‘Nigeria unlikely to feel the effect of Brexit’
While uncertainty may prevail in the global economy following the exit of Britain from the European Union (EU), members of the Organised Private Sector (OPS) have stated that the impact of Brexit on the Nigerian economy is unlikely to be profound, until negotiations are concluded.
According to them, most of the current responses are driven by uncertainties and expectations which will fizzle out in the not too distant future, as UK’s decision to end its relationship with the European Union has more implications for the UK than Nigeria.
Specifically, the Lagos Chamber of Commerce and Industry (LCCI) and the Nigerian-British Chamber of Commerce (NBCC) noted that while negotiations are expected to commence on the exit plan of the UK from the EU, the exit might mean investors looking at emerging markets like Nigeria for investments.
Director-General of the LCCI, Muda Yusuf noted that the outcome of the referendum has triggered some measure of uncertainty and anxiety in the global economy, as the British economy, which is worth$3 trillion, is the fifth largest economy in the world and the second largest within the EU.
“It is, therefore, a major component of both the global economy and that of the EU. Naturally, therefore, shocks to the British economy will have some transmission effects on the global economy. This perhaps informed the immediate responses of global and domestic financial markets. However, this dimension of the impact is unlikely to endure. They are responses driven by expectations and uncertainties.
“There is the currency effect. There is a high probability that the British economy will suffer some setbacks arising from the resultant weakening of investors’ confidence within the economy. The Brexit implies that investors within the British economy will no longer have free access to the EU market of over $16trillion and a market size of over 500 million people. This will reflect in the strength of the currency as there is a relationship between the strength of the currency and the robustness of its economy. A weak British currency offers an advantage to importers from Britain”, he added.
While Nigeria is yet to sign the European Partnership Agreement (EPA) which also reduces Nigeria’s exposure to the shocks of the EU economy, especially from a trade perspective, Yusuf noted that there is a trade effect as Britain accounts for only 4.4 per cent of Nigerian global trade and the EU accounts for 38.8 per cent.
“It is therefore, unlikely that the Brexit will have a material impact on our balance of trade situation. If anything, the trade between Nigeria and United Kingdom could be further improved on account of the likely depreciation of the British pounds and the affinity with Britain within the context of the Commonwealth”, he added.
President of the Nigerian-British Chamber of Commerce (NBCC), Prince Dapo Adelegan in a chat with The Guardian, said that the UK’s decision to end its relationship with the European Union has more implications for the UK than Nigeria, adding that the decision will affect Britain’s economy and competitiveness while aiding investments in Nigeria’s financial markets.
“Britain’s place in the world will shift, and the United Kingdom of Great Britain and Northern Ireland itself, may come to an end. Britain will lose the prestige as it serves as an entry point to the EU. In the long term, Britain’s exit may affect Nigeria’s trade relations with the EU considering that Britain and EU trade in the non-oil export sector”, Adelegan added.