U.S. Tariff Hike Threatens Nigeria’s Manufacturing Sector, Warns MAN
The recent announcement of a 14 percent tariff on Nigerian products entering the United States, part of President Donald Trump’s continuing global tariff policy, has raised alarm bells across Nigeria’s trade and industrial landscape. While the U.S. administration justifies this move as a response to disproportionately high tariffs imposed by other nations on American goods, the repercussions for developing countries like Nigeria are severe and far-reaching. This decision seems strategically designed to pressure trade partners into renegotiating tariff regimes to benefit U.S. manufacturers.
“The U.S. is one of Nigeria’s most important trading partners, accounting for approximately 7 percent of our non-oil exports,” stated Segun Ajayi-Kadir mni, Director General of the Manufacturers Association of Nigeria (MAN). “In 2024, bilateral trade reached N9.59 trillion. This tariff hike threatens not only our export volume but our entire economic framework, especially as we aim to implement a N55 trillion budget amidst declining global oil prices.”
The timing of this tariff increase is particularly concerning, as Nigeria is delicately positioned to recover from previous negative impacts on the manufacturing sector. In 2024, the manufacturing sector accounted for 8.64 percent of the country’s GDP, making it one of the most vulnerable to trade policy shifts. With the new tariff, local goods exported to the U.S. will face heightened competition, significantly undermining their competitiveness in that crucial market.
Manufacturers in various sectors—including agro-processing, chemicals, and light industrial manufacturing—rely heavily on access to the American market. Unfortunately, increased costs for U.S. buyers due to the tariffs are predicted to diminish demand for Nigerian products. Notably, processed agricultural products like cocoa derivatives and sesame seeds have gained modest market footholds in the U.S. However, under the new tariff regime, these products could see export volumes drop, potentially wiping out an estimated N1 to N2 trillion from agricultural exports annually.
The implications of the new tariffs extend beyond revenue. They are poised to deter investments in value-added manufacturing. Over the last decade, the industry has worked diligently to transition Nigeria from being a raw material exporter to a producer of semi-processed and finished goods. But rising market-entry costs may make it more appealing for companies to revert back to raw material exports, undermining Nigeria’s industrialization goals and the long-term vision of export diversification under frameworks such as the African Continental Free Trade Agreement (AfCFTA).
Ajayi-Kadir notes the potential for significant job losses as well. “As export revenues decline, manufacturers may be forced to cut production and downsize their workforce, particularly impacting small-scale industrialists and those in special economic zones focused on the U.S. market,” he warned. This could be particularly devastating given Nigeria’s high unemployment rate and ongoing youth underemployment crisis.
The impact on the broader economy is also concerning. A decline in exports to the U.S. could erode Nigeria’s trade surplus, pushing the balance of payments into deficit. “This would have immediate implications for our foreign reserves and could lead to aggressive Central Bank interventions in the foreign exchange market, reducing its capacity to manage macroeconomic shocks,” Ajayi-Kadir explained.
The government’s budget for 2025, based on optimistic revenue predictions, could also be jeopardized. With assumptions of oil prices averaging $75 per barrel, the reality of prices falling below $60 complicates the economic landscape even further. A decrease in export revenues from non-oil sectors would force the government to cut capital expenditures and delay critical infrastructure projects.
The inflationary implications are troubling as well. With dwindling foreign exchange earnings, the Central Bank may resort to increasing interest rates to manage inflation, further raising business borrowing costs and stymieing domestic investment. “These ripple effects will ultimately burden consumers with higher prices, worsening the cost-of-living crisis,” added Ajayi-Kadir.
Ajayi-Kadir concluded with a note of caution about the political ramifications of the tariff: “We are concerned about potential pressures for Nigeria to reciprocate by lowering its own tariffs on U.S. imports, which could flood our market with subsidized goods and undermine local producers. This situation demands a carefully constructed policy response to safeguard our manufacturing sector and the larger economy.”
The hope remains that robust policy adaptations can mitigate these looming challenges while preserving Nigeria’s ambitions for self-sufficiency and a thriving manufacturing sector.