Trading thin? Nigeria must do more Africa business
The Visa Africa Integration Index 2013 describes Nigeria as one of the least regionally integrated economies on the continent. (Image: Visa Report)
In two years, experts predict that Nigeria will replace South Africa as the continent’s largest economy, but the West African frontier economy is not sending out the right signals of collaborating with fellow economies for the greater good – and greater growth.
The Visa Africa Integration Index 2013, which measures the degree of economic integration within key trade corridors of sub-Saharan Africa, describes Nigeria as one of the least regionally integrated economies on the continent.
Thus, for a country which may be about to explode on the scene as Africa’s largest economy, following a GDP revision exercise currently underway and expected to be completed this month, the report card for sharing its gains with its neighbors is already under criticism.
Given that the Visa report categorically states that ‘regional integration is a consistently more important contributor toward economic progress and social development than global integration’, Nigeria suffers from an eclipsed presence on the African trading scene.
The West African frontier economy pulls in a dismal regional integration score of 35.7 per cent while its global integration score stands at least 10 points higher (at 45.4 per cent) on the back of investments from, and trading partnerships with big countries in Europe, Asia and America.
Last February, British Deputy High Commissioner to Nigeria, Peter Carter, estimated that Nigeria’s trade with United Kingdom would hit $12.2 billion by 2013. Asia is also well-represented in Nigeria’s trade scorecard courtesy China which earns the economy the maximum revenue at over $13 billion in trade annually.
The continent’s leading economy at present, South Africa, scores the highest points on economic integration as it shows greater economic links on both regional and global level with an overall score of 63.3 per cent.
However, even Africa’s largest economy fails to bridge significant gaps between global and regional integration, with its international linkages standing at an impressive 78.2 per cent, while its continental links lag behind at 48.4 per cent. This opens a window of opportunity for the frontier West African economy to play catch-up with its more prosperous South African counterpart, provided it acts decisively, and soon.
According to the Visa report, Nigeria will benefit if it integrates with the rest of Africa because its growing market prompts both a demand for more sources of capital as well as calls for a diversity of trade partners to address the needs of increasing industrialization, a rising appetite for production and services and growing sophistication in lifestyles.
However, apart from increased growth, Nigeria must also evidence diversification in the sectors that constitute its GDP. The finance ministry of Nigeria recently stated that 80 per cent of revenue and 95 per cent of export income comes from oil alone.
Therefore, whatever final figures are obtained by Nigeria in the GDP revision exercise, the country has made impressive economic gains over the past decade mainly from oil, signaling a worrying overdependence on a limited resource, which is moreover, largely sold in crude form.
According to Professor Adrian Saville, author of the Visa report, Nigeria must start increasingly refining and processing crude exports into more complex products such as refined petroleum or petroleum jelly to replace imports with domestic production.
Further, in a fuller state of economic development, the country can then start to sell refined products in the exports market.
Finally, more importantly for long-term growth and sustainable development, other sectors such as telecoms, e-commerce and agriculture are emerging, though gradually, as small yet growing sources of revenue in Nigeria’s fast moving economy.