What Nigeria and Other Emerging Economies Should Expect From Joe Biden’s Presidency

As Joseph Robinette Biden Jr., the former Vice President and President-elect of the United States of America, prepares to take over the world’s largest economy from President Trump on January 20, 2021, Investors King looks into what Nigeria and other emerging economies should expect following four years of unnecessary China-US trade war, US-Iran attacks, US-North Korea nuclear war declaration and back and forth with Russia on US election meddling.

Since Donald Trump became the President of the United States on January 20, 2016, he has worked hard to up global risk, increase economic uncertainties and ensure global economy does not expand through China trade war and the disapproval of a deal that took six world powers 12 years to sign with Iran. Like those were not enough, Donald Trump immediately started threatening a fellow psycho, Kim Jong-un of North Korea, with a bigger nuclear button, creating an intense and extremely challenging business environment in recent times.

The record-increase in global economic uncertainties and risks led to capital outflow from emerging economies as investors became wary of impending doom that could erode their capital, especially knowing that emerging economies do not have the structure to protect investment funds once catastrophe struck.

In the first quarter of 2017, just about a year in the office, Nigeria’s Foreign Direct Investment (FDI) plunged by $640.61 million or 41.36 percent from $1.55 billion posted in the final quarter of 2016. This decline continues throughout the year despite the Central Bank of Nigeria introducing Investors and Exporters Forex Window to bridge the gap between exchange rates offered by the apex bank, bureau de change operators and on the black market.

According to a United Nations report, Nigeria’s FDI declined by 43 percent in 2018 to $2 billion, partly because of MTN tax issues with the Federal Government and Trump’s ‘shithole’ comment that demarketed Nigerian assets and discouraged potential investors from looking the Nigerian way in the same year that foreign investment inflow into sub-Saharan Africa rose by 13 percent to $32 billion.

Donald Trump’s poor attitude towards Africa was the main reason African nations increased their Chinese loans and other financial supports that has now distanced the continent from the world’s largest economy. One of the jobs of Joe Biden would be to prove the United States’ commitment to the continent or watch American position in Africa further relegated.

Likely Implications of Joe Biden Presidency on Nigeria and Emerging Nations

As widely expected, Joe Biden’s calm personality and diplomatic nature could help bridge the division created in the upper house — control by the Republicans — and unite US lawmakers for one specific purpose, national building.

Investors King is anticipating that this unity, coupled with the fact that Democrats control the lower house would help speed up the approval of almost $2 trillion stimulus package as the world’s largest economy looks to revive businesses battered by COVID-19 and protect jobs while simultaneously creating new ones.

On the global front, Joe Biden would likely seek an amicable trade agreement with the second-largest economy, China and look to ease global tension and support the International Monetary Fund, the World Bank, United Nations and other global organisations on growth and at curbing or securing COVID-19 cure.

With global tension and uncertainties predicted to subside with the exit of Donald Trump, global investors will start looking into emerging markets with the ability to grow over two percent and with lesser risk. And not just focus on the United States as a safe haven to protect their funds.

Charles Robertson, a Chief Economist at Renaissance Capital (RenCap), said Blackrock’s fixed income section that manages over $2.6 trillion in assets have said they will invest more in emerging economies. To put this in perspective, Africa’s total GDP is $2 trillion, therefore, Blackrock alone could be dumping over $100 billion in fixed income on the continent next year.

Robertson said “The stock of Africa’s Eurobonds only topped $100 billion in 2018, and even if it is only Blackrock’s actively managed part of the business more like $2 trillion in all asset classes (perhaps $700 billion in fixed income), that starts to shift to Emerging Markets this could be very helpful.

“Our base case is that Foreign Direct Investment will stop being a net positive for the US due to Trump’s defeat, and portfolio flows will also go to EM, and together, these will drive the $ gradually weaker in coming years,” he said.

For Nigeria, this will means more forex inflow to augment weak foreign revenue generation amid low oil prices and weak global demand. This will further expand Nigeria’s economic productivity given its import-dependent nature and lack of alternative foreign revenue generation.