Why Nigeria should trade more with Africa

By Onome Amawhe

A Nigeria-Africa trade tie has long been a cherished, but elusive goal. With a growing need for the establishment of  closer economic tie between Nigeria and the continent’s numerous countries, based on a heightened need for regional integration, and a clearer understanding of the reasons for past economic failures, the concept has gained a much more significant voice through Visa Africa Integration Index , launched in 2014 at the prestigious World Economic Forum in Durban, South Africa. The Visa Index which aims to foster a better understanding of Africa and the need for the continent to unleash its enormous growth potentials, has since become an important economic research initiative, highlighting  trends that deliver helpful insights to economic decision- makers throughout the continent. The Visa Africa Integration Index was necessitated by the dearth of accurate data, research and low level of information in Sub-Saharan Africa, widely known as the world’s fastest growing region. The report jointly produced by the African Development Bank, the World Bank Group and World Economic Forum, was authored by Professor Adrian Seville, Visiting Professor of Economics at the Gordon Institute of Business Science (GIBS), Johannesburg.

Adrian Seville CEO, CannonAssets

In the 2014 Visa Africa Integration Index, you noted that Nigeria must trade more with Africa. How important is Nigeria to Africa’s economic growth and sustainability?

 Given Nigeria’s population size and that the economy ranks as one of the largest on the continent, along with the likes of South Africa and Egypt, it follows that if these large economies produce ‘lagged’ growth, then they will drag down regional growth.

What has inhibited Nigeria from realising the enormous potential of a Nigeria-Africa trade? 

The evidence suggests that Nigeria’s prospect of connecting to others is being held back by at least two macroeconomic factors, namely – an over-reliance on a single industry in which the economy has not progressed in terms of industrial complexity; and under-investment in fixed capital, where over the last five years (2011-2016), Nigeria invested about 15.5% of GDP into fixed capital formation against the world average of 24.4% per year.  Alongside this, there is evidence that Nigeria needs to improve micro-economic aspects such as improving the ease of doing business and ease of travel across borders, to encourage business relationships across border whilst at the same time lowering costs of transportation and communication, which are important sources of efficiency, in relation to competitors.

What do you see as a resolution to this issue? Be it in the form of policy or otherwise, how can Nigeria encourage further African investment in the country?

From above, the emphasis should be on a combination of macroeconomic elements such as promotion of gross domestic fixed investment, and microeconomic elements such as promoting the ease of doing business. Ethiopia offers an excellent example of the first aspect in recent times, and Kenya offers an excellent example of the second aspect in recent years.

What are the sectors to be involved in this push to develop the Nigeria-Africa trade?

Transport and communications are obvious components.  Financial intermediation to enable and facilitate the movement of goods, services, information, people and capital is an equally critical industry. It is also likely that rising connectedness would promote legal, administrative and regulatory capacities and capabilities.

Does the infrastructure necessarily exist for the Nigeria-Africa synergy?

 The short answer to this is that the infrastructure does not yet exist. Important to note is that the infrastructure that is needed is across border as well as within country – it is necessary that not only is it efficient for goods, service, people and capital to be able to move across borders, but that competitiveness also requires an efficient and effective movement of these economic elements inside of the country.

In the report, you argued that ‘Nigeria will be the main beneficiary of greater integration across Africa as its growing market matures.’ Could you shed some light on what you mean here?

 This is a result of Nigeria’s size and potential contribution.

How could a Nigeria-Africa trade become a significant component of development?

The evidence that we have from international studies is that regional connectedness is potentially a more powerful and more sustainable form of cross-border connection than a simpler outcome of “connecting to anyone.” Excellent examples of this power of the region and impact of the neighbourhood come from the likes of NAFTA, the Eurozone and ASEAN.

In what ways does Nigeria serve as an important resource in improving Africa’s economic ecosystem?

This is a call to action or call to purpose rather than an observed outcome. It points to Nigeria’s potential to contribute in a meaningful and powerful manner.

What role does or has Nigeria played in Africa’s economic development?

Nigeria has the potential to play a large role based on population size, demographic structure, the prospect of a large internal market and proximity to growing external markets.

Which are the African countries that Nigeria should be paying close attention?

It can be argued that countries that have achieved sustained growth that has started to transform into new and emergent industries with rising income and growing employment all offer examples of what is possible.  Helpful case studies include the likes of Ethiopia, Rwanda and Kenya. Equally, one can learn what not to do by studying countries that might have stalled or lost their way.

Why does Africa show the highest growth prospects out of any continent in the world?

Arguably the highest global economic growth prospect belongs to South-East Asia.  However, the growth prospect for sub-Saharan Africa ranks the continent as the second-fastest growing region in the world.  This is explained by a young and rapidly growing workforce; vast improvements in infrastructure, including transport and communications; increasing connectedness, regionally and globally, where the EAC is a lead example; and rising investment levels (such as Botswana, Ethiopia, Tanzania and Zambia).

What are key areas of opportunity to capitalise on for Nigeria-Africa trade?

The evidence from other countries is that the best prospects lie in the neighbourhood.  For Nigeria, this would mean finding partners and prospects in the likes of Ghana and Cote d’Ivoire.

In your opinion, what are the advantages that other African companies could have in Nigeria vice versa?

 The story of investing and operating successfully across borders is no different in Nigeria than anywhere, and it hinges on at least four elements: understanding the context to develop appropriate product and services; successfully navigating administrative obstacles and meeting or exceeding regulatory requirements; connecting first to partners that are geographically closer and/or easier to get to from a transport/geography perspective; and meeting needs that match or complement your business skills in other markets.

Asian countries like India, Korea and Japan have been doing business in Africa a lot more than Nigeria. What is the difference between Nigerian companies’ business strategies in Africa and their Asian counterparts?

 Perhaps the best lessons from the Asian model come in the form of the so-called “flying geese,” where countries learned quickly from others, were ready to adopt and adapt quickly and worked actively to find neighbours who offered new markets to develop economies of scale and scope.

What strategies should Nigerian companies take in order to adapt themselves into the larger African environment and culture?

 My response to this is the same as the answer above. The story of investing and operating successfully across borders is no different in Nigeria than anywhere, and it hinges on at least four elements: understanding the context to develop appropriate products and services; successfully navigating administrative obstacles and meeting or exceeding regulatory requirements; connecting first to partners that are geographically closer and/or easier to get to from a transport/geography perspective; and meeting needs that match or complement your business skills in other markets.

 

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