The recent U.S. tariff hike poses significant challenges for the Nigerian manufacturing sector, potentially stifling growth and innovation, while also reverberating throughout the broader economy by increasing production costs and limiting export competitiveness, which could lead to job losses and reduced economic stability.

The announcement of a 14 percent tariff on Nigerian products entering the United States, as part of President Donald Trump’s ongoing global tariff policy has triggered widespread concern across Nigeria’s trade and industrial landscape.

While the broader rationale behind this trade action is grounded in the U.S. administration’s claim that many countries impose disproportionately high tariffs on American products, the consequences for developing nations like Nigeria are profound and far-reaching.

The decision appears to be a strategic move to pressurize trade partners into renegotiating tariff regimes in favour of U.S. manufacturers.

Undoubtedly, the United States remains one of Nigeria’s most significant trade partners, accounting for approximately 7 percent of its non-oil exports.

In 2024, bilateral trade between Nigeria and the US stood at N9.59 trillion, representing 6.9 percent of Nigeria’s total trade volume. Of this, Nigerian exports to the U.S. amounted to N5.52 trillion, while imports from the U.S. stood at N4.07 trillion.

The new tariff regime directly threatens this trade dynamic, particularly in a year when Nigeria is projecting an ambitious N55 trillion budget and facing the downward trend in global crude oil prices, which have already fallen below the government’s benchmark of $75 per barrel. The tariff hike, therefore, comes at a vulnerable moment when the country is just recovering from the impact of the government policy mix that has had negative effects on the manufacturing sector.

Impact on Nigeria’s Manufacturing Sector

Nigeria’s manufacturing sector, which contributed 8.64 percent to the country’s GDP in 2024, is one of the most predisposed sectors of the economy when it comes to trade policy shifts. The imposition of a 14 percent tariff on Nigerian exports significantly undermines the competitiveness of locally manufactured goods in the U.S. market.

MAN members who are exporters in Agro-processing, chemicals and pharmaceutical, basic metal, iron & steel, non-metallic mineral products and other light industrial manufacturing rely heavily on the U.S. for market access.

With increased costs for American buyers due to the tariffs, demand for Nigerian products is expected to decline. For instance, processed agricultural goods such as cocoa derivatives, sesame seeds, and ginger, which have gained modest penetration in U.S. markets, are likely to witness a drop in export volume.

According to the National Bureau of Statistics, agricultural exports accounted for over N4.42 trillion in 2024, with the U.S. being one of the top destinations. The tariff could potentially wipe out N1 to N2 trillion of that figure annually.

In addition to revenue losses, the new tariffs pose a significant disincentive to firms investing in value-added manufacturing. Over the past decade, manufacturers have made concerted and strategic efforts to support the country’s transition from exporting raw commodities to semi-processed and finished goods. However, higher market-entry costs because of higher tariff on Nigerian products reduce the profitability of such investments, making it more attractive for firms to revert to exporting raw materials. This is counterproductive to Nigeria’s industrialization agenda and compromises the long-term goal of achieving export diversification under platforms such as the African Continental Free Trade Agreement (AfCFTA).

Moreover, the implications on employment in the manufacturing sector are dire. As export revenues fall, many companies may reduce their production scale or downsize their workforce to cut costs. Contract manufacturers, small-scale industrialists, and firms operating in special economic zones targeting the U.S. market are likely to be worst hit. This could lead to job losses at a time when the national unemployment rate remains high, and youth underemployment continues to pose a socio-economic threat.

Additionally, Nigerian firms that are part of regional or global supply chains—particularly in pharmaceuticals, chemicals, foods and beverages and motor vehicle assembly—stand to lose their competitive edge, as their products become less attractive to U.S. companies seeking sourcing partners.

Impact on the Broader Economy

Beyond the manufacturing sector, the Nigerian economy is not insulated from the effects of the U.S. tariff decision. First, there is direct impact on Nigeria’s trade balance. With the country already grappling with a fragile external sector, any significant reduction in exports to the U.S. will erode the current trade surplus, potentially pushing the balance into deficit. This will have immediate implications for the nation’s balance of payments and could result in a drawdown of foreign reserves, putting further pressure on the exchange rate.

The Central Bank of Nigeria may be forced to intervene more aggressively in the forex market, thereby reducing its buffer for managing other macroeconomic shocks.

The timing of the tariff decision is particularly difficult for the federal government, which has tied much of its 2025 budgetary projections to optimistic revenue assumptions. The budget, pegged at N55 trillion, assumes oil prices will average $75 per barrel throughout the fiscal year. However, the reality of the global oil market is starkly different, with current prices already falling below $60 per barrel. If export earnings from non-oil sectors such as manufacturing also decline due to the new U.S. tariffs, the government will face greater shortfall in revenue. This could lead to cuts in capital expenditures, delays in infrastructure projects, and an increase in borrowing—all of which could undermine economic growth and stability.

There is also the inflationary dimension to consider. As the trade environment becomes more uncertain and foreign exchange earnings dwindle, monetary authorities may be compelled to raise interest rates in a bid to control inflation and stabilize the naira. However, higher interest rates will increase the cost of borrowing for businesses, including manufacturers, and could stifle domestic investment. The ripple effects will be felt by consumers, as firms pass on higher costs through increased prices for goods and services. This will exacerbate the cost-of-living crisis and further strain household incomes.

Moreover, the tariff hike will halt investors’ confidence in the economy. Nigeria has been striving to position itself as a manufacturing hub in West Africa, partly by attracting foreign direct investment from firms interested in tapping into both domestic and export markets. The new tariff regime makes Nigeria a less attractive proposition for such investors, particularly those who view access to the U.S. market as a key strategic advantage.

In 2023 alone, Nigeria’s manufacturing sector attracted over $1.6 billion in capital importations. That figure could decline significantly in 2025 if investor confidence is not restored through robust policy responses.

MAN’s Concerns

In a release signed by Segun Ajayi-Kadir mni, Director General, MAN, stated it’s concerns as follows:

That the Manufacturers Association of Nigeria is deeply concerned about both the substance and the implications of the new U.S. tariff policy. Our foremost concern lies in the asymmetry of the trade action which undermines the spirit of international cooperation and disregards the developmental needs of emerging economies.

MAN is also wary of potential pressure on Nigeria to reciprocate by reducing its own tariffs on U.S. goods. While the U.S. may frame this as a step toward “fair trade,” the reality is that lowering tariffs on U.S. imports could flood the Nigerian market with subsidized goods, thereby undermining local producers. This is especially troubling given the weak state of Nigeria’s infrastructure, logistics, and energy supply—all of which already place local manufacturers at a disadvantage.

Another key concern is the risk of policy diversion. Nigeria has, in recent years, made commendable strides toward achieving self-sufficiency in several manufacturing segments and diversifying away from oil. However, succumbing to external pressures to liberalize trade prematurely would reverse these gains. Instead of supporting domestic production, such actions would signal to investors and industrialists that Nigeria lacks a coherent long-term trade and industrial policy.

Furthermore, the absence of institutional capacity to engage in sophisticated trade negotiations places Nigeria in a vulnerable position. While countries with advanced legal and economic institutions may be able to negotiate favourable terms, Nigeria is at a disadvantage due to capacity constraints. This could lead to suboptimal agreements that serve foreign interests more than domestic development objectives.