By Olumayowa Okediran
Nigeria and South Africa might not be next to each other but, their fates are tied together. The two countries, in the past few years, have battled it out as two of the largest economies in Africa. According to the World Bank, South Africa’s GDP is around $314bn while Nigeria is a little bit ahead at $481bn. However, Nigeria has nearly 120 million more people. While trade across borders in Africa still remains tedious, Nigeria and South Africa are smoothing out a complicated relationship to build a more harmonious trade route.
A recent rise in trade
Jacob Zuma’s visit to Nigeria, in March 2016, to mend bilateral relationships that soured during President Goodluck Jonathan’s regime, gave a green light for fostering improved trade relations. Before this, the deportation of 125 Nigerians from South Africa for not possessing the Yellow Fever Card, and Nigeria’s deportation of South Africans doing business in Nigeria, showed that the relationship was breaking apart.
South African High Commissioner to Nigeria, Louis Mnguni, revealed that trade volume between Nigeria and South Africa has recently risen to 1.3 trillion naira ($4.2 billion). He added that there were currently about 120 South African companies in Nigeria, which includes MTN, Standard Bank and Shoprite. These companies engage in engineering, ICT, construction, aviation, media, hospitality, banking, retail chain and oil and gas exploration services. On the other hand, Nigeria’s major export to South Africa is oil and Nigerian companies in South Africa are mostly small and medium sized enterprises (SMEs).
To maximize the enhanced bilateral relationship with South Africa, Nigeria needs to diversify its export to the southern African country.
Nigeria’s population may be one of the key reasons that Nigerian companies are reluctant to step outside the country’s borders. Companies struggle to meet the demands of a market Nigeria’s size, and so, expanding to South Africa might seem unjustified. However, the few that managed to expand to South Africa have several obstacles stacked against them.
On the Nigerian side, MTN and Shoprite, among others, are some South African companies that have increased their dominance over the years. To improve its position, Nigeria must advocate for bilateral agreements that allow Nigerian companies in South Africa the same freedom that South African companies in Nigeria currently have.
Nigeria needs to move beyond oil
The increasingly unstable oil prices are a sign that Nigeria must consider other sources of revenue. The crash in oil prices in 2016 eventually led to an economic recession, which left Nigeria’s reserves in danger. To improve its relations with South Africa, Nigeria should focus on supporting export diversification. This can start from refining crude oil into more complex products. Nigeria needs to protect itself from further shocks in the oil industry.
[su_pullquote align=”right”]With more exports, and the extension of its corporate services to other neighboring countries, Nigeria will improve its economic footprint across the continent and could regain its status as an African giant.[/su_pullquote]
Thus, improving its exports to South Africa by diversification would be an essential step. With more exports, and the extension of its corporate services to other neighboring countries, Nigeria will improve its economic footprint across the continent and could regain its status as an African giant. Bettering the communication between the two countries will improve trade. Nigerians in South Africa have said that they face xenophobic attacks. These are threats to a healthy relationship between the two countries and must be dealt with accordingly. Nigeria must advocate for mutual respect and peaceful coexistence between the two countries and its citizens in order to enhance trade relations.Jacob Gedleyihlekisa Zuma, President of South Africa came to visit Nigeria in March 2016, to mend bilateral relationships that soured during President Goodluck Jonathan’s regime. | Photo courtesy: allafrica.com
Nigeria may also benefit from South Africa’s advancement in technology and mining. Mining has become a key sector in the Nigerian government’s diversification plan. Thus, Nigeria will benefit from the recently signed bilateral pact to collaborate and learn more about mining from South Africa. This would help build a formidable mining industry in Nigeria.
Learning from South Africa
What does Nigeria stand to lose by ignoring South Africa? South Africa remains one of the most populous and prosperous countries in Africa. The only other country that balances its population with prosperity is Egypt. However, language and culture might be a barrier for better relations.
[su_pullquote]With Nigeria’s population and the tenacity of its citizens, its economy will witness a giant leap if some of South Africa’s successes are recreated in the country.[/su_pullquote]
South Africa’s advancement in technology and industrialization increases the need for Nigeria to improve its relations with it. This will help boost Nigeria’s struggling economy and industries. To be better, one needs to learn from, and associate with, better minds. With Nigeria’s population and the tenacity of its citizens, Nigeria’s economy will witness a giant leap if some of South Africa’s successes are recreated in the country. Oil remains Nigeria’s most important export product. However, to create more a more sustainable economy, Nigeria should explore new avenues to benefit from its improved trade with South Africa.
Olumayowa Okediran is a policy fellow at the South African Institute of Race Relations.
Featured image: Wall street Journal
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