Martins Hile, Editor, Financial Nigeria magazine
Follow Martins Hile
Subjects of Interest
- Social Development
Potential impact of Brexit on Nigeria 15 Jun 2016
As the world awaits next week's referendum on Britain's membership of the European Union, the debate is fully on about the political, economic, immigration and diplomatic impact of British exit from the EU. In a worst case scenario, the Gross Domestic Product (GDP) of the United Kingdom would shrink by 2.2 per cent by 2030 if the country leaves the EU on January 1, 2018, according to Open Europe, an independent think-tank that has done an economic modelling of the trade impacts of "Brexit", the portmanteau word for British exit.
But a “Yes” vote on June 23 has far-reaching implications than a reduction in the size of the economy. For one, as the world's fifth largest economy, there is a risk of a contagion effect beyond the borders of the island nation. The impetus for the politics of nationalism within the UK and the EU would also increase, fostering anti-immigration around the world.
While the UK would be placed in the difficult position of renegotiating its economic relations with other EU countries, its economic ties with non-EU countries like Nigeria would remain unchanged. The theoretical argument is that trade agreements between EU countries and non-EU countries are negotiated by the European Commission, albeit on behalf of EU member states. In reality, investment in Britain would be less attractive to foreign investors since the country would no longer offer full access to the lucrative EU market.
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 per cent increase from a £30.8 billion deficit posted in Q1 2015. According to the World Bank, exports of goods and services as a percentage of UK's GDP is 28.4 per cent. This shows the importance of trade to the UK economy. The increase in trade deficit may not be unconnected to uncertainty due to a potential vote to leave the EU. The country’s GDP growth rate also slowed to 0.4 per cent in Q1 of 2016.
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. 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 include grants to non-profits, technical assistance and partnerships with other development agencies. A weaker and smaller UK economy would scale back its investment in development projects in Nigeria, even if temporarily.
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 be punctured in the event of Brexit.
Ahead of the referendum, a YouGov/The Times poll result released on Monday, June 13, showed the "Leave" campaign with a 7-point lead over "Remain". The "Leave" campaign is largely being driven by 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. 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. A Yes vote would lead to the enforcement of tougher immigration policies that would affect Nigerians travelling to the UK and the estimated over 2 million Nigerian migrants in the country.
For Britain, including those who are misguided by rising nationalism, the political backlash of a Brexit must only be left imagined. To have a Brexit, the unification of the United Kingdom of Great Britain and Northern Ireland would effectively be a toss-up. Nationalism sentiments in Scotland would resurge. 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.
This foreboding scenario could have a strong influence on secessionist sentiments in Nigeria. Should Britain, which cobbled Nigeria together begin to unravel in its own union, agitators for independence for some of Nigerian ethnic groups would find the bad example worthy of emulation. 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.