Trump’s Tariff Tantrum and the Curious Rise of the Naira

By early 2025, Nigeria’s long-beleaguered currency has staged an unlikely comeback. The naira, following two brutal devaluations, is now among the world’s top-performing currencies since the November 2024 U.S. election, rallying over 7% against the dollar. While domestic reforms under President Bola Tinubu have laid the groundwork, the more immediate propellant of this currency renaissance lies far afield—in Washington, D.C.

As President Donald Trump embarks on his second term with a fresh round of tariff threats against major emerging markets such as China, Mexico, and Vietnam, global investors are scrambling for havens insulated from the turmoil of global trade disputes. Nigeria, once a pariah among portfolio managers, has suddenly emerged as an improbable beneficiary.

This revival is not simply a case of “local boy makes good.” Rather, it exemplifies the rising attractiveness of “idiosyncratic” frontier market trades—bets on economies that are relatively decoupled from global supply chains but offer extraordinary yields. Nigerian local currency bonds, yielding between 20% and 25%, are proving irresistible in a world of geopolitical risk and uncertain monetary policy. These yields have drawn a wave of foreign inflows, bolstering the naira and helping fund a fiscal environment long reliant on volatile oil exports.

“There’s been proper change in the fundamentals of the Nigerian economy,” says Charlie Robertson of FIM Partners told the Financial Times. “Two years ago, you had a currency that was uninvestable.”

Those fundamentals are indeed more solid. Tinubu’s government has scrapped costly fuel subsidies, de-anchored the naira from its unsustainable peg, and lifted policy rates to 27.5% in an attempt to tame inflation—still running hot at 23% in February. While the reforms have extracted a steep toll from ordinary Nigerians, especially through surging food and transport prices, investors are viewing the pain as a sign of seriousness.

Much like the 2013 “taper tantrum”—when the U.S. Federal Reserve’s hints at ending quantitative easing triggered mass outflows from emerging markets—Trump’s renewed protectionist threats have caused a reordering of capital flows. But this time, the panic has a different geography. Rather than punishing risk broadly, investors are drawing finer distinctions, rotating out of export-driven economies vulnerable to tariffs and into frontier markets that are both reform-minded and relatively detached from global supply chains. In this odd inversion of the taper tantrum, Nigeria has emerged as an unlikely haven.

Indeed, Nigeria’s lack of integration into global manufacturing—long a disadvantage—has become a hedge against the turbulence of Trump-era mercantilism. “They don’t have high trade surpluses with the U.S. [and] they are not as exposed to the noise from tariffs,” observes Alexis de Mones of Ashmore, an emerging markets fund manager told the FT.

Yet, warning signs remain. The Central Bank of Nigeria appears to be actively managing the currency to avoid speculative attacks, and while gross foreign reserves have fallen from $40 billion to $38.5 billion, officials say this reflects the clearing of off-balance sheet obligations rather than capital flight. The opacity of net reserves, however, clouds the true picture.

More worryingly, should oil prices fall or foreign inflows reverse, the naira’s newly restored stability could rapidly unravel. For now, policymakers are wagering that fiscal discipline and high real rates will keep investors seated at the table.

Still, Nigeria’s ascent from crisis to cautious optimism suggests a wider shift in how capital is allocated in the age of trade wars. In a world where even large emerging economies can be targets of erratic U.S. trade policy, smaller economies with credible reforms, high yields, and limited exposure to U.S. sanctions or tariffs suddenly look less like risk and more like refuge.

As long as U.S. trade policy keeps reshaping the flows of capital—and Nigeria sustains its reform momentum—the naira may find itself not just supported, but strategically sought after.

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