A finance expert and CEO of Nairametrics, Ugodre Obi-Chukwu, says the return of the US President Donald Trump to power could strengthen the dollar and weaken Nigeria and other African currencies.
He said a stronger dollar could also increase debt servicing costs and heighten inflation.
Trump, who was sworn in on Monday as the 47th US President, had signed dozens of executive orders, which may impact on the world political economy.
But Obi – Chukwu said Trump 2.0 could impact the economy of sub – Saharan Africa, especially on the currency, capital flows, immigration and inflation.
He stated this in an outlook titled “Nigeria’s Macroeconomic Outlook 2025: Nigeria in Transition: Reforms, Global Shifts and Strategic Opportunities.”
“Stronger dollar could weaken the African currencies, increase debt servicing costs, and heighten inflation.
“Capital Flows: Lower U.S rates might attract investment to SSA if yields remain high.
“Oil prices: increased US oil production may surpress prices, reducing revenue for oil producers.
“Immigration: travel restrictions may lower remittance, impact FX reverses and consumption.
“Inflation: US tariffs might raise import costs, worsening Africa’s inflation challenges,” he said.
On the outlook for inflation, the expert said stronger dollar continues to exert pressure on exchange rate as increase in money supply “Likely to remain sticky as CBN continues to tighten.”
Obi – Chukwu also noted that insecurity and logistics challenges have continued to hamper food supplies nationwide
He projected that the increase in minimum wage could increase aggregate demand for products.
“Government actions at curbing inflation is indirectly fueling inflation.
“Global efforts to curb inflation via rate cuts could make frontier markets like Nigeria attractive. For portfolio inflows.
“Higher interest rate creates opportunity for local currency investments in government securities above 25%,” he said.
On the Naira/Dollar, the Nairametrics boss said “Businesses should hedge against a worst- case scenario of N2,200/$1 and take advantage of a best-case scenario of N1,700$1.”
According to him, mismatch between the true value of the naira and its current price can only be resolved with adequate supply bearing in mind challenges of a stronger dollar and likely competition for dollar inflows out of frontier markets.
“Nigeria’s large fiscal deficits, growing debt burden and high inflation rate, poses more threat to exchange rate stability and could rubbish the benefits of ongoing forex reforms,” he added.
He said the galloping inflation will continue to impact real GDP growth outcomes, while “Weakening purchasing power will dampen consumption, impacting GDP growth.”
