US Announced a 14% Tariff on Nigeria’s Goods Exports
Investment Research Weekly Market Commentary | Apr 7, 2025
Welcome to this week’s edition of our stock market newsletter!
Green White Green Recap
Macro Update
US Announced a 14% Tariff on Nigeria’s Goods Exports
While it is unclear what President Trump’s sweeping tariffs against the world are meant to achieve, it is disruptive for African economies like Nigeria.
The US introduced a 14% tariff on Nigerian exports, which is roughly half of the US’ trade deficit with Nigeria. In 2024, for instance, the US exported $4.2bn worth of goods to Nigeria and imported $5.7bn for a trade deficit of $1.5bn or 26.3%.
This decision is a turning point in US-Africa trade relations as the US offered many African countries, including Nigeria, tariff-free access to support their development through the African Growth and Opportunity Act (AGOA). Interestingly, AGOA is up for renewal in September 2025, but this is now potentially in jeopardy.
The increase in tariff may affect the competitiveness of Nigeria's exports to the US, which are mainly crude oil and gas products. It is also likely to affect Nigeria’s efforts to grow non-oil sectors. Nigeria's non-oil exports to the US reached ~$243.7 million as at Q3 2024, including gas, fertilizers, and agricultural products.
While the sweeping nature of the tariffs provides some comfort, since all countries are affected, countries with lower tariffs than Nigeria, which is a lot of developing countries, can potentially have a better relative advantage. This would mean weaker exports and profitability for exports facing businesses.
However, Nigeria's 14% tariff is lower than rates for major exporters like China (34%) and the EU (20%), potentially offering a relative advantage.
Outside of bilateral goods trade considerations, the tariffs could potentially hurt global growth and demand for commodities, which would mean lower prices for energy and agriculture products. Similarly, foreign investors would be more reluctant to invest in emerging markets given the uncertainty and risk.
Weaker oil exports and foreign investment in Nigeria would affect dollar supply and potentially lead to a further naira depreciation.
Key Takeaways
The new 14% tariff on Nigeria’s exports to the US is potentially disruptive for Nigeria’s export facing businesses.
The increased uncertainty brought by US’ sweeping tariffs could lead to lower commodity prices and weaker investor sentiment, which would hurt the naira.
FX Update
CBN Reports Significant Increase in Nigeria's Foreign Exchange Reserves
In positive news, the Central Bank of Nigeria (CBN) announced a significant improvement in the country's net foreign exchange reserves (NFER). As of the end of 2024, Nigeria's NFER stood at $23.11 billion, the highest level in over three years and a substantial increase from $3.99 billion at the end of 2023.
This improvement in net reserves suggests a strengthening of Nigeria's external liquidity and a greater capacity to meet short-term external obligations.
Despite the positive news, the naira weakened 3.9% to ₦1,600/$, a notable depreciation compared to ₦1,537/$ last week (March 28, 2025). In the parallel market, the naira exhibited stability, holding steady at ₦1,550 against the US dollar compared to its value on March 28, 2025.
Nigeria's gross external reserves at $38.173 billion as of April 2, down from $38.30 billion, recorded on March 28.
Key Takeaways:
The increase in CBN’s net reserves provides some comfort about the gains and stability in the naira. However, the naira still weakened during the week, perhaps due to worries about President Trump’s trade policies.
Long-term investors are encouraged to invest in dollar-denominated assets.
Remember to save dollar-based goals in dollars, which can be done with apps like Ladda.
Equities Update
Slight Gain but Mixed Sector Performance
For the week ending April 4, 2025, the NGX All-Share Index (ASI), a broad measure of the performance of Nigeria’s stocks, saw a slight 0.01% increase, with a 2.53% gain Year-to-date (YTD).
Looking at different sectors, Insurance and Banking performed well with a 1.70% and 0.51% gain respectively, while Consumer Goods (-0.66%), Oil & Gas (-0.19%), and Industrial Goods (-0.02%) saw losses.
The Financial Services sector (including Banking) saw the most trading activity, supported by the Banking Index's strong 6.96% growth in Q1 2025, indicating a positive underlying trend. Earnings reports from major players like GTB, Zenith Bank, Access Bank, and UBA released during the week were likely a key factor in these movements, as positive results typically draw investor attention and drive stock appreciation within the sector.
In short, the NGX showed a slight overall gain, with varied performance across sectors potentially influenced by earnings and a strong banking sector trend.
Key Takeaway:
The weakness in the earnings performance of non-banking stocks and weak investor sentiment is affecting the performance of Nigerian stocks in 2025.
We continue to maintain a limited exposure to Nigerian stocks due to the challenging macro environment.
Fixed Income Update
364-day Treasury Bill Yield Much Higher
The yield on the short-term 91-day bills saw a slight increase to 17.51% from 17.33%. Interestingly, the yield on the 182-day bills decreased to 17.71% from 19.42%, suggesting some shifts in demand or market dynamics for mid-tenor instruments.
Meanwhile, the longer-tenor 364-day bills experienced lower demand, leading to a decrease in their price, which in turn caused their yields to climb significantly to 24.866% from 20.72%.
In contrast to the movements in the treasury bill market, the bond market exhibited stability, with average yields across maturities holding steady at 18.54% for the week, indicating a cautious stance from investors amid the tightening monetary policy.
Key Takeaways:
You can invest in treasury bills to save for your short-term goal on rent, schools, fees, etc. through Ladda—a fintech app that helps you save at high returns.
For long-term goals, naira-denominated fixed income instruments are not suitable due to inflation and currency risks
Star-Spangled Banner Recap
Tariff Fears Trigger Broad Sell-Off
Investor sentiment took a sharp negative turn towards the end of the week, primarily driven by fears of a global trade war following the US administration's announcement of sweeping tariffs and swift retaliation from China.
The prospect of prolonged tariffs has repercussions for global economic growth, with projections indicating a potential reduction of around 0.5% to 1.0%. If these tariffs are not reversed, they could also lead to a recession in the United States.
The concerns about the tariffs contributed to the broad sell-off in risk assets.
Major Stock Performance:
US stock markets saw a significant downturn following tariff fears. On Thursday, April 3, the Dow fell 4%, the S&P 500 dropped 4.8% (worst day since June 2020), and the Nasdaq tumbled 6% (worst since March 2020). This continued on Friday, April 4, with the Dow plunging another 4.7% (entering correction), the S&P 500 falling 5.1%, and the Nasdaq declining 4.9% (entering bear market).
Global Markets:
FTSE 100 (UK): Posted a weekly loss of 0.5%, with a year-to-date performance of +1.3%.
Nikkei 225 (Japan): Showed positive momentum with a weekly gain of 0.6% and a strong year-to-date performance of +21.8%.
CAC 40 (France): Experienced a decline for the week, falling by 0.9%, while maintaining a year-to-date gain of +5.2%.
Shanghai Composite (China): Recorded a marginal increase of approximately 0.3% for the week, with a year-to-date performance of -1.2%.
Key Takeaways:
The dominant theme in the US market for the week ending April 4, 2025, was the rapid escalation of trade tensions between the US and the rest of the world.
We expected sustained volatility and weakness in US stocks if the tariffs are unchanged.
Remember to always save for your dollar goals in dollars. You can do this with us on Ladda—a fintech app that helps you save at high returns.
We hope you find this edition insightful, and as always, stay focused on your financial goals!
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Interesting read. Thanks.