Brexit: FGN, UK May Reach New Agreements on Tariffs

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Eromosele Abiodun

As millions of Britons head to the polls tomorrow to decide whether there should be a British exit, or Brexit, from the European Union (EU), indications have emerged that a possible Brexit will disrupt trade agreements with Nigeria.

Momentum is gathering behind the EU exit campaign, which wants to end central control by Brussels and give Britain the freedom to manage its own affairs.

With Brexit, THISDAY findings revealed that the Federal Government of Nigeria (FGN) and the United Kingdom (UK) would have to reach a new understanding on tariffs.

Trade volume between Nigeria and the UK currently stands at 6 billion pounds (N 2.4 trillion), the UK Department for International Development invests 222 million pounds a year in Nigeria. When added to the contributions to the World Bank, Britain is investing about 400 million pounds a year in the development of Nigeria.

However, the UK’s development assistance to Nigeria (and other countries) is delivered both bilaterally and through the EU.
Reacting to the development, analysts at FBN Quest said they doubt that the process of negotiating the tariffs would be problematic.

“We would not expect much, if any change in the total envelope, given the traditionally close bilateral ties and Nigeria’s strategic importance. Beyond the short term, we would not see downside for the prime Central London property market, which is international by any criteria.

“We can identify one clear advantage from the UK’s withdrawal for Nigerian (and other non-EU) nationals with professional qualifications. Currently, many large companies in the UK will only consider such applications once all EU candidates have been considered, “they said.

The analysts, however, warned that there are possible general consequences and those that may be specific to Nigeria.
They said: “Economists employed by the UK government, large banks and international organisations have been busy, and the majority have come up with forecasts to show negative consequences for the domestic economy in the event of Brexit.

Despite being a member of the fraternity ourselves, we are wary of any forecasts out as far as 2021 in some cases. The only EU member to have walked away to date has been Greenland. If the UK, which both sides in the domestic debate insist is the fifth largest economy in the world, takes the same step, there would be a period of legal uncertainty as several treaty obligations would have to be unwound.

“The length of this period would hinge upon the stance of the EU and, to a lesser extent that of the UK Parliament, which has a large majority in favour of continued membership The Brexit camp argues that the EU would not be obstructive since the UK runs a substantial trade deficit with the union. The UK is not a member of the Eurozone. Sterling has sold off ahead of the referendum, and some investment banks are suggesting a further fall as far as 1.10 for GBPUSD in the event of Brexit. Renewed weakness would be consistent with a period of legal uncertainty.

“The path of GBPEUR is less clear since some market analysis centres on the possibility that other EU members might favour their own Brexit. This fear is overdone in our view. London’s role as a financial centre would be diminished by the loss of some EUR-denominated activity in currencies and fixed income. We would not expect a loss of business in other areas, least of all in natural resources.”