The world is bracing itself for a Donald Trump or Kamala Harris’ win in the Tuesday presidential election in the United States.
No matter who wins, markets will react in certain ways. For Nigeria, Trump or Harris’ win will have implications for the economy.
The showdown could leave a lasting mark on Nigeria’s financial landscape, potentially triggering a wave of reactions in stock markets and bond prices.
Financial market reactions
Investors are increasingly nervous, causing stock markets around the world to shift unpredictably. In Nigeria, the stock market—already sensitive to foreign investment—feels this tension.
If Trump wins, some believe his growth-focused policies might boost global stocks in the short term, possibly benefiting Nigerian stocks as well. However, a Harris win could bring a more cautious approach to US spending, which may reduce investor interest in riskier markets like Nigeria.
Oyekan Idris, a capital market analyst, explained that a hawkish economic stance from Harris could further drive yields up in the US, making American assets more attractive.
“If US yields rise, we could see investors preferring the relatively safer, higher-return US assets over Nigerian investments,” Idris said. This shift in capital flows could draw funds away from Nigerian markets, adding pressure on local stocks.
Recalling the market reaction to Trump’s election in 2016, investors saw a temporary drop followed by a quick recovery.
A similar scenario could play out again. If the US election ends with a clear result, markets may stabilise, potentially helping Nigerian stocks in the short term.
Michael Brown, senior research strategist at Pepperstone London, echoed this view, noting that “markets crave certainty,” and a clear outcome could ease anxieties, allowing investors to refocus on growth.
Read also: How the US election could shake Nigeria’s stock and bond markets
Safe bets and Nigerian bonds
With all the unpredictability, investors tend to rush towards safe assets like US Treasury bonds. Yet, under either a Trump or Harris presidency, US Treasury yields could rise due to inflation fears or high government spending.
This increase in US bond yields could make Nigerian government bonds less appealing, leading to higher borrowing costs if investors pull back from emerging markets.
As Idris emphasised, Nigeria’s reliance on foreign capital means that any rise in US yields could divert investments, putting added strain on Nigeria’s bond market. If Trump’s policies boost inflation, as some economists predict, US bond rates could spike.
Alternatively, a Harris victory might nudge yields higher through spending increases, albeit at a slower pace, adding further pressure on Nigerian bonds.
A sharp rise in US bond yields would force Nigeria’s bond market to adjust, potentially pushing up yields and costs for the government. Such a development could lead to higher financing costs for infrastructure and public programmes, intensifying the country’s economic challenges.
Impact on energy industry
Nigeria’s economy is heavily reliant on oil exports. A Trump presidency, known for pushing for energy independence, might lead to higher oil prices if domestic US production increases, potentially affecting the Naira negatively if oil revenues decrease.
Roukaya Ibrahim, commodity and energy strategist, BCA Research, said an increased US production – as well other non-OPEC+ countries such as Brazil, Guyana and Canada – “has nearly fully nullified the impact of OPEC+ production cuts this year.”
One key area of divergence between Trump and Harris is the sanctions policy, analysts say, which has affected crude output in OPEC+ producers – Russia, Iran and Venezuela – in recent years.
After plummeting during the first Trump administration, oil production in Iran and Venezuela has recovered under President Joe Biden, with the focus of sanctions moving to Russia.
Both countries are exempt from quotas under the OPEC+ agreement, allowing them to pump as much as they can. They produced a combined 4.15 million bpd in September, according to the Platts OPEC+ Survey by Commodity Insights, up from 3.2 million bpd in February 2022 when Russia invaded Ukraine.
Conflicts in Ukraine and the Middle East as well as anti-democratic moves by Venezuelan leader Nicolas Maduro are likely to remain the key drivers of US sanctions policy, but the severity, speed and enforcement could differ depending on November’s result.
“Under a Trump Administration, the possibility of loosening sanctions on Russia is greater than under a Harris presidency,” said Jim Burkhard, vice president, research, S&P Global Commodity Insights. “Neither will be eager to ease sanctions on Iran given the escalation of its conflict with Israel.”
Ibrahim, earlier quoted, said Trump is more likely to apply maximum pressure on Iran than Harris. “Tighter sanctions would create space for other producers to make up for supply losses. OPEC could take advantage of this by raising its output,” she said.
Read also: What Trump or Harris’s presidency will mean for automotive industry
Energy security
Another area of divergence could be on Middle East energy security. OPEC+ is largely counting on the US to help secure energy infrastructure in the region amid escalating tensions between Israel and Iran.
In September 2019, Saudi Aramco’s Abqaiq crude processing plant and Khurais oil field were attacked, taking out over five million bpd of production. The US – then led by Trump – responded by deploying additional US troops and boosting Saudi air defences.
Since the Israel-Hamas war began last October, Yemen’s Houthi rebels have attacked vessels – including crude tankers – in Middle East chokepoints, although Biden appears to have succeeded in preventing Israel from striking Iranian oil installations.
In a note on Oct. 29, Standard Chartered Bank said, “The risk of an escalating series of attacks over an extended period” could spike oil prices.
The potential for a further confrontation between Israel and Iran is likely to widen significantly as soon as voting has concluded in the US election, StanChart said.
Beyond production, OPEC’s relationship with the US has been fractious at times.
Periods of price volatility have led the US and the International Energy Agency (IEA) to release strategic petroleum reserves, impacting crude prices and OPEC producers’ export revenues.
US presidents have signed off on emergency Strategic Petroleum Reserves (SPR) releases in response to Operation Desert Storm, Hurricane Katrina, unrest in Libya and Russia’s invasion of Ukraine.
Trump directly called for the group to change output policy during his presidency. In 2018 he demanded the group increase production in a flurry of tweets. In April 2020, when the coronavirus pandemic caused prices to crash, Trump regularly tweeted about OPEC+ negotiations, which eventually resulted in massive production cuts.
“A US president would likely try to assert influence when prices rise, especially if they were to reignite inflation. But the oil market is currently well-supplied – and is moving to a significant surplus if OPEC+ increase production in 2025,” Burkhard, earlier quoted, said.
What’s next for Nigerian economy?
The US election’s impact on Nigeria underscores the interconnectedness of global economies. Nigerian policymakers are likely bracing for aftershocks, especially if the election disrupts investor confidence in emerging markets.
With strategic planning and efforts to diversify revenue sources, Nigeria could strengthen its resilience against such external shocks.
Brown of Pepperstone London believes that a clear election result—regardless of who wins—would be the best-case scenario for markets.
If investors see stability, even temporarily, they might gain enough confidence to take on more risks, which could help drive Nigeria’s stock market back up.
