Forging new trade ties for global market access
Although, stakeholders note that the early ripples Brexit is sending through the financial world may be set aside, the direct effect on trade deals would be less dramatic, as a negotiation period of two years will shape events to come.
However, stakeholders believe the unfolding events present an opportunity for Nigeria to review its bilateral ties with several entities to avoid effects of uncertainties on trade.
While the UK is not Nigeria’s biggest trading partner, even in Europe, there are concerns that, like other countries, Nigeria might also experience a reduction in trade with Britain, as trade between the two countries dropped to below £8 billion while expectations to achieve a trade volume by £15 billion may be affected by the new decision.
Though, negotiations are expected to commence on the exit plan of the UK from the EU, stakeholders in Nigeria note that there is no cause for alarm for Nigeria in the short term as the UK and the EU have two years to figure out the terms of the exit, adding that the exit might mean investors looking at emerging markets like Nigeria for investments.
Similarly, there are concerns that about the EU’s ability to fulfil its €6.5 billion of trade development assistance every five years till 2035 to African countries with the exit of Britain as well as events that may like follow the exit since the trade development package will be jointly contributed by the EU members, to which Britain would no longer be a member.
Also, a contracting UK economy will have a deep impact on aid programmes to Nigeria, especially DFID interventions, which have been a burning political issue in the UK.
Britain’s exit from the EU, dubbed “Brexit,” has shocked the global economy, causing the value of the pound to plummet to its lowest rate in over 30 years on Friday while an economic consensus suggests that the UK will fall into a recession, the effects of which will have global implications, including many African nations engaged with trade and immigration to Europe.
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.
“Scotland may hold another referendum, and leave the UK in short order. Northern Ireland may decide to join the Republic of Ireland, itself, an EU country. The exit is a two-year process and a lot of things can still happen”, Adelegan added.
The Counsellor and Head of Trade and Economics Section of EU, Filippo Amato, noted that it is too early to make a comment on Brexit as there are no repercussions yet in terms of bilateral ties on the decision by Britain.
Amato expressed caution on whether decisions will be made on trade deals, saying that it is a moment to start thinking on what will happen, even as he added that negotiations will commence to determine what the UK wants.
Indeed, the vote within the UK highlighted deep divisions. With the exception of London, England voted massively to leave the EU. Scotland, which only a year ago, voted by a thin margin to remain in the UK, voted by almost 2 to 1 to remain in the EU. Wales voted to leave, while Northern Ireland voted to remain.
These divisions have already had an immediate impact as politicians in both Scotland and Northern Ireland have begun to take positions regarding the continued stay of their countries in the UK.According to SB Morgen Intelligence report, there is going to be volatility as the UK eventually comes to terms with being a smaller economy.
“With the decrease in the size of its economy, and possibly reach of its economy, Westminster will have to find other forms of revenue. It will either have to raise taxes, or cut its budget, neither decision will be taken lightly, and either one taken, will feed into the political mood in the UK home countries.
“In the short term, being our former imperial rulers, the UK has been one of Nigeria’s traditional trading partners, and because of a shared language, has remained a destination of choice for most Nigerians. Our elite are deeply ingrained in the UK, and have bought into that country very deeply. With a population of 201,184 according to the 2011 Census, the UK is home to one of the largest concentrations of Nigerians outside Nigeria. Issuance of visas to Nigerians may take a hit as immigration was one of the key issues in the Brexit vote.
“As a destination for Nigerian exports, the UK at $5.21 billion comes fourth behind Spain ($9.7 billion), the Netherlands ($5.59 billion) and France ($5.48 billion). As a source for Nigerian imports, the UK at $2.28 billion, comes third behind the Netherlands ($3.4 billion) and Belgium ($2.59 billion). These realities, and the UK’s diminished status, have to be taken into account in the renegotiation of trade agreements that are sure to come. Nigeria must look to increase her ties with the bigger market that is the EU, while taking into account the cultural ties, especially the monies spent by Nigerians in British schools”, the report stated.
The Senate Committee on Tertiary Institution and Tertiary Education Trust Fund, according to Euromonitor International noted that Nigeria currently spends over $2 billion yearly as capital flight on education abroad; with the UK chalking up the lion share of those education dollars as 66 per cent of Nigerian foreign students attend universities in the UK.
Nigerians received a total of $3.7 billion from relatives residing in the UK in remittances in 2015 according to the Global Knowledge Partnership on Migration and Development, second only to the United States.