UK-Africa Investment Summit and its Benefits to Economic Growth in Nigeria
The 2020 UK-Africa Investment Summit, which took place in London last week, aims to bring together the UK and African leaders, business and entrepreneurs to help derive investment, jobs and growth. With Brexit fast approaching, the UK government and British companies are looking to bolster their ties with non-European countries. The UK summit is a stepping up of renewed international competition for African states. In a similar step, Russia hosted African leaders in October last year to strengthen its ties with African countries. In the case of China, several African countries have become increasingly drawn to China’s “no-strings-attached” development assistance and promises of growth.
Many other countries including France, Germany, India, Turkey, Russia, Brazil, the Netherlands and Israel are scaling up investment, trade and economic cooperation with African countries. However, given the ongoing scramble for African states, it is pertinent to ask these questions: did the UK-African Investment Summit present equal partners or master to servant relationship? Was the UK-Africa Investment Summit a major opportunity for Nigeria to grow her economy? On account of these developments, this edition of ENGAGE NIGERIA Weekly analyses the UK-Africa Investment Summit and its benefits to economic growth in Nigeria.
The rationale behind the UK-Africa Summit
The attention Africa is now receiving from the UK government is much about Brexit than anything else. With the UK on the verge of leaving the European Union (EU) on terms yet to be agreed, it needs to shore up its trading relations with other parts of the world. Recent findings on economic growth in Africa revealed that the continent has eight of the fifteen fastest-growing economies in the world and, by 2050, will be home to a quarter of the world’s consumers. That spells opportunity for the UK government to manage the adverse effect Brexit can cause to the country. However, there is a lack of consistency in the UK’s approach and while the Prime Minister, Boris Johnson claims that the UK is interested in the entire continent, only 21 countries were invited. The rationale behind that remains mysterious. There is a possibility that the UK government wanted to focus on countries with the strongest ties or with the greatest potential.
Nigeria-UK Trade Relationship
Relations between Nigeria and the UK are close and longstanding, most recently reiterated in the 2018 bilateral security pact and the collaboration in anti-trafficking. But in later years, Nigeria’s relationship with the UK – particularly economically has become increasingly defined by Britain’s membership of the EU. Although Nigeria is the second-largest destination for UK investment in the whole of Africa, however, the UK’s importance in Nigeria has been sliding in the past years. Since 2000, the UK has fallen from 1st to become the 5th largest non-oil goods exporter to Nigeria behind China, US, India and Germany. Also, the UK’s share of the FDI stock in Nigeria has decreased from close to 7% to less than 2% between 2005 and 2014 and in 2018, the UK’s two-way trade with Nigeria stood at 5.4 billion dollars.
The decline in the UK’s trade relationship with Nigeria can be attributed to the growing importance of China and India in global trade, and an apparent decline in the UK’s competitiveness relative to its developed European rivals, most notably Germany.
The German government appears to have been more effective at using closer cooperation at the ministerial level and trade delegations to bring together German and Nigerian businesses.
However, it is expected that the UK-African investment summit will give the country a fresh opportunity to strengthen her economic relationship with Nigeria. The UK’s government has shown a desire to reconfigure this and the government is starting in the right direction. Africa is and will continue to be the fastest urbanizing region in the world. Throughout this century, the vast majority of growth in the global labour force will come from this most youthful continent.
As one of its largest economies, Nigeria with nearly 200 million people has a great deal to offer in a new trade agreement: Nigeria’s vast natural energy and mineral resources could help supply growth for companies in all corners of the UK.
What does Nigeria benefit?
The UK-Africa investment summit yielded business deals of about £6.5 billion with Nigeria among the top gainers, according to the British government. The first of its kind, the summit had British investors ink deals estimated to be £324 million (more than N153.4 billion) with their Nigerian counterparts. Recent reports from the local newspapers in Nigeria revealed that four British companies signed business deals with Nigeria on the sidelines of the inaugural investment summit in London. While multinational UK-based firms with African links are exploring more opportunities in Nigeria; small and medium-sized UK firms that have never done business in Nigeria are also doing the same.
Conclusion and Recommendations
The UK-Africa summit is just one of the many trades and investment initiatives that major world powers have held with the African countries thus showing increasing interest in the continent. But why is this so? With a population of about 1.2 billion, Africa has been referred to as the opportunity for the world. Eight of the 15 fastest growing economies are expected to be in Africa while over one in four global consumers will be Africa by 2050.
When ratified, the African Continental Free Trade Area is expected to create the world’s largest free trade area. In this regard, presidents and leaders of African countries must demand a mutually beneficial partnership that brings rapid development to the continent rather than accepting whatever the global powers put on the table. As it stands, it is believed that the rationale behind the UK-Africa investment summit is being driven by Brexit and the realignment or expansion of trade focus. Thus, African leaders need to explore the position of the UK to demand better deals. Secondly, there is an urgent need for African states to improve security on the continent. There is no point for the Nigerian government to be chasing investment without proving adequate security for the citizens and prospective investors. Thirdly, Nigeria should provide leadership for Africa in charting the way forward, as well as coordinating the objectives of the various summits within the framework of the African Union’s Agenda 2063 and AFCFTA.