Nigeria: The blurry lines of domestic trade

Nigeria’s greater focus on external trade is undercutting her growth efforts. Kano State in Nigeria has a population of 13 million people and an estimated GDP of $12.39bn. (one of many estimations) it’s a major commercial hub with an immense trade potential. This hub like other grade A commercial hubs in Nigeria – Aba – Lagos-Ogun – Onitsha -Nnewi has seen growth that can rightly be described as incidental. The consequences are; several lost opportunities, unused capacity and skewed national progress (in a geo sense) that will limit rather than accelerate growth.

Compare Kano State with Rwanda; having a population of 12.46m (2018 UN estimates) and a GDP of $21.97 billion (2016). Rwanda’s third quarter economic growth (in 2017) came to 8 percent year on year, driven mainly by the Agriculture and services sector – where Kano has near equal comparative advantage. In 2016, Rwanda’s global shipment was valued at USD 621.6 million. The noteworthy data, however, is that 58.7percent of that was delivered to other African countries. Mainly members of the East African Community (EAC); the regional block of six (6) nations whose combined population and GDP (USD 159b [2016 values) is less than Nigeria’s.

But Kano – like her few sister trade/commerce hubs – in Nigeria is sitting in a super market that may be limiting her potential, simply because of the nomenclature that it’s a state or city within Nigeria. The simple but sad fact is that, if Nigeria had a strong unencumbered framework for optimizing internal trade, Kano would be far greater than Rwanda and the rest of Nigeria would be Kano’s equivalent of the EAC bloc.

Imagine a market system, tailor-made infrastructure development and national plans, geared towards the systematic linkage of major hubs and the sharpening of weaker and blurry trade lines and corridors in Nigeria. There are plans, completed and on-going projects, especially in rail and road networks for linking some hubs; commendable! But they are yet to incorporate the global view or represent the scale of the situation. Even in the absence of any real trade borders between states in Nigeria; movement of goods is still constrained. The numerous transportation options available in peer countries are simply absent here and the available ones are simply sub-optimal.

The obscure truth is that even Nigeria’s export potential is constrained by the poor structure of internal trade. This brings on the contentious issue of Nigeria’s signing or non-signing of the AfCFTA. Most opinion and analysis have downplayed the contingent and contextual significance of trade agreements. What do I mean? Trade agreements and the concept of common markets do not deliver; equal, equivalent or consistent benefit for all participants. If we separate expert opinion from empirical data, we see that the decision is best made using a sound, bespoke model that considers each signatories political-economy and then juxtaposed with that of other signatories. Succinctly, what each party gets out of trade agreements is simply the resultant of a long mathematical equation with complex variables. Where it delivers consumer surplus, it may not deliver producer surplus and vice versa.

It’s desirable for Nigeria to optimise trade and market opportunities with Rwanda, Ivory Coast and Botswana. However, equally important – if not more important- is for Kano to optimise trade with Lagos, Rivers and Plateau state. Internal trade in Nigeria is incidental, unstructured and un-driven; and there inlays a neglected part to economic growth, job creation and – ironically- increased exports too.

What percentage of Aba-originated wearable fashion and other items in that value chain goes into Kano to compete – strongly – with substitute products arriving from Philippines, London, Vietnam and China? Of Kano’s tomato production what percentage is consumed in Rivers state households, compared to tomato products arriving from China or Italy, in which an estimated N12bn and about 3000 jobs is lost annually to the imports of tomato in Nigeria. It’s widely known that locally produced commodities lose a large portion of their value, due to poor processing capacity; which is hinged mainly on the Energy/Power crises, Sub-optimal state of transport infrastructure and poor access to credit. Taking Tomato and tubers from Jos to Lagos in open trucks (instead of refrigerated cargo rail transportation) not only leads to wastes/losses to the farmer in transit, it also leads to reduction in quality that lowers its ultimate market value.

A robust export system is good and critical – especially for scarce foreign exchange earnings, but it should not be accompanied by a gross negligence of internal trade capacity. The fast is; they are organic! If the right domestic, geo and economic linkages are established, new capacity for the production of goods and services will certainly be discovered and several idle resources harnessed. This will amount to thousands of jobs.

External trade will never reach its full potential until internal trade is revived and tightly coupled to it. Note that Nigeria’s top 10 exported commodities in 2017, accounted for 99percent of all its global shipments; so where are the rest of the commodities that are rife? Until internal trade is strengthened they will not reach the international market; that is the crucial linkage.

One 2017 power sector study suggests that up to 34percent of the production cost of goods in Lagos state is related to the cost of power generation (self-generation). Another 2015 UN report suggests that up to 30percent of the cost of traded goods in the Lagos – Kano corridor is related to the cost of transport – inefficient transport!. There are no physical borders or independent customs regime encountered between Kano and Abuja, but trade actors admit that moving goods within that channel is – technically more encumbering than importing products from Italy to Lagos. Although actors get used to it, but getting used to it does not translate to efficiency. Any new initiative – public or private driven – that is capable of optimizing existing domestic trade linkages or creating new capacity will deliver inclusive growth and revive the hundreds of stifled and now dying semi-urban and rural cities in Nigeria. Admittedly, there are on-going efforts, but how sufficient are they? A federal framework for a fresh mapping of geo-capabilities in trade and subsequent development of the capacities through the right vehicles will cause massive internal economic renewal.

No one person, administration or policy is to blame, but unbalanced and decades-long focus on external trade has seriously masked the treasures within. The current challenge is to redraw the disappearing lines of internal trade in Nigeria in other to establish a future-looking trade nexus. However it’s essential to say that the destination will not be reached through a single program, policy or declaration. It will be a salad of many vehicles and domestic trade optimisation strategies.

Chijioke MAMA

…Mama is the founder of Meiracopp Nigeria Limited (MNL) and a Doctoral Researcher at University of Port Harcourt (m.chijioke@meiracopp.com)