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Economy

New Momentum for Russia – Nigeria Relations

Kester Kenn Klomegah

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Nigeria is considered the economic powerhouse in the West Africa region. As it is popular known, Nigeria is one of Africa’s fastest growing economies and boosts the largest population. After the change over of the presidency in May 2015, from Goodluck Jonathan to Muhammadu Buhari, the Nigerian diplomatic mission said it was ready to take practical steps to bolster economic and strategic ties with Russia.

Quite recently, Ibrahim Usman Gafai, Charge d’Affairs at the Embassy of the Federal Republic of Nigeria in Moscow, said in an interview that economic relations between both countries have steadily developed during the past few years with a number of leading Russian companies establishing their presence in Nigeria.

Russian investment in Nigeria covers such areas as energy, iron and steel, and hydro carbon. Over the years, the diplomatic relationships have also witnessed the establishment of Russia-Nigeria Business Council (RNBC) which oversees economic activities between between the two countries.

So far, the two countries have held three meetings of the Joint Commission, the last being in 2009. The Joint Commission is the platform for the two countries to sit down and draw up agreements and Memorandum of Understanding (MoU) on how to conduct businesses and investment in each other’s country.

Interestingly, Russia and Nigeria’s two-way trade was a modest $350 million in 2013. Authorities in both countries have repeatedly said that it should be many times larger, given that Russia is the biggest market in the former Soviet Union and Nigeria the biggest market in Africa.

“Unfortunately, trade volume between Nigeria and Russia has been comparatively low and highly skewed in favor of Russia. There is an attempt to balance the current trend through boosting economic relations between the two friendly nations,” Gafai acknowledged in the interview.

One of the strategies is to encourage trade promotion through solo exhibitions of good made in each other’s country. Nigeria businesses are encouraged to carry out such solo exhibitions in Russian cities such as Moscow, Saint Petersburg, Krasnodar and Kuzbas regions.

On the other hand, Russian businesses are also encouraged to participate in various annual trade fairs organized by different Chambers of Commerce in Nigeria. In addition, the Moscow’s Nigerian Embassy will continue to call on the two countries to create an investment forum to showcase their potentialities in each other’s territory. The major challenge facing investors from both sides of the divide is dearth of information on each other’s business environment. This has, over the years, created a condition of uncertainty and misgivings among prospective investors.

As part of the initiatives to contribute to revamping the Nigerian economy, Nigerians under the auspices of Nigerians in Diaspora Organization in Europe (NIDOE), the Russian Chapter in collaboration with Russia-Nigeria Business Council, Institute of African Studies and Russian ministries and agencies have adopted corporate strategies in identifying and wooing potential Russian businesses and industry directors to invest in Nigeria.

In another interview with Buziness Africa, Rex Essenowo, Chairman of NIDOE-Russia, talks about current opportunities and wide ranging perspectives for strengthening business partnership and the huge potential that exists for mutually economic cooperation between Russia and Nigeria.

He believes strongly that NIDOE-Russia and the Russia-Nigeria Business Council could help greatly to further develop the mutual business cooperation both in the private and public sectors between the two countries.

The key issues and questions raised were focused on trade and investment possibilities in Nigeria. What has been done and what has not been done in order to boost economic development in Nigeria, and how the relationship has benefited both countries.

A very important issue is the post-election investment climate. Nigeria is always considered as one of the most attractive investment destinations in the world before the 2015 general elections, so it is necessary to keep that environment stable in order to boost the country’s relationship with Russia.

“As already known, we are only doing our best to supplement government efforts at boosting economic development, which in turn can benefit the population. On implementation of various agreements that were signed, we could not achieve 100% results, that is the reason why we keep pushing forward to make some considerable changes,”according to the views of the Chairman.

“Most of the issues are still based on logistics, we have been able to identify other setbacks and challenges which depend much on the part of the governments of Russia and Nigeria,” Essenowo said.

At the last NIDOE-Russia workshop that took place in April 2015, the Chairman and CEO of the Business Council, Valeriy Vozdvizhenskiy, expressed high optimism about the new Nigerian administration of General Muhammadu Buhari, noting assertively that “there is a lot to do, for example, starting from implementing the numerous MoUs that were signed by the previous administration.”

But NIDOE-Russia Chairman Essenowo pointed out explicitly: “Personally, I will suggest a quick review of those key areas that can impact positively on the lives of Nigerians and on the economy of Nigeria. One important aspect is providing sufficient and required information about Nigeria for the Russian business and investors’ community as well as widening the scope cooperation in different sectors of the economy.”

Further, Essenowo said that “NIDOE-Russia wants to see different directions in the Russia-Nigerian economic cooperation. We are really tired of wasting potentials and the rate of poverty our country, despite our enormous amount of resources.”

Russia and Nigeria should not only be regional leaders or key players in world market of oil and gas, but they must become real strategic partners in economic cooperation and development.

There are millions of the educated youth and graduates unemployed, while many Russian companies need external markets and new cooperation for their technologies; the technologies are quite affordable.

There are thousands of Nigerians who were trained in the Soviet Union and in Russia now, could effectively be used as bridges. For example, Nigerians would love to see a Nigerian Ambassador who speaks Russian language to deal with strategic and development issues as well as identifying with and tapping into the fast growing vibrant Nigerian diaspora in the Russian Federation.

The face of African diplomacy is changing steadily. At least, during the past one decade, Russian-speaking African ambassadors from Benin, Burkina Faso, Chad, Ghana, Ethiopia, Kenya, Rwanda, Sierra Leone, Madagascar and Zambia have been appointed to the Russian Federation. Besides, there are Russian-speaking diplomats that make for a new face of Russia-African diplomacy.

The former Nigerian Ambassador to the Russian Federation, Mr. Assam Ekanem Assam told a Nigerian press that he was determined to get Russian businesses to invest in the economy with a view to enhancing growth and explained further that Moscow was home to most dollar billionaires in the world who were looking for a safe and secured environment to invest their money.

He also told the media that Russia as a BRICS (the acronym for an association of five major emerging national economies including Brazil, Russia, India, China and South Africa) has a lot to offer Nigeria in the area of investment in agriculture and the oil and gas sector – especially now that major European countries are facing economic downturn.

As far back as in October 2013, the Russian Ambassador to Nigeria, Nikolay Udovichenko said during a business forum in Abuja that Russia was interested in developing cooperation with Nigeria in the fields of investment, energy, trade and agriculture, among others.

“We see new opportunities for Russian companies. Suffice it to say that Nigeria has all chances to become Africa’s biggest economy in the nearest future. That is why we and the Embassy of Nigeria in Moscow almost simultaneously decided to amplify efficacious bilateral cooperation,” he said.

Udovincheko noted however that Russia considered Nigeria to be a strategic partner in Africa because of its numerous opportunities in human and natural resources, and added that “Nigeria is the largest economy in Africa and it needs objective and balanced information that promotes cooperation and harmony between different groups in the country and the international community.”

With all these laudable ideas on raising economic cooperation, significant corporate projects are yet to be undertaken. But now, new hopes in Moscow and Abuja are that the countries’ annual commercial ties will rise to billions of dollars in the few coming years. Russia plans to help Nigeria explore for oil and gas. Nigeria has expressed interest in Russia, helping it build nuclear power plants, petroleum pipelines, railways and other infrastructure.

Both Russia and Nigeria have a wealth of minerals — and some could be the basis of additional commerce between the two. Nigeria’s natural resources include gold, bauxite, zinc, tantalum, niobium, iron ore and coal.

Nigeria and Russia are both “large economies” and “rich in natural resources,” Goodie Ibru, head of the Chamber of Commerce of Lagos, Nigeria’s largest city, said at a bilateral economic conference in 2013, adding that “although Nigeria is smaller in terms of technology and infrastructure development, there’s a lot for both countries to benefit from.”

The Federal Government of the Republic of Nigeria has, indeed, expressed its support for any Russian genuine and legal investment. Without doubts, Nigeria remains “one of the best countries in the world to do business because of guaranteed return on investment.”

Russia has pledged to help Muhammadu Buhari to fight terrorists in Nigeria. It is selling weapons to Nigeria and training Nigerian troops in counter-terrorism. Moscow was delighted during Nigeria’s election campaign to hear Buhari say he wanted his country to forge a “special relationship” with the BRICS countries, and in particular, Russia. The other BRICS members are Brazil, India, China and South Africa.

Kester Kenn Klomegah is an independent researcher and writer on African affairs in the EurAsian region and former Soviet republics. He wrote previously for African Press Agency, African Executive and Inter Press Service. Earlier, he had worked for The Moscow Times, a reputable English newspaper. Klomegah taught part-time at the Moscow Institute of Modern Journalism. He studied international journalism and mass communication, and later spent a year at the Moscow State Institute of International Relations. He co-authored a book “AIDS/HIV and Men: Taking Risk or Taking Responsibility” published by the London-based Panos Institute. In 2004 and again in 2009, he won the Golden Word Prize for a series of analytical articles on Russia's economic cooperation with African countries.

Economy

Upswing in global growth won’t last forever: IMF says world must prepare now for leaner times ahead

MD Staff

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While the world economy continues to show broad-based momentum, a new report released Tuesday by the International Monetary Fund (IMF) is warning that there may be choppy seas ahead, caused by increasing protectionism or tit-for-tat trade wars.

“Global growth is projected to soften beyond the next couple of years,” said the report, explaining that: “Once their output gaps close, most advanced economies are poised to return to potential growth rates well below pre-crisis averages – held back by aging populations and lackluster productivity.”

Looking at the largest economies, the World Economic Outlook , the Fund’s semiannual report on the health of the international economy, shows growth projections at 2.4 per cent for the euro area, 1.2 per cent for Japan, 6.6 per cent for China and 2.9 per cent for the United States.

“Despite the good near-term news, longer-term prospects are more sobering,” said Maurice Obstfeld, Economic Counsellor and Director of Research at the IMF, the specialized United Nations agency working to ensure stability in the global financial system.

“Advanced economies – facing aging populations, falling rates of labor force participation, and low productivity growth – will likely not regain the per capita growth rates they enjoyed before the global financial crisis,” he continued.

Mr. Obstfeld painted a diverse picture for emerging and developing economies, saying that among non-commodity exporters, some countries can expect longer-term, pre-crisis type growth rates.

However, despite some improvement in the outlook for commodity prices, he pointed out that some exporters will need to diversify their economies to boost future growth and resilience.

The IMF, which is holding its annual Spring Meetings in Washington, D.C., with the World Bank, continued to echo its advice that the current cyclical upswing offers policymakers a good opportunity to make longer-term growth more resilient and inclusive.

“Sound policies can extend the upswing while reducing the risks of a disruptive unwinding,” Mr. Obstfeld stated. “Countries need to rebuild fiscal buffers, enact structural reforms and steer monetary policy cautiously in an environment that is already complex and challenging.”

Trade tensions

While some governments are pursuing substantial economic reforms, trade disputes risk diverting others from the constructive steps they would currently need to take to improve and secure growth prospects, Mr. Obstfeld warned.

Despite widespread economic growth, public optimism has been eroding over time by job and wage polarization trends, raising the threat of political developments that could destabilize various economic policies – even beyond those of trade.

“Governments need to rise to the challenges of strengthening growth, spreading its benefits more widely, broadening economic opportunity through investments in people […] that could radically transform the nature of work,” underscored Mr. Obstfeld. “Fights over trade distract from this vital agenda, rather than advancing it.”

Trade tensions started in early March when the US announced it would levy steel and aluminum tariffs for national security reasons, provoking China’s announcement of retaliatory tariffs on US imports.

In the present environment, excessive global imbalances should be reduced multilaterally.

“Plurilateral arrangements, if consistent with multilateral rules, can also provide a useful springboard to more open trade,” stated Mr. Obstfeld.

While each Government can do much on its own to promote stronger, resilient and inclusive growth, multilateral cooperation remains essential to address a range of challenges – including climate change, infectious diseases, cyber-security, corporate taxation and corruption.

“Global interdependence will only continue to grow and unless countries face it in a spirit of collaboration, not conflict, the world economy cannot prosper,” Mr. Obstfeld underscored.

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Economy

Why Trade, Investment, and Competition Reforms Matter for Argentina

MD Staff

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A loaf of bread. A gallon of milk. Eggs, cheese, and chicken. Most people would not link these everyday staples with a country’s integration in the global economy. But in Argentina, where customers pay 49% more, on average, for these groceries than people would have to under similar conditions in OECD countries, higher food prices are a symptom of deeper economic issues.

The country faces challenges in three policy areas that reinforce each other in fostering further integration in the global economy: trade, investment, and competition. Argentina’s trade flows have fallen by almost half over the past fifteen years, and while most countries participate in about 14 free trade agreements each, Argentina is only party to one, Mercosur. Foreign direct investment levels are low in Argentina, amounting to just two percent of GDP between 2000 and 2015. Further, state-owned enterprises in 17 different sectors are not competing on a level playing field with private investors or delivering services less efficiently than the private sector could.

A report from The World Bank Group, Strengthening Argentina’s Integration in the Global Economy: Policy Proposals for Trade, Investment and Competition, analyzes the current state of affairs in these three policy areas and proposes reforms designed to boost integration with the global markets which would then provide opportunities to grow, create welfare for consumers, and generate better employment opportunities. The reforms suggested in the report cover a wide range and include recommendations such as lowering tariffs, removing bureaucratic hurdles that make private sector investments difficult, and strengthening anti-cartel enforcement, among others. Enacting these reforms would allow firms to be more competitive and better integrated into the global economy, the report finds.

Implementing economy-wide reforms will pay off in a variety of ways. For instance, with all else being equal, a more integrated Mercosur- with lower external tariffs and streamlined internal non-tariff measures – would expand Argentina’s GDP by at least 1%over baseline projections for 2030. Increasing competition in the manufacturing sector would add 7 percent to annual growth labor productivity. Reducing the restrictiveness of market regulation in Argentinian services sectors (such as energy, transport, professional services, and telecommunications) would translate into an additional 0.1 percent to 0.6 percent growth in annual GDP.

Argentina’s government recognizes these opportunities and is taking active steps to open its markets. The Macri administration, which took office in 2015, has already reduced export taxes, replaced the import licensing system, approved reductions in energy and transport subsidies, pushed for a new Competition Law and facilitated $102 billion in new future investments in just 24 months.

“We are convinced that to defeat poverty, Argentina needs a profound productive transformation to become a developed country,” said Miguel Braun, Secretario de Comercio de la Nación, at an event in December 2017.

To reap the benefits of an open economy and increase prosperity in Argentina, the World Bank Group suggests tackling reforms across all three policy areas simultaneously, prioritizing those that can offer short-term wins and tangible benefits.

“No one policy alone ensures that firms can integrate into the global economy,” explains Martha Martinez-Licetti, Lead Economist in the World Bank Group’s Macroeconomics, Trade & Investment Global Practice and Lead Author of the report. “More must be done to ensure that everyone shares fully in the benefits of trade. Policies that help all people benefit from the opportunities that come with trade include investment and competition policies. It is only when implemented in a coherent way that reforms to trade, investment and competition can bring positive effects for the economy as a whole, better jobs for Argentine people, and more variety of goods and services at lower prices for consumers.”

The reforms suggested by the World Bank Group aim to address four particular challenges that firms in Argentina face.

  • Opportunities to enter and/or invest;
  • Access to efficient market inputs;
  • Ability to compete on a level playing field;
  • Capacity to thrive in global markets.

In the past, government interventions prevented investment from expanding or thriving. But today, Argentina is looking to the future and building policies that will help it reintegrate into the world economy.

“Even in this turbulence that we are experiencing, there is an opportunity to intelligently join the world,” said Argentina’s Minister of Production, Francisco Cabrera. “This report is an analytical anchor to understand where we are standing and to be able to make decisions.”

World Bank

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Economy

Growth Expected to Rebound in Middle East and North Africa

MD Staff

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The World Bank Group’s latest Middle East and North Africa Economic Monitor projects regional growth to increase to 3.1% in 2018, up from 2% in 2017. The increase in growth is expected to be broad based, driven by a favorable global economic environment, stability in the oil market at slightly higher prices, and the resumption of post-conflict reconstruction.

“There are grounds for optimism,” said Hafez Ghanem, World Bank Vice President for the Middle East and North Africa Region. “Now is the time to focus on creating more jobs and economic opportunities for youth. The positive outlook is an opportunity to speed up reforms for a renewed private sector as an engine of growth and job creation.”

On the back of a good performance by Gulf Cooperation Council countries, oil exporters could see growth reach 3% in 2018, double the rate in 2017. Growth among oil importers is expected to increase to 4% on average from 2018 to 2020, driven by a sharp rebound in Egypt and a rise in remittances, tourism and exports. Almost all countries in the region have embarked on major reforms to reduce or eliminate energy subsidies, identify new sources of non-oil revenues, and expand social safety nets to shield the poor from adverse effects of change.

“While stabilization policies have helped economies adjust in recent years, we need much faster growth to absorb the hundreds of millions of young people who will enter the labor market in the coming decades,” said Rabah Arezki, World Bank Chief Economist for the Middle East and North Africa Region, “In this report, we study ways for transforming rather than adjusting the region’s economies, to achieve the growth needed.”

Low oil prices and a global shift toward renewable energy to meet climate goals poses risks and opportunities. With its abundant sunshine, the region can leverage the power of solar technology. Turning risks into opportunities will require innovation and the adoption of new technologies. Along with helping the region adapt to the new reality of low oil prices, leveraging new technologies could be a new engine of growth and jobs for the regions. A focus on corporate governance will need to accompany efforts to improve the business environment, to create a new system of incentives at the firm level that encourages the bold and creative thinking required for economic transformation.

Adopting new technologies will require significant investments in infrastructure, which will require greater leveraging of private finance. This can be achieved through public-private partnerships, which Jordan has used to build the Queen Alia airport, and Egypt to attract sizeable private investments in its energy sector. Public-Private partnerships have the added advantage of drawing on the innovation and efficiency of the private sector, and are a step toward changing the role of the state from the main provider of employment to an enabler of private sector activity.

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