It is no longer news that the United Kingdom, the UK has voted in a crucial referendum to leave the European Union- Brexit.
For over 43 years, the UK has been a stronger member of the EU. Its economy has benefited immensely from being a part of the 28 member economic and social organisation that made Europe what it is today.
Amongst other benefits, the UK overtime achieved major feats and its economy became the centerpiece of the EU. Because of its historical position and geographical location, the UK became the melting pot of economic and civil activities in the EU and EU member countries accorded her that position. Immigration to the UK from EU member countries and other countries around the world such as Nigeria, India and South Africa is higher than any country within the union.
Also, until the plug is finally pulled in two years from now, London is still the world’s banking headquarters and perhaps the number one financial services centre for the world. However, leaving the EU with all these privileges is a major decision that must be taken with serious recourse to its attendant consequences. The immediate plunge of the FTSE 100 (top 100 most capitalised stocks on the London Stock Exchange) and an unprecedented fall in the value of the British Pounds to a 32 year low figure is just a tip of iceberg.
The bigger problem is that the consequence of Brexit is far reaching than its proponent had expected. Brexit will also impact our local market. Nigeria and major economies in Africa have strong trade, economic and social relationships with the EU via the UK. The severance of this relationship as a result of Brexit is a major headache yet to hit all concerned.
As a Nigerian company with a global perspective here are some of the consequences of Brexit on the Nigerian economy.
Reduction in capital flows. Nigeria gets about 50% of its portfolio investments and a sizeable amount of her foreign direct investments, FDIs from the EU and majority of these come from companies, investors and corporations accessing the Nigerian markets via the UK. The absence of the UK in the equation will lead to a re-calibration of strategies on the part of investors to understand how they will access the market without the UK as a buffer. As a practical food for thoughts, virtually all marketing consultancies with business presence in Africa and Nigeria come through the UK. What happens to this relationships with Brexit on the table?
Expect a serious cuts in remittances. Nigeria is one of the countries in Africa that benefit from huge inflow of diaspora funds. In 2014, Nigerians abroad sent home about NGN4.2 trillion (USD21 billion). About 60% of this amount are sent from Nigerians living in the UK. The inflow of funds from Nigerians living abroad has a ripple effect on the local economy and the sharp drop would definitely take a toll on families, SMEs and the local financial system facilitating the process.
Another impact is that the UK will no longer offer Nigerians access to 28 countries where they can pursue their educational goals and career. Nigeria is one of the major countries where oversea education to the UK is high. Local universities would however benefit from this. As the Naira gets weakened and a Brexit is added on top, it will be more difficult for many Nigerian parents to afford university educations for their wards in the UK. The adverse effect of this is that foreign students bring home exotic talents that can be added to home grown knowledge to develop the local business and creative environment, this would be very much threatened.
As the Remain campaign canvass for a second referendum, the new status quo is that UK is no longer in the EU. All quarters need to start hedging against these and many other risks ahead.
As for Nigeria, maybe the time is ripe to enter the next train to Germany and say – Guten tag!
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