Nigeria’s trade and investment challenges persist as Adebayo clocks one year in office

Admin 01-Sep-2020 Business

On August 21, 2019, President Muhammadu Buhari appointed Niyi Adebayo, a former governor of Ekiti State, as Minister of Trade and Investment.

He succeeded Okechukwu Enelamah, his predecessor in that office.

Mr Adebayo had the mandate to lead the promotion of government’s policies of Ease of Doing Business, job creation, poverty eradication and industrialisation.

The minister was also expected to implement policies and programmes to improve standardisation of bilateral trade agreements, stimulating growth of domestic Micro, Small and Medium Enterprises, MSMEs and renewed roadmap to increase Nigeria’s Foreign Direct Investment, FDIs.

When Mr Adebayo assumed office, there were a number of challenges bedeviling the trade and investment environment such as multiple taxation, high cost of power supply, difficulty with access to loan, poor infrastructure, high cost of doing business, among others. These and numerous other factors culminate in the inability of Nigerian produce to be competitive in the export market.

Twelve months afterwards, a number of the problems persist.

FDI slumps

In June, the United Nations Conference on Trade and Development (UNCTAD) disclosed that Foreign Direct Investment (FDI) into Nigeria declined by 48.2 per cent to $3.3 billion in 2019 from $6.4 billion in 2018.

According to the report, FDI flows to Nigeria declined due to a slowdown in investment in the oil and gas industry.

There were projections that the COVID-19 pandemic would severely curtail foreign investment in Africa in 2020. The downturn would be further compounded by low oil prices, dragging FDI flows down by 25 and 40 per cent.

European Union Ban

In February, the Cowpea and Beans Farmers, Processors and Marketers Association of Nigeria said the ban placed on Nigeria’s beans in European countries would not be lifted until 2021.

In January 2013, the European Union (EU) placed a temporary suspension of imports of dried beans from Nigeria for one year. The ban was over the excessive use of chemicals by Nigerian farmers to control a pest, Maruca vitrata, from damaging crops on the field.

The ban was extended by three years from the June 2016 deadline due to the observation of non-compliances. Although it was supposed to be lifted in June 2019, it has not been lifted.

Experts felt the government would put measures in place to ensure that there is compliance and initiate constructive engagements with authorities in other jurisdictions to ensure the ban is lifted.

Struggling companies

Aside from the ban by European Union, many manufacturing companies are struggling to remain in operation in Nigeria.

In the first week of August, South African retail giant, Shoprite, announced the commencement of a formal process to discontinue its operation in Nigeria.

The multi-national retail group announced that it took the decision to discontinue its Nigeria operation “following approaches from various potential investors, and in line with our re-evaluation of the group’s operating model in Nigeria.”

Although the retail giant did not announce the reason it is leaving Nigeria,analyst showed that profit repatriation concerns, naira fluctuation, logistics bottleneck, and sundry other issues related to the Nigerian business environment may have contributed to the planned exit.

Apart from Shoprite, other companies have since announced their exit from the Nigerian economy in recent times.

Regional trade, border closure

Last year, the Nigerian government announced the closure of all land borders across the country. The government explained that closure of the borders was to protect the economy and to stop cross-border security breaches.


Although the government has claimed that the policy has effectively helped to check smuggling and protect Nigerian manufacturers, there have been other negative aftermaths from the policy.

There have been massive smuggling of foreign rice into the country from these border communities, among other illicit activities that harm local industries.

For instance, last November, the Comptroller-General of the Nigerian Customs Service, Hammed Ali, placed an embargo on the supply of petroleum products to filling stations with 20 kilometres of Nigeria’s land borders. According to Customs, the ban was necessary to stop the smuggling of the products across the borders to neighboring countries.

Across the country’s land borders in five of the country’s six Geo-political zones revealed that the while the restriction on supply of petroleum products has been effective, it has exposed inhabitants of the communities within the embargo area to exploitation from security operatives, and hardship.

Again, many companies have stopped exporting through the land border due to the closure of the border.

For logistics concerns, quite a number also find it difficult to move their goods through the sea, hence, stifling trade between Nigerian indigenous traders and their counterparts in other West African countries.

PEBEC, Ease of Doing Business

In July, Vice President Yemi Osinbajo noted that business reforms triggered by the Presidential Enabling Business Environment Council (PEBEC) are an opportunity to significantly boost local and foreign investments in the country.

He noted that as a result of the work of PEBEC, the World Bank has praised the economic direction of the Buhari administration and ranked the country higher in its annual Ease of Doing Business Rank. 

Last October, three months after Mr Adebayo assumed office, the World Bank listed Nigeria among the economies with the most notable improvement in the Ease of Doing Business. In the report, the World Bank named Saudi Arabia, Jordan, Togo, Bahrain, Tajikistan, Pakistan, Kuwait, China, India and Nigeria.

Overall, Nigeria emerged 131 out of 190 countries, up 15 places from 146th position last year, or 56.9 per cent point score. The score is about 3.5 per cent better than 53.4 per cent point score recorded in the previous year.

High cost of doing business

Despite its favourable ranking in the Ease of Doing Business category, the Lagos Chamber of Commerce and Industry (LCCI) in December projected a high cost of doing business in 2020.

Muda Yusuf, the LCCI Director-General, made the projection in the LCCI 2019 Economic Review and Outlook For 2020. He attributed the projections to poor infrastructure, multiplicity of levies, excessive regulations, among others.

Mr Yusuf said that while the nation may have recorded improvement on the Ease of Doing Business Ranking due to some recent policy measures, realities on ground would continue to differ if the highlighted challenges were not properly addressed.

He said the performance of the trade sector in 2020 would be shaped by the direction of government policies.

According to Jide Ojo, a policy analyst, “since Mr Adebayo assumed office, his efforts have been complicated by COVID-19 pandemic and its attendant effect on cost of doing business.”

Trade, logistics, NIPOST

In Nigeria’s business environment, logistics is a major challenge. Young Nigerians trying to ease the concerns have also had their efforts stifled by government policies.

In July, the Nigerian Postal Service (NIPOST) announced new fees for courier and logistic business operators in Nigeria. NIPOST increased the new licence fees for Municipal operators to N1 million, and annual renewals fees to 40 per cent of new licence fees at N400,000.00 a year.

All licence renewal fees are pegged at 40 per cent of fees per zone, among other regulations. The development triggered protests among young Nigerians, especially on social media, with many attributing it to reasons why businesses struggle to survive in Nigeria.

Logistics at Nigerian ports, especially Apapa in Lagos, is another major hurdle for business owners as consignments spend months with huge cost to the businesses. No improvement has been witnessed in this area in recent time.

According to a report by the LCCI, about 5,000 trucks seek access to Apapa and Tin Can ports in Lagos every day, even as the ports were built to accommodate only 1,500 trucks.

AfCFTA

Due to COVID-19 and the border closure policy, little has been heard about the progress of the widely applauded AfCFTA agreement.

Earlier in August, the ministry said it met with executives of the Nigerian Agribusiness Group (NABG) on the implementation of the African Continental Free Trade Area (AfCFTA) and access the continent’s market worth $659 billion, in mostly manufacturing goods and services.

AfCFTA is said to provide Nigeria with a preferential access to African market worth over $650 billon, in mostly manufactured goods.

COVID-19, taxes and SMEs

Since the pandemic broke out, forcing countries of the world to declare lockdown orders, there have been disruptions in the activities of small and medium businesses.

Although the government says it is supporting SMEs with funding and other support scheme (like the Micro Small and Medium Enterprises (MSMEs) support scheme being rolled out under the National Economic Sustainability Programme), SMEs groan amid complaints that they are still largely shut out of

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