The global uncertainty occasioned by the economic tussle between the United States of America (USA) and China as well as the ongoing deliberations on Britain’s exit from the European Union (Brexit) had an adverse effect on Nigeria’s economy in 2019.
Economic experts say Nigeria observed the least foreign direct investment from UK in 2019, while the USA-China friction also hindered Chinese projects in the nation especially the much anticipated rail projects and road constructions.
According to the International Monetary Fund (IMF) Coordinated Direct Investment Survey (CDIS), the UK is amongst the top five economies providing inward investment into Uganda, Zambia, Botswana, and Nigeria.
While UK’s FDI makes up the highest percentage of GDP in Zambia, making it the most likely to feel the effects of a decrease in investment from the UK; Nigeria is Britain’s second-largest African market behind South Africa with Kenya coming third.
Before Brexit, bilateral trade between Nigeria, Africa’s largest economy, and Britain was worth about £6 billion ($7.9 billion), and had been projected to reach £20 billion ($26.6 billion) by 2020. With Brexit, that projection turned overly optimistic.
As Nigeria grappled with falling oil prices, its main income source; crude chemicals and allied materials make up almost a quarter of Nigeria’s trade with Britain. A drop in oil demand coupled with low oil prices affected the Nigerian economy in 2019.
The IMF announced that the effect of Brexit would plunge the Nigerian economy into a recession shrinking by 1.8% from the earlier 2.3% growth projection and statistics from the United Nations Conference on Trade and Development (UNCTAD) showed that FDIs to West Africa declined by 15%, to $9.6 billion largely due to Nigeria where flows plunged by 43% to $2 billion.
British government statistics show that FDIs in Africa doubled between 2005 and 2014, from £20.8 billion ($27.6 billion) to £42.5 billion ($56.5 billion) before the concept of Brexit emerged at the June 2016 referendum and the FDIs crashed to £34.02 and £38.71 in 2017 and 2018, respectively.
Speaking with MMS Plus newspaper during a review of Nigeria’s economy in 2019, the Chairman, Nigerian Ports Consultative Council (PCC), Otunba Kunle Folarin described 2019 as a year of partition.
“The big players were having disagreement in balance of trade, particularly the US and China. This is very important to us because Nigeria trades substantially with US and China. If there is an issue within the international trade Nigeria would either be a beneficiary or a victim of the disagreement. In perspective, there has also been a tussle and disagreement between the United Kingdom (UK) and the European Union on the issue of Britain exiting the EU. This is also significant because Nigeria has a big relationship with the UK and the EU”, Otunba said.
According to him, the effect of these disagreements on Nigeria was that there was no opportunity to get trade support while that argument was going on between UK and EU and the fracas between the USA and China.
“You can see that some of the projects handled by the Chinese companies such as the railways and bridges were stuck. They weren’t moving as they ought to. You could also see the disagreement between Nigeria’s Minister of Transportation and these Chinese companies as they failed to meet the completion date for projects that ought to have been finalized at the end of 2019”, Otunba explained.
Similarly, the Managing Director of Cowry Assets Management, Mr. Johnson Chukwu agreed that the global disagreements affected the nation’s economy.
However, the good news is that Africa can actually seek assistance elsewhere as Africa’s trade with Europe estimated at €106 billion (US$116.6 billion) in 2016, has been eclipsed by China’s worth over $300 billion, making China Africa’s top trading partner currently.
In another development, the bid to ensure local content improvement in ship building and ship repairs is set to take an upward slope as the Nigerian Maritime Administration and Safety Agency (NIMASA) is presently engaging the Ministry of Finance to stop the Customs duties collected on import of vessels and vessels’ parts.
This fiscal challenge has become a major impediment to ship acquisition and its management in the country; while it was one of the factors that saw the Singaporean shipping firm Pacific International Lines (PIL) back out of initial agreement to partner Nigeria in establishing the much touted national carrier.
This fiscal policy issue has also been highlighted by shipping experts as an impediment to the five year waivers cessation plan by NIMASA for importation of vessels.
The Director General of NIMASA, Dr. Dakuku Peterside revealed to MMS Plus during an exclusive chat, that the agency has been engaging with the Finance Ministry to review the policy.
According to the NIMASA boss, the current fiscal policy of taxing vessels imports and their parts would continue to scare investors from the country.
Speaking with our correspondent, Dakuku said: “NIMASA and the Ministry of Finance have been in talks. There is an ongoing engagement. We have been able to make them realize that the maritime industry and shipping in particular has the potential to contribute immensely to economic growth and wealth creation in the country.
“The regime where they slam heavy duties and taxes on those bringing in vessels and vessels’ parts would always discourage people from investing in the sector. I think they understand our point of view as we are all working to create a mechanism that would change the tax regime structure so people are incentivised to bring in vessels and parts to enable us continue to have investments in the shipping sector,” he said.
However, he expressed optimism that Nigeria had the capacity to build the fishing trawlers and other category of vessels whose import waivers have been seized.
He also opined that this development would lead to growth in the welding sector and other aspects involved in ship building.
“The agency has been engaging stakeholders to find out how to provide a conducive investment climate for ship building. We are also engaging with all stakeholders and the outlook has been progressive”, he added.
Meanwhile, the Chairman of the Nigerian Fleet Implementation Committee and CEO, Nigerian Shippers’ Council (NSC) Mr. Hassan Bello told MMS Plus that the committee had gained special consideration for tax holidays for vessels’ import.
“We are discussing with the new economic management team to make requests on several issues. We have gained special consideration for tax holidays but we are also working on other concessions” he told our correspondent.
Bello also noted that the committee would have a meeting with the economic team to discuss other key issues in January, 2020.
“We don’t want a national fleet that wouldn’t be sustainable. We don’t want to have two or three ships that wouldn’t be able to compete with already established operators on the international scene. We have to develop a national fleet that can be competitive, hence, we need modern facilities like the ship repair yards instead of towing our ships to other nations for such services”
“We need our nautical colleges to train seamen that meet the global best standards. So, there is need to develop all these sub-sectors in order to ensure that shipping thrives in the country and plays a lead role in the nation’s economic growth”, he added.
Recall that the former President, Ship Owners Association of Nigeria (SOAN), Greg Ogbeifun, stated that unless the government reviews some of its tax laws to serve as incentives to both local and foreign investors, it will be difficult to establish any competitive international fleet.
He said: “If you look at the Nigerian Investment Promotion Council compendium, you will see all incentives that are granted to different sectors of the economy including aviation but there is nothing on shipping or maritime and all the other sectors depends on maritime because almost 80 to 90 percent of our import and export are carried by ships, so there is a very major omission.”