Former U.S. President Donald Trump’s proposed tax reforms and tariffs pose significant risks to Nigeria’s economy, particularly affecting its banking sector and foreign direct investment (FDI).
As Trump seeks to reduce the U.S. corporate tax rate from 21% to 15%, experts caution that this may trigger a repetition of the economic turmoil witnessed after his 2017 Tax Cuts and Jobs Act.
That legislation led U.S. companies to repatriate $777 billion, resulting in a dramatic drop in Nigeria’s FDI, which plummeted from $4.65 billion in 2017 to $2.23 billion in 2018.
According to Business Day, the combined threat of tariffs and tax reductions could disrupt vital Nigerian industries such as oil and agriculture, which depend heavily on international trade and financial support.
Nigerian banks, already grappling with liquidity challenges, face the prospect of diminished capital inflows and increased risks.
However, experts believe that banks can adapt by providing diversified financial products and capitalising on Africa’s rising financial prominence.
Abayomi Fashina, a finance and tax expert, highlighted that Nigerian banks have the potential to prosper by creating tax-efficient financial products and taking proactive measures to diversify their portfolios.
He emphasised that the key to success lies in agility, robust risk management, and capitalising on the opportunities presented by these policy changes.
Fashina further stated that by positioning themselves to cater to the needs of U.S. firms seeking diversification, Nigerian banks could mitigate risks and seize emerging opportunities within Africa’s evolving financial landscape.
He concluded that in the context of the changing global economy, Nigerian banks could play a crucial role.
