How a Trump or Harris Win Could Shape the Naira

The naira, Nigeria’s currency, has faced serious challenges since the Tinubu administration introduced a foreign exchange floating regime. Since last year, the naira has lost around 70% of its value against the U.S. dollar. 

This devaluation was designed to attract foreign investment, reduce the cost of defending the currency, and make Nigeria a more appealing investment destination. However, the immediate outcomes have been tough for Nigerians, with inflation at its highest in thirty years, low disposable income, and increasing social unrest.

As the United States approaches a significant presidential election, the question arises: how might a win by Donald Trump or Kamala Harris impact the naira? Here are some ways each candidate’s policies could influence Nigeria’s currency through factors such as economic policies, oil prices, investment flows, interest rates, and geopolitical stability.

Economic Policies and Trade Tariffs

One of the most direct ways a U.S. president affects the global economy is through trade policy. Donald Trump, who has previously imposed tariffs and adopted protectionist policies, might pursue similar strategies if re-elected. 

These actions could make the U.S. dollar stronger as investors seek the safety of the U.S. market. A stronger dollar typically increases the pressure on the naira, making it more expensive to import goods and pay off foreign debts.

On the other hand, if Kamala Harris wins, her administration might pursue a more open, business-friendly approach, potentially boosting trade relationships and reducing tariff barriers. This could lead to a less aggressive increase in the dollar’s value, which might provide some relief to the naira by encouraging trade flow and potentially attracting more investments into emerging markets like Nigeria.

Oil Prices and U.S. Energy Policy

Nigeria’s economy depends heavily on oil exports, which generate most of the country’s foreign exchange earnings. A U.S. president’s stance on energy policies can influence global oil prices, directly affecting Nigeria. 

Trump has a history of prioritizing U.S. energy independence, which often results in policies encouraging domestic oil production. If he returns to office, a focus on American energy independence could lead to increased U.S. oil output, potentially lowering global oil prices. This would decrease Nigeria’s oil revenues, further weakening the naira.

In contrast, a Harris administration may prioritize environmental and renewable energy policies, which could reduce U.S. oil production over time. If global oil supplies tighten as a result, prices may rise, potentially boosting Nigeria’s oil revenue and providing some support for the naira.

Foreign Investment and Capital Flows

The U.S. president plays a significant role in directing global investment trends. A Harris administration may appeal to foreign investors by offering a more stable and globally engaged outlook. For Nigeria, this could mean increased capital inflows, as international investors might be more willing to invest in emerging markets under a stable U.S. leadership. 

This inflow would strengthen the naira by increasing the supply of foreign currency in the Nigerian market.

A Trump presidency, however, might lead to a more isolationist stance, causing U.S. investors to focus more on domestic opportunities, reducing foreign capital flows into Nigeria. A decrease in foreign investment could add to the naira’s struggles, especially given Nigeria’s high demand for foreign currency for fuel imports, foreign tuition, and travel.

U.S. Interest Rates and Monetary Policy

The U.S. Federal Reserve’s interest rates greatly influence global financial markets. Higher interest rates attract foreign capital into the U.S., strengthening the dollar. If interest rates remain high, the naira could face even more pressure. 

Trump has criticized the Federal Reserve in the past and may advocate for policies that pressure the Fed to adopt looser monetary policies. Lower U.S. interest rates could soften the dollar, potentially relieving some pressure on the naira.

A Harris administration might support the Fed’s independence, allowing it to make decisions without political interference. If the Fed chooses to raise interest rates to combat inflation, the dollar’s strength could increase, putting more pressure on the naira.

Geopolitical stability

The U.S. president’s approach to global diplomacy and international relations also impacts the naira. If Trump pursues an aggressive stance on trade disputes or military conflicts, this could introduce uncertainty into global markets, leading investors to retreat from riskier investments in emerging markets like Nigeria. 

This pullback would weaken the naira, as investors would demand fewer Nigerian assets.

Harris, however, might focus on strengthening alliances and supporting global institutions like the World Bank and International Monetary Fund (IMF), where the U.S. holds significant influence. These institutions provide financial support to developing countries like Nigeria, which relies on their funds to manage its foreign obligations. A stable international environment could make emerging markets more attractive for investment, possibly supporting the naira.

Potential Market Reactions and Uncertainty

Even with a Trump victory, global markets may not always react in a straightforward manner. For instance, if investors fear the repercussions of a protectionist U.S. policy, they may still seek safer investments outside the U.S., which might limit the dollar’s rise. Conversely, a Harris presidency may not necessarily weaken the dollar if the administration implements policies that strengthen the U.S. economy.

In the end, the future of the naira is influenced by numerous factors beyond U.S. policies alone. Domestic policies, global economic trends, and unforeseen geopolitical events all play a role.

While the outcome of the U.S. election will have implications for the naira, the degree and direction of this impact will depend on a range of unpredictable global and local factors.How a Trump or Harris Win Could Shape the Naira