Donald Trump’s recent reelection to the U.S. presidency, which saw him defeat Vice President Kamala Harris, has sparked concerns about how his policies may affect international investment flows in the years to come.
Foreign capital inflows to Nigeria increased significantly during Trump’s first term, five times as much as they did under President Joe Biden’s administration.
Data shows that during Trump’s first four years in power, Nigeria brought in $10.5 billion in foreign investment, whereas that amount has only been $2.39 billion under Biden.
According to analysts, this discrepancy results from the interaction of Nigeria’s interest rate strategy, U.S. monetary policy, and currency stability, all of which worked together to improve the investment climate under Trump.
Compared Inflows of Capital: Trump vs. Biden
A closer examination of the statistics shows that Nigeria’s capital inflows increased consistently under Trump’s presidency, indicating a positive climate for international investment. This pattern may be seen in the capital inflows breakdown by year:
- $950 million in 2016
- $2.47 billion in 2017
- $3.58 billion in 2018
- $4.5 billion in 2019
The United States alone contributed $4.5 billion of the $23 billion in total capital inflows to Nigeria by 2019. On the other hand, Nigeria has seen a sharp decline under Biden, drawing only $2.39 billion thus far, or around 25% of what was accomplished under Trump.
Important Elements Influencing Capital Under Trump
Interest Rate Policies: The United States kept interest rates low throughout Trump’s presidency, which attracted American investors looking for larger returns to emerging nations like Nigeria.
In order to attract international portfolio investment, Nigeria simultaneously provided favourable interest rates, especially from 2017 to 2018.
Higher yields on Nigerian government securities increased investor interest and inflows during this time.
Exchange Rate Stability: The naira’s relative stability was another foundation for Nigeria’s capital inflows.
For international investors worried about currency risk, the Central Bank of Nigeria (CBN) maintained the value of the naira at roughly N360/$1 between 2017 and 2019.
A stable currency is crucial for investors, especially in emerging nations where currency devaluation can significantly impact returns.
The narrative changed in the Biden years that followed. Many investors returned to the U.S. for greater, safer returns after the U.S. Federal Reserve raised interest rates to fight inflation.
A higher dollar and this policy shift decreased demand for risky developing market assets. The investment climate has become less predictable due to Nigeria’s severe devaluation pressures and growing difficulties in ¨preserving currency stability.
Trump’s Re-Election And Its Implications
Will Nigeria witness a boost in capital inflows once more as Trump takes office for a second term?
Investor interest in emerging markets like Nigeria may increase if Trump returns to his previous policy of supporting low interest rates.
Nigeria’s domestic economic policies, particularly those about inflation control, exchange rate stability, and a favorable interest rate environment, will also determine its capacity to take advantage of this.
Way Forward
Trump’s reelection offers Nigeria a fresh chance to attract global investment. To fully realize this potential, though, domestic policies must be carefully aligned to foster an environment favorable to investors.
Exchange rate stability, competitive interest rates, and ongoing reforms that increase Nigeria’s attractiveness to foreign investors will need to be the main priorities of policymakers.
