Tackling Implications of New US Tariffs the CBN Way
By Zekeri Idakwo Laruba
The recent announcement by the United States government imposing new import tariffs has sent ripples across global markets, particularly affecting Emerging Market and Developing Economies (EMDEs) like Nigeria. In response, the Central Bank of Nigeria (CBN) has taken decisive steps to cushion the impact on the country’s foreign exchange (FX) market, amid growing concerns over naira depreciation and macroeconomic instability.
Recently, U.S. President Donald Trump announced a sweeping new tariff policy that brought a 10 percent “minimum baseline tariff” on all imports into the United States. Some countries, including Nigeria, are subject to even higher levies, raising the stakes for bilateral trade. This move is expected to significantly disrupt the flow of goods and services into the U.S., particularly from resource-dependent economies.
For Nigeria, the implications are profound. The U.S. remains a key trade partner, importing crude oil, petroleum gas, and nitrogen-based fertilisers—products that collectively form the backbone of Nigeria’s export economy. The new tariffs not only threaten demand for Nigerian oil exports but also create uncertainty in the global commodity markets, which are already facing volatility.
The impact of the U.S. tariff decision was almost immediate. According to data from the CBN, the naira depreciated nearly 1 percent within 24 hours, closing at N1,567/$1 on April 4, compared to N1,553/$1 the previous day. The depreciation signals market anxiety and heightened demand for dollars as investors brace for reduced dollar inflows from oil exports and increased costs of U.S. imports.
In a bid to preempt disorderly market behavior and maintain liquidity, the CBN injected $197.71 million into the FX market through sales to Authorised Dealers. The intervention, announced by Omolara Duke, Director of the CBN’s Financial Markets Department, is part of a broader strategy to ensure a “stable, transparent, and efficient” foreign exchange regime. Duke stated that the provision of funds is in line with the bank’s commitment to supporting orderly market functioning and expressed confidence in the resilience of Nigeria’s FX framework.
The CBN also emphasised the importance of strict compliance with the Nigeria’s FX Market Code to ensure discipline and integrity among Authorised Dealers.
Compounding the pressure from tariffs, global crude oil prices have dropped by more than 12 percent, settling around $65.50 per barrel. For an oil-dependent economy like Nigeria, lower oil prices mean dwindling foreign reserves and a further strain on FX supply. The dual blow, reduced oil earnings due to falling prices and the potential drop in demand owing to U.S. tariffs—creates a challenging scenario for the apex bank. Sustained low oil prices could undermine Nigeria’s fiscal and external positions, thereby putting further strain on the naira and increasing the need for policy buffers.
In the short term, the CBN’s liquidity injection is a necessary shock absorber, aimed at calming market nerves and stabilising the naira. Alongside this, the bank’s real-time monitoring of global and domestic indicators positions it to respond swiftly to any further deterioration in market conditions.
However, these measures, while effective in the interim, need to be complemented with long-term strategies. Strengthening FX market transparency and competitiveness remains central to the CBN’s broader reform agenda. Nigeria must also reduce its vulnerability to external shocks by diversifying its export base beyond oil. By expanding into agriculture, technology, and manufacturing exports, the country can build a more resilient economy.
Additionally, building stronger external reserves will provide a buffer for the naira in times of crisis. Strategic diplomatic engagement with the U.S. and other major trading partners may also become necessary to renegotiate more favorable terms for Nigerian exports, especially in light of protectionist policies that threaten global trade flows.
To mitigate the risks and position Nigeria for long-term stability, several recommendations are crucial. First, the government and the CBN should intensify support for non-oil exports by empowering agencies like the Nigeria Export Promotion Council (NEPC) and implementing incentives for exporters. Second, Nigeria must enhance local production capacity to reduce reliance on imported goods such as refined petroleum and wheat, which put pressure on FX reserves. Third, improving the ease of doing business can help attract foreign direct investment, which will serve as a vital source of FX inflows. Lastly, the strategic utilisation of FX reserves should be guided by data and long-term planning, ensuring a balance between currency defense and reserve preservation.
The ripple effects of the U.S. tariff policy on Nigeria’s FX market underscore the vulnerability of single-resource economies in a highly goobalised trading system. While the CBN has taken commendable steps to stabilise the naira and maintain market confidence, long-term economic resilience hinges on diversification, strategic diplomacy, and structural reforms. The coming months will be a test of Nigeria’s ability to navigate a shifting global economic landscape with agility and foresight.
Zekeri Idakwo Laruba is the Assistant Editor with PRNigeria and Economic confidential. He can be reached via [email protected]
