On June 23, the UK voted to leave the European Union. The decision has sent shockwaves across the world, with politicians, economists, the press and a good part of the globe’s population still trying to understand what this historical event means for us all. The financial markets, information-driven as they are, have not been so reflective- bourses the world over have nosedived.
But what does Brexit mean for Nigeria?
The United Kingdom is one of Nigeria’s key trading partners; the volume of trade between the two countries in 2015 was valued at £6 billion (about ₦2.4 trillion), and forecasts have pointed in the direction of an increase in this figure as Nigeria’s relationship with its former colonial master matures. A significant change in the outlook for the UK’s economy would no doubt affect exports to, and imports from that country.
The UK has enjoyed benefits from being a part of the EU, such as not having costly restrictions on trade with Europe’s mainland. London, ‘the world’s financial capital’ has greatly benefited from this. Exiting the EU means that it loses these benefits and investors may find it a less attractive investment location. As a result, the economy may suffer. If there is less money going into the UK, there will be less heading out of it for countries like Nigeria. Unless Nigeria offers opportunities which British investors see as worth their money, investment inflow from the UK is likely to contract.
Interestingly, the outlook may be brighter for British exporters. The British pound has weakened considerably against the naira, in reaction to news that the UK will be leaving the EU. If the pound settles at a lower value relative to the naira, imports into Nigeria from the UK will be cheaper. Power generation equipment, textile garments and fabrics, and indeed petroleum products and related materials sold to Nigeria by the Brits will cost less. Consumers may think that this is great, but local producers of these goods may struggle to keep up with the intense competition that this causes. On the other hand, Nigerian exporters will moan about their wares being overlooked by thrifty Britons who find the Nigerian goods more expensive.
A weaker pound could also make travels to the UK less expensive (this should excite Nigerian holiday makers).
Oil prices have fallen today, raising fears that Brexit’s ripple effects may halt what has been a march towards higher prices for the commodity in recent weeks. It is however not certain that Nigeria’s hopes of getting more from its oil revenues have been put to bed by this.
Nigerians who own property in the UK are also going to find that their rental income will be lower in naira terms.
An artist’s paintings cannot adequately capture objects in motion, thus, a perfect picture of the changes in Nigeria’s economic landscape that may arise from Brexit is probably not possible at this point.