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Britain's historic decision to leave the European Union (EU) is fraught with economic, political, immigration and diplomatic implications that would spread far beyond the borders of the island nation. For the EU, losing one-sixth of its Gross Domestic Product (GDP) size in one fell swoop is quite staggering. But the EU will have to soldier on, foster a more inclusive economic bloc and prevent the unraveling of the European project.      

As Europe’s second largest – and the world's fifth largest – economy, there has been an uncertainty over the competitiveness of the United Kingdom as a key investment hub since it is now going to lose the market access that it has by virtue of its membership in the EU's single market. This and other uncertainties around the renegotiation of UK-EU economic relations sent the global financial and oil markets plunging the day after the referendum result was announced.      

Of course those who campaigned for Brexit, have maintained that the UK can negotiate better trade deals for itself when it leaves the EU. The UK’s economy largely thrives on trade. Measured as a share of GDP, trade accounts for about 59 percent of the UK’s economy. Exports alone accounted for 28.4 percent of the country’s GDP in 2014. This is slightly lower, compared to smaller economies such as France (28.7 percent), Italy (29.6 percent) and Spain (32.5 percent). Supporters of Brexit insist Britain will not get better terms of trade if the country were to remain in the EU since trade agreements between European Union countries and non-EU countries are negotiated by the European Commission, albeit on behalf of EU member states.  

Without knowing whether or not the rhetorics of getting better trade deals with UK’s largest trading partner can be positive, investors are expected to delay investment decisions in the UK. Long-term investment is encouraged by an assurance of market access. But UK firms will lose that ‘automatic’ access to the biggest single market in the world when the country exits the EU. UK Overseas Trade Statistics for April 2016, published by HM Revenue and Customs, already shows that UK recorded a trade deficit of £35.2 billion for the first quarter of 2016, a 14.5 percent increase from a £30.8 billion deficit posted in Q1 2015.    

Before the referendum on June 23, the International Monetary Fund warned that Brexit would slow the UK's economic growth as disruptions to trade could ensue during the process of the negotiations. The UK’s economy grew at 2.2 percent in 2015, after expanding by 2.9 percent in 2014, the fastest pace of growth since 2007. GDP growth rate, however, slowed to 0.4 percent in the first quarter of 2016 as uncertainty over Brexit became widespread.     

According to Open Europe, an independent think-tank which did an economic modelling of the trade impacts of Brexit, UK’s economy would shrink by 2.2 percent by 2030 if the country leaves the EU on January 1, 2018. The immediate fallouts of the Brexit vote have shown that a decline in the UK’s economy is not hypothetical.   

Should the British economy become weaker post-Brexit, the country would scale back its investment in development projects in countries like Nigeria, even if temporarily. As of December 2014, the UK Department for International Development had a portfolio of 40 projects in Nigeria with a planned budget of £232 million for 2014/2015, which included grants to non-profits, technical assistance and partnerships with other development agencies.

As a member of the British Commonwealth, Nigeria has strong ties with Britain. After South Africa, Nigeria is Britain's second largest trading partner in Africa, with £6 billion (about N2.4 trillion or $8.52 billion) in bilateral trade volume last year. Demand for UK goods and services in Nigeria could rise as the value of the British pound depreciates due to weak economic performance in the UK. The value of the British pound already fell to a 31-year low on the day after the Brexit referendum. But while UK exports become cheaper for foreign buyers, there would be no immediate incentive to import more Nigerian products to the UK. Besides, the value of Nigerian non-oil exports to the UK in 2015 was less than $40 million, while the value of imports of pharmaceutical products alone was $70.6 million, according to the International Trade Centre.

Apart from the potential net-negative trade impact on Nigeria as well as diminished aid to the country on account of a weaker British economy, the UK referendum has political implications for African countries, including Nigeria. To a large extent, the conception of regional economic blocs in Africa has been predicated on the success of the European Union. To further the agenda to facilitate free movement of persons, goods and services around the continent, the African Union has announced the commencement of the e-passport for Africa.

However, all the argument about the benefits of deepening integration and socio-economic development through economic blocs in Africa would now be tenuous given the UK vote to leave the EU. The "Leave" campaign was largely driven by nationalism sentiments of politically far-right groups and rising anti-immigration sentiments that have gained momentum in the wake of the Syrian refugee crisis. Some citizens believe that immigrants have caused social and economic problems in the UK. Net migration from EU and non-EU countries is about 184,000 and 188,000 per year, respectively. The Migration Observatory at the University of Oxford, England, says the proportion of foreign-born population in the UK increased from 7 per cent in 1993 to 13.1 per cent in 2014. Brexit would lead to the enforcement of tougher immigration policies that would affect foreigners including Nigerians travelling to the UK and the estimated over 2 million Nigerian migrants in the country.   

With Brexit, the unification of the United Kingdom of Great Britain and Northern Ireland could effectively be a toss-up. Nationalism sentiments in Scotland have resurged. Whereas England and Wales voted strongly for Brexit, Scotland and Northern Ireland voted to remain in the EU. By 2030, the consequences of an independent Scotland would be far beyond a probable 2.2 per cent reduction in the economic size of Britain. Indeed, it would further threaten the treaty that still binds Northern Ireland to the monarchy.

Should Britain, which cobbled Nigeria together begin to unravel in its own union, agitators for independence for some of Nigeria’s ethnic groups would find the bad example worthy of emulation. The genie is already out of the bottle. The question has already been asked whether there should be a referendum on Biafra.

In the final analysis, like Britain, the toll of Brexit on Nigeria would be less severe on the economic front; its deeper implications would be political. The UK would need to diversify its export markets to mitigate any potential shortfalls in trade with the EU. Expanding its share of exports to emerging markets would be an imperative for Her Majesty’s Government. In doing so, it could strengthen its ties with Nigeria by signing a Free Trade Agreement (FTA) which currently does not exit. This would be one of the positive impacts of Brexit on Nigeria.

In terms of immigration, even the leave campaigners did not call for an outright ban on immigration. They advocated for an immigration system that admits highly-skilled migrants since many UK businesses would need foreign skilled workers.

Notwithstanding the potential benefits of Brexit, the full ramifications of this major political development in Britain and its spillover effects on Nigeria are still to be determined.

Martins Hile is the Executive Editor of Financial Nigeria publications.