The Chief Executive Officer of the Centre for the Promotion of Private Enterprises (CPPE), Muda Yusuf, has warned that US President, Donald Trump’s America-first policy may result in a stronger dollar, which will result in a weaker naira......CONTINUE READING THE ARTICLE FROM THE SOURCE>>>>>
The CEO issued the warning ahead of the decision day of the Central Bank of Nigeria’s Monetary Policy (MPC) meeting.
Trump signed three executive orders placing 25 percent tariffs on all goods from Canada and Mexico. He also signed a 10 percent tariff on Canadian oil and an additional 10 percent tariff on Chinese goods.
The tariff led to retaliatory trade policy actions from some countries.
“Meanwhile, the tariff war offers some opportunities for export and investment for Nigeria taking advantage of the gaps that the trade war may create in the countries involved, to the extent that Nigeria is not a victim of the tariff actions,” Yusuf said.
The CEO said the trade war may create export opportunities for the United States to fill supply gaps that the tariff war may create in the United States.
He said, “Nigerian companies could position themselves to take advantage of these imminent supply gaps. New bilateral and multilateral trade alliances are likely to evolve due to the ongoing trade war.
“The trade war may trigger a disruption of global supply chains which may adversely affect the global economy, especially from a cost of supplies perspective for imported goods.”
It is predicted by Senior Research Fellow, Global Economy and Finance Programme, Michael Klein, that there is the risk that the US dollar – which is expensive already – becomes more obviously overvalued
According to Yusuf, the possibility of a stronger naira is high adding that it could frustrate CBN efforts to stabilize the naira.
Yusuf argued that a stronger dollar would have severe consequences on the naira.
He said, “The prospects of a strong dollar are very high with the current Trump policies. There is an inverse relationship between the strength of the dollar and that of the other currencies.
“A stronger dollar will mean a weaker naira. This may result in higher import costs for domestic investors and invariably become inflationary.
“Current tariff policies of the Trump administration would trigger inflation as costs of imports into the United States surge. The US Federal Reserve would respond by tightening monetary policy, creating a high interest rate scenario in the United States.
“This could result in capital flow reversals, posing a risk to the naira exchange rate.”
For Yusuf, diaspora remittances will drop following Trump’s current immigration policy.