Currently there is great excitement in the freight transport, logistics and supply chain management sectors about the Nigerian government’s plans to increase port and terminal activity. Thousands of representatives from the transport and logistics industry, ranging from road, rail, sea, air to inland waterways, will meet for the Multimodal West Africa exhibition and conference in Lagos from 24th -26th January 2017.
Nigerian economy is ready to take a big leap
The Nigerian economy is ready to take a big leap but its port infrastructure unfortunately does not support the vision and forms a major bottleneck. With the new plans in place it is believed that the port and terminal industry landscape will completely change.
In July 2016, the Minister of Aviation noted that their ports are currently overwhelmed and as a result of that, they are creating dry ports for the different geopolitical zones. This will go a long way to strengthen connecting modes of transports, especially the rail system and also boost relationship within and outside African countries through the Ecowas Trade Liberalisation Scheme.
UK businesses are well placed to succeed in Nigeria
The UK’s importance in Nigeria has been declining. Since 2000, the UK has fallen from 1st to become only the 5th largest non-oil goods exporter to Nigeria behind China, US, India and Germany. Similarly, the UK’s share of the Foreign Direct Investment (FDI) stock in Nigeria has decreased from close to 7% to less than 2% between 2005 and 2014.
The UK’s decline 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 economic 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.
UK businesses remain well placed to succeed in Nigeria because of its familiar legal system, strong ties through the diaspora community, and the perception that UK brands offer high quality.
Challenges to overcome
Nigeria is dogged by a perception as being a difficult place to do business. While these constraints certainly exist, businesses can thrive if they are ready to adapt to the local business environment. We have categorised the constraints into two groups:
- Infrastructure constraints – utilities (power, water), transport (roads, ports, rails and airports) and ICT (telecommunications and media connectivity).
- Other business constraints – expensive and scarce financing (trade and working capital), lack of skilled labour, security concerns and higher cost of doing business.
Successful UK companies deal with these constraints in two ways: smaller companies tend to partner with local distributers and wholesalers, whereas larger companies typically establish a representative office in Nigeria and then build a supply chain locally.
The UK’s non-oil exports to Nigeria could reach £7bn in 2030
It is predicted that UK non-oil exports to Nigeria could account for £7.1bn by 2030, up from £1.9bn in 2014, and split 75% and 25% between goods and services. In addition, we estimate that the UK’s FDI footprint could increase to £4½bn from £1bn over the same period.
The critical success factors that will determine where in this range the UK’s export potential in Nigeria will be are:
- The speed at which Nigeria’s government can overcome the current adverse economic conditions and make progress on reforms, particularly addressing corruption and infrastructure constraints;
- Nigeria’s policies on trade openness to compliment economic growth and provide more opportunities for UK exporters; and
- UK competitiveness relative to its advanced economy rivals.
The opportunity will only materialise if it is proactively pursued, by the UK government to ‘myth bust’ and facilitate cooperation, and by UK businesses to build relationships and partners in Nigeria.
With Nigeria looking to invest heavily in its trade resources, this presents a great opportunity for trade from the UK to Nigeria and vice versa. With the highest level of expertise and years of experience Jonen Shipping are able to provide expert advice and shipping solutions for you to capitalise on this exciting prospect.