a positive effect on the Naira.
Chart 3: Capital Importation into Nigeria
2. Trade balance with USA (as a percentage of Nigeria’s Total Trade): This refers to how much of Nigeria’s trade is done with the United States.
- Again, the graph below tells us that between 2015 and 2019 eight percent (8%) of our total trade was done with the USA, this compares to the recent years of 2020 to 2023 whereby only 6% of Nigeria’s total trade is with the USA. (i.e. more recent years are averaging 2% lower)
The incoming America-First administration has promised to leverage technology to help make made-in-America goods more globally competitive thus presenting an opportunity for commodity exporters such as Nigeria to target the US markets and its supply chain.
- Other opportunities for trade with the US relate to the upcoming renewal of the African Growth and Opportunity Act (AGOA) trade agreement in 2025, as well as, the US-Led Partnership for Global Infrastructure and Investment (PGII) program seeking to fund ultra-large investment on the African continent
- Boosting bilateral economic relations with the USA has the dual effect of increasing dollar earnings and net reserves, whilst on the flipside import of high-quality Made-in-American products will aid the quality of life of Nigerian citizens and mitigate issues of sub-standard products overwhelming our country.
Chart 4: Nigeria’s Foreign Trade
3. Diaspora remittances: In simple terms, this refers to when citizens of a nation who have migrated to other nations continue to send funds back to their home country.
- For low- and middle-income countries (LMICs) such as Nigeria, this is a critical external funding source that often outpaces FDI and ODA. Read more from the World Bank’s migration & development report here.
The key theme is that the US is the largest source of diaspora remittances globally whilst Nigeria is the largest recipient in Sub-Saharan Africa.
The graph below shows that in the first half of the past decade, between 2014 and 2019, diaspora remittances averaged $22.3 billion. This compares to only $ 18.9 billion between 2020 and 2023 in the second half (i.e. recent years are lower by 17%).
- The incoming America-First administration has promised to make middle-class Americans wealthier through Tax cuts, better wages, and more job opportunities thus creating more disposable income for the Nigerian diaspora based in the USA.
- This presents an opportunity for Nigerian policymakers to further strengthen interactions with its citizens to facilitate increased remittances to our home nation
- Again, boosting diaspora remittances will have a positive effect on the Naira.
Nigeria’s central bank has made a bold step of introducing several policy measures in this direction such as the non-resident BVN registration which facilitates eases account opening.
According to the apex bank, international money transfer inflows via official sources have grown from $200 million monthly to about $600 million.
Chart 5: Nigeria Diaspora remittances
To conclude, the incoming America-First administration presents multiple opportunities for Nigerian policymakers to adopt a “Nigeria-Next” approach whereby various aspects of the Nigeria-US bilateral relationship are strenuously evaluated to align with both the US interests AND Nigeria’s interests.
The existing economic indicators tell us that 2020 to 2023 results could have been much better when compared to the earlier part of the trailing decade (i.e. 2014 to 2019).
Nonetheless, more effort can be put in place starting now to grow the Nigeria-US relationship.
- Even just getting back to pre-2020 levels of activity can be an initial target and would represent an accomplishment.
The resulting economic outcome of more capital investments, more trade, and enhanced diaspora remittances will all serve to increase FX inflows and have a positive effect on the Naira to benefit Nigerians.
