A few weeks ago, the Nigerian government signed a “new-old” national anthem into law, a situation that has sparked outrage among citizens. In a period where the country’s inflation is increasing daily and other dire economic and national issues, there is certainly a case of misplaced priorities somewhere. Moving forward, the global trade landscape is constantly changing, part of which has far-reaching implications affecting everything from the prices of everyday goods to investment strategies and employment opportunities.
Understanding these global trade changes and their impact on personal finances is crucial for making informed financial decisions.
Trade Wars and Tariffs
One of the most significant recent shifts in global trade has been the escalation of trade wars, particularly between major economies such as the United States and China. Trade wars typically involve countries imposing tariffs on each other’s goods, leading to increased costs for importers and consumers. For instance, tariffs on Chinese electronics and appliances have led to higher prices for these products in the U.S. market. As a consumer, this means you might notice an increase in the cost of gadgets, household appliances, and other imported goods.
Higher tariffs also affect businesses that rely on imported raw materials. These companies often pass on the increased costs to consumers, leading to inflationary pressures. Additionally, trade wars can disrupt supply chains, causing delays and shortages that further exacerbate price increases. For individual investors, trade wars create market volatility, affecting stock prices and the overall performance of investment portfolios.
Brexit and Regional Trade Agreements
The United Kingdom’s exit from the European Union (Brexit) has introduced new complexities in trade relations between the UK and EU member states. Brexit has led to the imposition of customs checks, regulatory changes, and new tariffs, which have increased the cost and complexity of doing business across the English Channel. For consumers, this can result in higher prices for goods imported from Europe and reduced availability of certain products.
On the other hand, new regional trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the African Continental Free Trade Area (AfCFTA), are opening up new opportunities for trade and investment. These agreements aim to reduce trade barriers, enhance market access, and foster economic integration among member countries. For investors, these trade agreements can present new opportunities in emerging markets, potentially offering higher returns on investment.
According to PwC, the trio of Brexit uncertainty, the US-China trade war and Iran sanctions hold important consequences for the Nigerian economy. Iran sanctions offer an upside for the Nigerian economy. Brexit and the US-China trade war create a downside for the Nigerian economy. Nigeria is exposed to global economic shocks due to significant debt accumulation, an import-dependent economy and low diversification of exports.
Technological Advancements and E-commerce
Technological advancements, particularly in e-commerce and digital trade, are transforming global trade. The rise of online marketplaces and digital platforms has made it easier for businesses to reach international customers, reducing the need for physical storefronts and traditional distribution channels. This shift has led to increased competition and lower prices for consumers, who now have access to a broader range of products from around the world.
However, the growth of e-commerce also brings challenges, such as cybersecurity risks and regulatory issues. Consumers need to be vigilant about data privacy and secure payment methods when shopping online. For businesses, adapting to digital trade requires investment in technology and compliance with varying international regulations, which can be costly but essential for staying competitive.
Currency Fluctuations
Global trade changes often lead to fluctuations in currency exchange rates. For example, trade tensions can cause uncertainty in financial markets, leading to volatility in currency values. A weaker domestic currency makes imports more expensive but can boost exports by making them cheaper for foreign buyers. For individuals, currency fluctuations can affect travel costs, foreign investments, and the prices of imported goods.
In Nigeria, the government and the apex bank, CBN have had issues with the stability of the exchange rates – to this end, different measures, policies, sanctions, and regulations and deregulations have all been carried out, most of which to a significant extent is yet to yield results. An article on Nairametrics further cements this position highlighting certain issues including the introduction of significant risks and uncertainties into the business environment in Nigeria. This instability has also made it difficult for companies to predict costs and revenues, and even properly plan for future business dealings.