Nigeria’s President Buhari is on a working visit to the United States of America where he met with his counterpart President Donald Trump.
Both leaders were pictured together all chummy as they signed bilateral trade related agreements between both countries. Following the signings, they both appeared at the White House Rose Garden where they briefed journalist and took questions from them.
In a nutshell, here is what Trump wants from Nigeria!
1. Vote North America to host 2026 World Cup
2. Free trade so they can export stuff to Nigeria and perhaps we export to them.
3. Improve Ease of doing business if you want American Investments.
4. Stop herdsmen https://t.co/DU8m05n0Nv
— Ugo Obi-Chukwu (@ugodre) April 30, 2018
In his briefing, President Trump basically laid out what his demands for Nigeria were as he seeks mutual beneficial partnerships.
These are three of the most demands wanted by the President;
- Bring down trade barriers – the US President believes Nigeria “owes” the US a reciprocal right to remove some of the trade barriers inhibiting US exports into Nigeria. Even though he alluded to reciprocity in his remarks, the US wants more balanced free trade between Nigeria and the United States with barriers brought down. Nigeria currently has banned 41 items from import into the country, a major trade barrier frowned against by most countries. Trump said they hope to be the “economic partner of choice” for the African country including Nigeria and this means bringing down trade barriers.
- Ease of Doing Business – one of the major economic policy fronts of this government, Trump made it clear once again that should Nigeria require foreign investments from the United States, then ease of doing business must improve. It is incredibly difficult doing business in the country considering the numerous taxes and levies paid by companies looking to start a business in the country.
- 2026 World Cup – Perhaps not a direct economic demand, this has economic connotations for the United States. The country joins Mexico and Canada in a bid to host the 2026 World Cup. Africa is expected to support Morocco, the North African country that has been bidding to host the World Cup for years. Nigeria is expected to vote in Favour of Morocco, however, in on of his first remarks, Trump demands that Nigeria supports their hosting bid so that they can support us as well. In fact he states clearly that “they will be watching closely” for support they can get in that regards.
What does this mean?
The United States is currently one of Nigeria’s top export destination even though data from the National Bureau of Statistics puts oil as the major export commodity to the country.
Data from the NBS reveals Nigeria has a Trade surplus of abut N1 trillion over the United States. Trade exports was N1. 73 trillion compared to imports of N760 billion. Over 90% of the exports are crude oil exports.
Demanding for taking down “trade barrier” is good for both countries provided it is in line with the principle of “reciprocity” like Trump stated. However, it is poignant to note that Nigeria recently withheld consent for the signing Continental Free Trade Agreement with the rest of Africa in Rwanda, due to fears that our local economy might be negatively impacted.
The government is big on local production and less import and has focused the last three years of the administration on growing Nigeria’s local agriculture production. Policy analysts believe this is basically what the president went to sell to the US. The Nigerian President demanded for lesser rice imports into Nigeria considering the billions sunk in improving local rice production.
However, the US will have major superior advantage over Nigeria if a free trade agreement is pursued considering their apparent superiority when it comes to technology and manufacturing.
The Nigerian market is a major trade destination for US consumer products and they will like to make inroads considering how dominant Asian products are in the country. Americans also have cars, solar powered and renewable products, phones and accessories, consultancy businesses they would want to export incrementally into the country.
What this means for retail investors?
At Nairametrics retail investing comes first. Western economies typically prefer to Foreign Portfolio Investing into Nigeria. A trade deal could first open doors to foreign portfolio investing from US investors which could provide the liquidity required for the capital market to thrive.
Nigeria is currently yanked off the JP Morgan Bond Index and there is chatter that we might be brought back soon. Some of the issues cited for removing Nigeria, such as the fixed exchange rate policy have largely been addressed with the introduction of the Investor Exporter Window which has been in operation for over a year now.
Are we optimistic? Yes we are provided oil prices continue to remain high and above $70. Data from the Nigerian Stock Exchange for the first quarter of the year shows an 80% rise in foreign portfolio investments into the country compared to the same period last year. Most of this already come from Europe and the US.
As we typically believe, first comes the FPI, then the FDIs.