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Trump’s Return Could Spark Volatility, Hit Nigerian Economy and Global Oil Prices

Written by Agboola Oluwafemi on November 8, 2024

News Views: 410

The potential return of Donald Trump to the U.S. presidency may have significant global economic impacts, especially for Nigeria. In a recent analysis by FXTM, Senior Market Analyst Lukman Otunuga cautioned that Trump’s expected policies, which prioritize increased U.S. energy production, could drive up domestic supply, pushing oil prices down.

This scenario would be challenging for oil-dependent economies like Nigeria, which relies heavily on oil exports for revenue. Otunuga stated, “Trump’s victory may pressure oil prices as he is seen pushing for a further increase in domestic oil and gas production, leading to increased supply in the long term.

In addition, his policies could see a boost in US growth – triggering inflationary pressures.“ He added that Trump’s policies could also fuel inflationary pressures in the U.S., which may lead the Federal Reserve to maintain higher interest rates, strengthening the dollar and potentially lowering global oil prices further.

Such developments, according to Otunuga, would add to (Nigeria’s) woes as it navigates a rough period.

In financial markets, the anticipation of a Trump victory has already stirred movement. The dollar gained 1.5% against the yen, marking a peak since July, and saw over a 1% rise against the euro and more than 3% against the Mexican peso.

Bitcoin also surged to a record $75,330.88, surpassing its previous high in March. Meanwhile, the S&P 500 futures rose by 1.4%, suggesting U.S. equities may benefit from Trump’s likely push for tax cuts and deregulation, a prospect FXTM described as favorable for U.S. equity bulls.

Otunuga remarked that Trump’s return to office could define market trends, with the USD, Bitcoin, and other assets tied to the ‘Trump trade’ the biggest winners.

Looking back at Trump’s prior term, Otunuga noted that his policy unpredictability and trade tensions, especially with China, drove heightened market volatility.

During that time, the VIX index, a gauge of market volatility, spiked by over 60%, while volatility has since eased by 10% under President Biden. Otunuga expects a Trump victory to reignite similar market uncertainty, predicting new levels of global volatility.

On the global trade front, Trump’s proposed tariff hikes on Europe and China might intensify trade tensions, potentially fueling inflation that could drive up interest rates. “An appreciating USD could hit gold prices along with emerging market currencies On the geopolitical front, Trump has already vowed to ‘stop wars’ and swiftly end the war in Ukraine.

Any major shifts in US foreign policy that escalate tensions could trigger risk-aversion,” it was said”. said Otunuga.