By Merit Ibe
For the Chartered Institute of Directors (CIoD), the ongoing trade wars between the United States and many countries, Nigeria inclusive, is not all gloom and doom, as they present silver linings for the country.
To this end, the body has asked the federal government and private sector players to leverage the face-off to carry out global trade realignments, as unprecedented growth opportunities for Nigerian businesses are springing up from the trade tensions.
The United States President, Donald Trump, recently imposed a 14 per cent tariff on Nigerian exports, while Nigeria maintains a 27 per cent tariff on American goods.
The institute argued that this financial standoff threatens to increase costs for importers, weaken the naira and disrupt established supply chains.
However, amid these difficulties lie potential advantages, including new trade partnerships, alternative export markets, and investment possibilities as global companies seek to restructure their operations in response to shifting trade policies, CIoD said Analysing the implications, the institute explained that the escalating tariff war challenges Nigeria’s trade balance and monetary stability.
“Economists widely recognise that trade barriers tend to restrict economic growth. With the US as its fourth-largest trading partner in 2024, these tariffs create substantial financial pressure on multiple fronts”, the CIoD said.
The institute led by its President, Tijjani Borodo, explained that the increased cost of foreign exchange as a result of the tariffs would particularly affect small and medium enterprises that lack the financial reserves to absorb sudden increases in import costs.
“These businesses form the backbone of the economy, and their struggles would ripple throughout the entire economic system, potentially increasing unemployment and reducing consumer spending power.
It pointed to one of the most pressing concerns for businesses to include disruptions to global supply chains, estimated to be worth tens of billions of dollars, noting that these disruptions will likely cause increased costs for goods and raw materials across various sectors.
“Nigeria imports most of its goods, such as electronics, vehicles, machinery, raw materials, and even food. If the new tariffs push up the cost of global trade, prices for these items will likely rise.
The interconnected nature of modern commerce means that even items not directly imported from the US will experience price increases as global trade patterns adjust. This challenges the manufacturing sector, which depends heavily on imported inputs.”
The CIoD also noted that the resulting inflation could further stress consumers already coping with high prices for essential goods.
It emphasised that businesses must contend with the reality that many international suppliers might increase prices across the board to offset losses in markets affected by tariffs.
“This could create a domino effect where even trade routes not directly targeted by the US-led tariffs experience cost increases. Furthermore, shipping and logistics companies might pass on their increased operational costs to customers worldwide, further compounding the price pressures on importers.”
CIOd believes that despite these challenges, the current trade situation may create strategic opportunities for forward-thinking businesses, as it could prompt a realignment of global trade partnerships, potentially benefiting Nigeria.
“This could help develop stronger trade relationships with countries affected by the tariff war, potentially opening new export markets.
The institute says as China and other tariff-affected countries seek alternative destinations for their products, Nigeria might become an attractive investment destination. “This could lead to technology transfer and manufacturing expansion, potentially strengthening local production capabilities and creating jobs. Businesses that are prepared to form strategic partnerships with international companies seeking to circumvent tariffs might find unprecedented growth opportunities.
It viewed that the situation might also accelerate interest in the African Continental Free Trade Area (AfCFTA), creating additional regional opportunities for businesses that can adapt quickly to changing trade patterns.
“Stronger intra-African trade networks could provide some insulation against external trade disputes whilst creating new markets for Nigerian products throughout the continent.”
To weather the storm, it advised that businesses should consider forming industry associations or cooperative arrangements to increase their collective bargaining power when dealing with international suppliers and customers as such collaborations could help spread risks and reduce individual exposure to sudden market changes resulting from tariff policies.
It also suggested that companies must also invest in understanding alternative supply sources and potential new export markets.
“Those able to quickly adapt their business models to changing trade conditions will likely outperform competitors who remain fixed in traditional patterns.
“This might require investments in market research, building relationships with potential international partners, and exploring regional alternatives to established global supply chains.”
While increased costs, currency pressures, and supply chain disruptions create serious obstacles, CIoD opined that redistributing global trade flows offers potential avenues for export growth and investment attraction.
It recommended that enterprises that adapt quickly to the changing trade environment by emphasising local production, exploring new export markets, and building resilience against external shocks may be better positioned for long-term success.
CIoD posited that government’s policy response, particularly regarding support for local manufacturing and strategic trade agreements, will prove crucial in determining how effectively the business community can weather this period of international trade tension.
As this situation unfolds, businesses must remain alert to emerging patterns and position themselves to capitalise on new opportunities whilst minimising exposure to the negative aspects of the tariff war”, CIoD advised.