Brexit has mixed implications for Nigeria’s economy – LCCI

The Lagos Chamber of Commerce and Industry (LCCI) has said that exit of Britain from the European Union (EU) has a number of immediate and remote implications for the Nigerian economy.

According to the chamber whose views are contained in a commentary titled ‘Comments on Brexit and the Nigerian Economy’ and signed by Muda Yussuf, its Director General, the first outcome of the referendum has triggered some measure of uncertainty and anxiety in the global economy.

The chamber said the British economy, which is worth $3 trillion, is the fifth largest economy in the world and the second largest within the EU and therefore, a major component of both the global economy and that of the EU.

Naturally, said LCCI, therefore, shocks to the British economy will have some transmission effects on the global economy. “This perhaps informed the immediate responses of global and domestic financial markets. However, this dimension of the impact is unlikely to endure. They are responses driven by expectations and uncertainties, “ it said.

The second implication, the chamber said, is the currency effect, which shows a high probability that the British economy will suffer some setbacks arising from the resultant weakening of investors’ confidence within the economy.

The Brexit implies that investors within the British economy will no longer have free access to the EU market of over $16 trillion and a market size of over 500 million people. This , LCCI said , will reflect in the strength of the currency as there is a relationship between the strength of the currency and the robustness of its economy. A weak British currency offers an advantage to importers from Britain.

The third effect is the fact that Britain accounts for only 4.4 per cent of Nigerian global trade and the EU accounts for 38.8 per cent.

According to LCCI , based on this “it is therefore unlikely that the Brexit will have a material impact on our balance of trade situation. If anything, the trade between Nigeria and United Kingdom could be further improved on account of the likely depreciation of the British pounds and the affinity with Britain within the context of the Commonwealth.

“It is also a fact that Nigeria is yet to sign the European Partnership Agreement (EPA) which also reduces Nigeria’s exposure to the shocks of the EU economy, especially from a trade perspective.”

The chamber also that there is the likelihood that Breixt will Nigeria a Diaspora dimension because of current sentiments in the United Kingdom to adopt tougher stance on immigration issues.

“We have over one million Nigerians in the United Kingdom; Nigeria is also a major recipient of Diaspora remittances in Africa. Therefore, the unfolding scenario may have some adverse implications for remittances to Nigerians from the UK. This will happen from the perspectives of tougher immigration regulations and enforcement as well as the likely slowdown of the British economy.

“On the whole, the impact of Brexit on the Nigerian economy is unlikely to be profound. Besides, negotiations will still take the next two years. Most of the current responses are driven by uncertainties and expectations which will fizzle out in the not too distant future, “ LCCI said.