Donald Trump, PHOTO: AFPOn January 20, 2017, Donald Trump was sworn in as the 45th president of the world’s most powerful country, the United States of America. President Trump campaigned on a populist economic and political agenda the implementation of which has broad implications for Nigeria. Essentially, Trump’s election promises an end to the liberal political and economic order that the U.S. and its allied built after World War II.
Nigeria benefitted from that order, as it was instrumental in ending the colonial period, as the U.S. and its allies sought to curtail the potential spread of communism, in the face of vigorous and sustained opposition to colonialism by Nigerian politicians. It was clear to America and its allies that the then Soviet Union, had the ability to support a message that could be compelling to Nigeria and other African countries, and that they risked losing access to minerals and consumers with a political shift towards the Soviet Union.
At their core, Trump’s policies are populist, anti-globalisation and protectionist. The policies threaten to increase tariffs on imports and restrict the flow of investment from the U.S. to other countries. Such policies are posited to hinder trade and investment between the U.S. and other countries and by effect, depress global economic growth, while stimulating growth in the U.S. Similar policies in the 1920 and 1930s helped worsen the great depression, as American protectionism in the form of higher tariffs on thousands of imported goods, triggered retaliation and currency wars.
Nigeria is a commodity dependent economy and is hugely exposed to global economic conditions. Dependent on oil and gas exports as the basis of the revenue that powers its economy, policies that depress global growth have a significantly negative economic effect as they depress crude oil and natural gas prices. The U.S. is the leading global economic, consumer and financial power in a deeply interconnected world, and the protectionist policies, that will have to be implemented for Trump to deliver his campaign promises, threaten global economic growth.
Given Trump’s pledge to revoke regulations deemed to hinder business growth and job creation in the U.S., a second threat comes from the increasing possibility that congressional Republicans will overturn anti-bribery regulations aimed at U.S. resource companies, such as Exxon Mobil Corp and Chevron Corp. The danger here, is the creation of a global climate that reduces the focus on corruption, as potent factor limiting economic growth and corroding national values. There is no doubt that enforcing sanctions on politicians for political and economic corruption, in a manner akin to the individual sanctions placed on politicians in Iran and Russia, will be a force for quickly reducing the rate of corruption in Nigeria, but it is clear that Trump, is unlikely to do that.
There is nothing Nigeria can do to counter the populism that has swept the U.S. and its potential to lower global economic growth and continue a lack of intense support from the U.S. to the country’s fight against corruption. As a crude oil exporting country, Nigeria is ill equipped to leverage the growth that Trump’s proposed trillion-dollar investment in infrastructure, reduction in regulations and isolationist policies is expected have on the U.S. economy. In fact, over the last 10-years, the U.S. has reduced its import of Nigerian crude to next to nothing and has no need to import liquefied natural gas. Nigeria has also hitherto failed to significantly leverage the opportunities created by President Clinton’s Africa Growth and Opportunities Act and President Obama’s Power Africa initiative, in any significant manner.
Nigeria can only hope that China (and possibly western Europe) will be able to negate any negative impact on global economic growth by powering the growth required to tighten the supply and demand conditions that are necessary for crude oil and natural gas prices to increase in a rapid and sustainable manner. Clearly, this is a tall order, given the huge inventories on hand, as being seen with the current slow increase in crude oil prices, as well as the fact that as OPEC is reducing its supply of crude oil to global markets, U.S. producers are ramping up production in response to the attendant price increase.
Slowing economic growth in China, as it continues the process of restructuring from an investment and export led economy to a more sustainable consumer and innovation led one, also portends headwinds for global economic growth and thus rising demand for minerals and commodities and the increasing prices Nigeria needs to ramp up revenues.
In response, Nigerian politicians can elect to deepen their own brand of nationalism by maintaining the high tariffs placed on selected goods in response to the deep foreign exchange crisis the country is currently facing, implementing tactics to inculcate a Nigeria first mentality in its population and conceivably increase consumption of locally produced goods and services, waging a war on corruption with deterrence as the key outcome to enhance the efficiency of budgets and the use of resources, making moves to create a skilled labour force, trimming the size of the public sector, and running budget deficits.
What is clear, is that the populism that has taken root in the U.S. gained traction in the United Kingdom, and threatening to take political power in France and Germany, has the distinct possibility of reducing global growth and having negative effects on commodity driven economies like Nigeria, that needs to be actively managed in a manner that fosters economic growth and job creation in the country.
Ijose is a policy analyst based in the United States.