Nine months after Britons unexpectedly voted to break with the European Union (EU), the U.K. invoked Article 50 of the Lisbon Treaty, the legal mechanism to exit the bloc, which analysts say offers some opportunity, as well as uncertainty for Nigeria.
“This is an historic moment from which there can be no turning back,” U.K. Prime Minister, Theresa May told lawmakers in London, shortly afterwards.
Following the move, the pound weakened against all of its Group-of-10 peers and fell to a one-week low against the dollar, before edging back up.
It has dropped 17 percent since the referendum, according to data from Bloomberg.
Frank Udemba Jacobs, president of the Manufacturers Association of Nigeria (MAN), said Brexit justifies the call for the country to jettison the signing of the Economic Partnership Agreement (EPA) proposed by the European Union.
“Brexit is helping our case that Nigeria should not sign the EPA. The fact that Britain exited from the EU makes a strong case that Nigeria should be allowed to grow on its own and at its own pace,” said Jacobs.
Jacobs said Britain’s decision to exit the EU should be a lesson for Nigeria to look inwards, to develop through its resources, rather than allow the EU to flood the local market with products that can compete much better than locally made goods.
The EPA is an agreement between the EU and West Africa, which seeks to free trade between the two blocs within specified periods.
Twelve countries in West Africa have all signed the agreement, except Nigeria and the Gambia. Nigerian manufacturers oppose the EPA because, according to them, it will squeeze struggling industries in the country.
The impact of Brexit on Africa will be felt more in the sophisticated markets with more liquid sovereign credit and currency forward agreements, according to NKC African economics, a research firm specialising in sovereign risks.
“In our view, the direct impact of Brexit on Africa will be contained to the forex and financial markets over the short term. This will primarily filter through to the real economy, via the indirect impact of global risk sentiment on commodity prices, impacting the balance of payments and the monetary system, and implying that the upside risks to inflation have increased on account of exchange rate pass-through,” NKC African economics said.
Sayina Rima, president of the Cocoa Association of Nigeria, said Brexit will have a positive impact on Nigerian exports, as it will enable Nigeria to negotiate better.
Rima said it could be possible for Nigeria to negotiate on better terms of trade, separately with the EU and the UK.
Trade volume between Nigeria and the UK currently stands at about 6 billion pounds (N 2.8 trillion).
The UK Department for International Development also invests some 222 million pounds a year in Nigeria.
Rima, however, complained that there is an oncoming ISO standard which needs to be opposed by Nigerian exporters, as it does not factor in the producer when prices fluctuate in the international market.
Last year, Gregory Kronsten of FBN Quest, said, “This fear is overdone in our view. London’s role as a financial centre would be diminished by the loss of some EUR-denominated activity in currencies and fixed income.”
In a six-page letter submitted on Wednesday to EU President Donald Tusk, May formally triggered two years of likely contentious talks that will end with Britain breaking ties with its largest trading partner after more than four decades.
May however struck a conciliatory tone toward the European Union, as she coupled her demand for divorce with a request for a sweeping free-trade deal, encompassing financial services.
Moody’s Investors Service recently published a report that analyses the impact of Brexit on Sub-Saharan Africa.
“Brexit-induced financial market volatility and a potential shift in investors’ risk perceptions are the main short-term challenges for Sub-Saharan Africa (SSA),” Zuzana Brixiova, a Moody’s Vice President and Senior Analyst said.
“Brexit may spur medium-term losses in trade, tourism, foreign direct investment and aid in parts of SSA.”