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Displaying items by tag: Nigeria

August 16, 2019

Can Nigeria’s CFTA move undo the negative legacy of protectionism?

African Business Magazine –

Joining the African Continental Free Trade Area may be Nigeria’s first step towards realising the potential of its business sector as a force in Africa, argues Dianna Games.

When Nigeria failed to occupy a seat at the African Continental Free Trade Area (CFTA) launch in Kigali last year, many asked why a country that has long considered itself a leader in African affairs would not be grabbing the mantle of leadership in a project of this scope and importance.

After all, the country has some form when it comes to regional integration, having been a leader in the establishment of the Economic Community of West African States (Ecowas) in 1975.

But nearly 25 years later, Nigeria was one of the last countries to sign the CFTA, alongside its tiny neighbour Benin and ahead of Eritrea.

As Africa’s biggest economy stalled at the starting gates of the initiative, questions were asked about its reticence.

The country has been a key promoter of the initiative since its launch in 2012. Nigeria continued to be closely integrated with the process leading up to the May 2018 Kigali launch and the Federal Executive Council, presided over by the vice-president, Yemi Osinbajo, had agreed that Nigeria’s signature would be on the agreement at the event.

However, it fell at the final hurdle when lobbying by policymakers, trade unions and local companies led President Muhammadu Buhari and his team to cancel the flight to Kigali, in response to accusations that the government had failed to consult widely enough on the potential impact on the economy. After further consultations and on the advice of local experts, Buhari signed it in July.

Nigeria’s central concern is that its market will be flooded by goods from other African countries, which will undermine local manufacturing and agricultural enterprises, many of which are performing well below their potential and may not survive competition.

Countries such as South Africa and Kenya as well as North African states are specific challengers given their relatively high levels of industrialisation and efficient supply chains.

Not much to show for protectionism

The CFTA has highlighted the soft underbelly of Nigeria’s protectionist trade policy, which it has employed for decades – without much to show for it.

Although the economy has made significant strides in some areas, particularly in services, the successes are few compared to the opportunities the policy has provided.

The share of manufacturing as a percentage of GDP, for example, has lingered at around 10%, rising slightly to 13% in 2018.

Economists say that under the right conditions, Nigeria should be able to increase this to over 40% by 2030. It is not yet clear whether the free trade agreement will help or hinder Nigeria’s ability to reach this target.

Meanwhile, the services sector has overtaken agriculture and industry to become the biggest sector in the economy, representing nearly 58% in 2017.

Import restrictions have been a trade policy instrument since the 1970s, when they replaced tariffs as an enabler of growth and a counter to the competition posed by imports to local producers.

The restrictions included outright prohibitions and import licensing.

In 1978, there were already 76 broad groups of import items on a prohibition list. In the 1980s, about 40% of agricultural and industrial products by tariff lines were covered by these prohibitions.

The line items have come and gone over the years but when items were removed from the prohibition list, they often quickly attracted high duties and tariffs to serve the same end. Smugglers enjoyed significant benefits, quickly moving into market gaps created by the restrictions, as Nigerians’ tastes for imports refused to be quelled by government fiat.

There is no doubt there have been legitimate beneficiaries as well, including Africa’s richest man, Aliko Dangote, who built an empire on the back of import restrictions and bans.

However, once thriving sectors such as textiles and leather, which were intended to be key beneficiaries, have been crippled by not only the country’s shift in focus to the lucrative oil sector in the 1970s, but also by the high cost of doing business in Nigeria.

Unresolved problems

This highlights the key weakness in the trade policy – the fact that governments, in imposing protectionist policies, have failed simultaneously to address the embedded dysfunction in the operating environment that has left so many companies unable to compete with imports or even meet local demand.

Companies battle against a host of challenges in manufacturing including expensive power, the high cost of money, an onerous regulatory environment, poor infrastructure, a volatile currency and inefficient ports.

In acceding to the free trade agreement, there are bound to be many positive outcomes for resilient Nigerian companies.

But the country may also end up paying the price of years of relying on restrictive trade policies, rather than investing in productive capacity, to grow the economy.

History shows the damage that was done to many companies across Africa during the liberalisation of African markets in the 1980s and 90s after years of surviving behind high tariff walls.

Signing the free trade agreement may be painful for Nigeria for a while but it also may be the first step forward in realising the enormous potential of its business sector as a competitive force in Africa.

Nigeria’s best chance of building a consumer class is not by making it difficult to get imports but by enabling the growth of a critical mass of efficient and sustainable companies. 

Dianna Games is CEO of advisory company Africa @ Work

Read more...
June 22, 2018

Ramaphosa can revitalise relations with Africa and repair mistrust of SA

 

Business Day - 2 March 2018

Former president Jacob Zuma was seen by many in Africa as a great leveller. This was not because of any attempt to address inequality among his people but because he aligned SA to the broader African experience of governance. His behaviour, together with that of his ministers and friends, removed any sense that SA is exceptional in Africa, a perception that used to be held by many in the international community but also by South Africans themselves.

Zuma can take responsibility for finally putting that issue to rest.

As SA’s media uncovered the excesses and murky strategies of the Zuma administration, revealing new dirt almost daily, many Africans expressed concern about SA’s trajectory. This was not because their own governments were better, but because they weren’t. They have lived with the continued erosion of value in their institutions, lifestyles, governance and other key areas of life. African countries from west to east have shown at times in their history how easily the rot at the top eats its way down, undermining moral and ethical propriety at all levels of society.

Nigerians maintain that SA is a beginner in the corruption stakes – their leaders and military dictators have siphoned billions from the fiscus for decades. Their lesson has been that self-interested leadership breeds endemic corruption. The longer rotten government is in place, the more moral laxity pervades the social fabric of the nation. It is hard to turn this around.     

State capture is also not new to this continent and elsewhere. Most African countries have experienced some form of capture by ruling elites and sometimes a ruling family. The continent is littered with dynasties.

While Angola and Zimbabwe’s first families appear to have been consigned to the dustbin of history, there remain others in Gabon, Togo and Equatorial Guinea.

They have their own Guptas.

Although Zuma was fond of state visits, both inside and outside Africa, commentators questioned the quality of the outcomes and of the business delegations that accompanied him. For example, while a large number of SA’s biggest corporations have investments in Nigeria, it was a little-known individual close to Zuma and the ANC who spoke on behalf of South African business at a well-attended forum during Zuma’s 2016 state visit to Abuja, Nigeria, raising more than a few eyebrows. Then there was Zuma’s controversial visit to one of Nigeria’s 36 states in 2017 to attend the unveiling of a large bronze statue of himself, an act inexplicably described as one that would help to strengthen socioeconomic relations between SA and Nigeria.

It was an exercise in moral bankruptcy — the honouring governor spent about R14m on the statue while failing to pay salaries to state workers for months.

The former president’s foreign priorities in Africa were often less about SA Inc and more about Zuma Inc, particularly in commodity-rich states such as Equatorial Guinea and the Democratic Republic of Congo.

SA’s membership of the Brics grouping since 2011, although scoffed at by many critics, was an important milestone in Zuma’s presidency. His moral laxity and greed, however, overflowed into relationships with key players in the bloc — China and Russia — undermining the broader benefits of Brics membership.

With the election of Cyril Ramaphosa as president, SA is hopefully back from the brink with a chance to re-establish a reputation as a capable state and a pivotal player in Africa’s development. As many have noted on social media, the dramatic events of the past few weeks signal the resilience of SA’s institutions, its media and civil society. This is not something enjoyed much in Africa.

A new administration presents an opportunity to revitalise SA’s foreign policy and regenerate important bilateral, continental and international relationships. The successful outing to the World Economic Forum in Davos highlighted the residual goodwill towards and confidence in SA. Ramaphosa tried to repair the country’s reputation and build bridges with African and international leaders.

                                                                                                   

The new president is no stranger to African politics outside SA. For example, he represented SA as a mediator in the Burundi peace process; in 2014, he led the Southern African Development Community delegation to Lesotho to tackle that country’s political crisis, and he has acted as SA’s special envoy to South Sudan.

In 2016 Ramaphosa led an ANC delegation to Zimbabwe to attend Zanu-PF’s annual jamboree, where he partied with then president Robert Mugabe, calling for closer co-operation between Africa’s liberation movements. He knows how to play the game.

So, while he is clearing out the Zuma Cabinet, the president might also want to think about how to develop a more strategic approach to SA’s diplomacy and those entrusted to drive it.

Since assuming the presidency, he has been quiet on the foreign affairs front. Understandably. The significant national challenges require all hands on deck.

But SA’s fortunes are inextricably linked to its hinterland. Despite the fact that the ANC has frequently said that Africa is at the centre of its foreign policy priorities, the country has battled to set the right tone on the continent.

Mistrust of SA’s continental ambitions runs deep in Africa and needs a clear strategy to address it. Given that SA’s corporate expansion lies at the heart of this mistrust, Ramaphosa, as a successful businessman, needs to play this card carefully.

The country’s efforts towards economic diplomacy have been weak, undermined by the generally poor relationship between big business and the government and lack of a coherent strategy to use foreign engagement to build economic advantage back home. The market share of South African companies in other African markets is declining as a result of the arrival of many new competitors from elsewhere, many of which have well-established diplomatic strategies for the continent.

SA has the opportunity to use its relative economic heft to play a stronger developmental role in Africa by leveraging the strengths of its business sector and its financial agencies. SA’s strategy for the rest of Africa cannot start at the border. It faces significant challenges at home in this regard. The issue of migrants and persistent attacks on Africans living in SA have not been tackled decisively and have scarred the country’s image on the continent. The perception is that SA is not welcoming to Africans.

The high number of illegal immigrants in SA is not just down to the country’s relative wealth but speaks to how bribery characterised the Zuma years.

Shaping policies that are simultaneously able to deliver benefits to SA, that enable it to adapt to a rapidly changing global environment and that build robust bilateral relations across the continent and further afield will demand strategic vision and delicate diplomacy.

It is a tough, but necessary, job.

• Games is CEO of business advisory Africa @ Work.

Read more...
February 1, 2016

New Abuja route signals Nigeria is still an important partner

SAAAbuja

   THE inaugural flight by South African Airways (SAA) last week from Johannesburg to Abuja, the capital of Nigeria, was a milestone in the relationship between the two powerhouses of Africa, WRITES DIANNA GAMES.

The launch of the route is not just about moving people between two strategic cities; it is symbolic of a greater connectedness between Africa’s two biggest economies that is long overdue.

The launch of the route between Johannesburg and Abuja came 19 years after SAA began flights to the commercial hub of Nigeria, Lagos, in 1998 — a route that became one of the fastest growing in SAA’s history and is still among the top three busiest for the airline in Africa.

In 2011, the SA-Nigeria Binational Commission increased the number of flights from seven to 10 each for both countries.

SAA flies seven times a week to Lagos and the three remaining slots are being used for the Abuja flights. The new route forms part of SAA’s turnaround strategy, and there are early signs of success.

The first return flight from Abuja to Johannesburg last week had a load factor of 67%.

Airline executives believe the route will be profitable in a reasonably short time.

There are many reasons why. First, many people who do not live in Lagos prefer to avoid the city if they can. The airport experience can be trying, with antiquated infrastructure and systems struggling to keep up with growing passenger volumes. Travelling from Abuja is easier and may attract more people to SA.

Second, the Abuja flights will provide a link for trading centres in northern Nigeria, allowing flights not just to SA, but to Southern Africa and to other regions such as Brazil, which has strong commercial ties with Nigeria.

The route will also make it easier for South African investors to connect to Nigeria’s administrative and political centre. What is more, it will facilitate interaction between the two governments.

The political dimension is significant. The choice of Abuja as SAA’s newest destination signals the fact that Nigeria is still an important partner for SA.

This will be cemented by the state visit to Nigeria by President Jacob Zuma in a few weeks.

An airline is an important diplomatic tool and the timing of the new SAA flight is good, coming at a time when there is a real willingness to build stronger ties between two countries that have had a complicated past relationship.

But this is being undermined by a few issues.

Read more

- Published in Business Day SA, 1 February, 2016

Read more...
October 12, 2015

Nigeria’s pan-African aspirations may change its dynamic with SA

   A QUESTION Nigerians often raise in discussions about SA and its West African counterpart is why there are not more Nigerian companies investing here, writes DIANNA GAMES. 

Where are the Nigerian banks, the food franchises, the supermarkets and IT companies? they ask. The diplomats are particularly exercised by the trade and investment imbalance. This, they say, reflects badly on the bilateral relationship.

It is true that there are few Nigerian investments here more than 20 years after SA opened its doors to the rest of the continent. Dangote Cement has acquired a cement operation, and oil and gas company Oando has a few, largely inactive, shares listed on the JSE. But there is little else if you don’t count the many small businesses owned by Nigerians resident in this country.

Compare this with the fact that the majority of SA’s top listed companies have a presence in Nigeria. Read more ... 

- Published in Business Day SA, 12 October 2015.

Read more...
August 3, 2015

Toothpicks are symbolic of Nigeria’s industrial policy weakness

Central Bank Of Nigeria

Toothpicks are on the list of more than 40 items for which the Central Bank of Nigeria has forbidden the sourcing of foreign currency through the formal banking system for spending on imports, writes DIANNA GAMES

Published in Business Day SA, 3 August 2015

THERE has been a lot of talk about toothpicks in Nigeria of late. The humble implement for removing elusive morsels of dinner is a culprit in Nigeria’s foreign exchange crisis. It is included in a list of more than 40 items for which the Central Bank of Nigeria has forbidden the sourcing of foreign currency through the formal banking system for spending on imports.

Other items on the list include private jets, tinned fish, vegetable oil, roofing sheets, cosmetics, soap, plastic and rubber products, Indian incense, steel pipes, plywood board, glassware and kitchen utensils.

Although the manufacturing sector’s contribution to Nigeria’s economy has grown from 1.9% in the early 1990s to 6.8%, the country has little to show for years of import bans designed to boost local manufacturing.

Read more ...  

 

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July 24, 2015

What Nigeria elections means economically: Dianna Games

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July 6, 2015

Nigeria on autopilot as new president uses time fighting fires

Muhammadu buhari

 

WE CANNOT afford to disappoint Nigerians, President Muhammadu Buhari told his party leaders at the weekend, writes DIANNA GAMES.

Published in Business Day SA, 7 July 2015

Mr Buhari was responding to concerns from a nation impatient for signs that their new president has the will and capability to tackle corruption, fight insecurity and instill discipline into the polity.

Just a few weeks into the job, Mr Buhari is battling to get on top of an array of problems plaguing the country, despite bold promises made before the April election that he would move swiftly to build a better Nigeria. He has spent his early days in office fighting fires in his party and in the country.

Last week, it emerged that Mr Buhari may not announce his new cabinet before September — three months into his tenure and nearly six since his election as president.

Read more ...

Read more...
May 25, 2015

New Nigerian president faces potential crisis of expectations

Muhammadu-Buhari-speech

Muhammadu Buhari may have ben handed a poisoned chalice, having to balance tackling a litany of economic and security problems while satisfying Nigerians' expectations of change, writes DIANNA GAMES

Published in Business Day SA, 25 May 2015

NIGERIA is facing a crisis of expectations as it heads for one of the most auspicious moments in its relatively short 16-year democracy.

The inauguration later this week of Muhammadu Buhari is expected to bring significant change to this large, complex nation.

Not only will Nigeria have a different head of state, it will have a new cabinet and two-thirds of the 36 states will be changing governors after the opposition All Progressives Congress won at the polls this year, displacing the Peoples’ Democratic Party, which had governed Nigeria since 1999.

While this presents an opportunity for a new broom to sweep away much of the rot that has dogged Nigeria’s progress, it’s a formidable task. Read more ...

Read more...
April 2, 2015

Nigeria With Buhari - 01 April 2015 - Part 1

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March 16, 2015

Dysfunction in the economy undermines Nigeria's progress

Dysfunction is fuelled both by powerful vested interests which benefit from the status quo and by millions of people who earn incomes from 'parallel' economic acvities, writes DIANNA GAMES

Published in Business Day SA, March 16 2015

ONE of the biggest complaints about Nigeria from foreign companies is how unnecessarily difficult it is to do business there. The government is not short of grand plans to diversify its economy and politically expedient quick wins but it is less exercised with dealing with the underlying factors that undermine economic development and diversification.

Many of its policies have focused on stimulating local manufacturing to reduce the country’s huge import bills. Over the years it has imposed import bans, slapped high tariffs on a range of goods and tried to pick winners to boost industrial development. But it has failed to simultaneously address the dysfunction that makes it so challenging to operate businesses in Nigeria.

These include a range of illegal business practices that have developed over the years to the extent they have now become part of the fabric of the economy, despite their corrosive and costly effect on development.

Read more ...

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