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The bottlenecks at Nigeria’s ports are the major constraints on its international trade performance @ftlive #Africa #Nigeria #Trade

By Rafiq Raji

nigeria ports

The Financial Times and the Nigerian Customs Service would today host investors to discuss “Business in Nigeria: Trade facilitation for Africa’s business hub”. In preparing for my attendance, I’ve had cause to take a second look at Nigeria’s recent trade statistics and doing business indicators. They are not encouraging. According to the World Bank’s Doing Business 2014 Report (a survey that compares business regulations for domestic firms in 189 economies), Nigeria ranked nine places lower in 2014 to 147th; worse than the Sub-Saharan Africa (SSA) average ranking of 142. The top three SSA countries are South Africa (41st), Botswana (56th), and Ghana (67th).  In terms of ease of getting electricity, ease of registering property, ease of paying taxes, and ease of trading across borders, Nigeria ranks lowest in Africa and in some cases was amongst the bottom five. On the positive side, Nigeria ranked highest in SSA at 13th place on how easy it is to get credit; higher than South Africa.

In 2013, FDI inflows to Nigeria decreased 20% to USD5.5bn largely because of asset sales by foreign oil companies. That said, Nigeria continues to be an attractive destination for foreign direct investment. On June 9, 2014, the Wall Street Journal (WSJ) quoted the asset manager, Advance Emerging Capital, as saying Nigeria and Kenya would be the two most attractive frontier markets over the next five years. The list of Nigeria’s backers is increasing; in spite of the recently bad press it has been getting. The WSJ also attributes Bank of America Merrill Lynch with favourable investment dispositions to the two countries. Incidentally, the two African stars have recently had to grapple with an increasing spate of terrorism. One may not want to entertain conspiracy theories, but the coincidence is uncanny. The most compelling investment case for Nigeria, however, remains its demographics. After an 8.5% decline in 2011, Nigeria’s exports volume increased by 1.1% in 2012 and likely improved further in 2013 by an estimated 1.7% according to the IMF. This could be better; especially as imports increased by an estimated 8.1% in 2013 after a 10.1% decline in the previous year.

Doing business in Nigeria remains profitable in spite of these inefficiencies, however. Investors look at Nigerian success stories in the cement and noodles manufacturing industries and think to themselves: where the heck were our heads all this time? But of course, fans of Nigeria wish it would fix the myriad of problems it has. Trading through the country’s ports can be unnerving and electricity generation increase production costs by as much as 40-50% according to some estimates. Recent developments in Nigeria point to the authorities’ increasing commitment towards increasing electricity production capacity. Progress remains slow, however. Increased efficiency at the ports is certainly an area that the authorities can record a quick-win if it is indeed committed to facilitating Nigerian trade and making the country Africa’s business hub. There are too many government agencies at Nigerian ports. All the relevant agencies should be integrated into one check-point at the ports. This is easier said than done, however. Most of the agencies at the ports belong to different ministries. It is not likely they would want to give up a lucrative revenue-earning function for efficiency’s sake. What is needed is a Presidential task-force to bring all the various parties together, manage the potential turf issues and persuade the political actors that having an efficient ports system is in the national interest. Otherwise, Nigeria would continue to lose ports business to its neighbouring countries. One certainly hopes the various government functionaries at today’s event in London would tell those who wish Nigeria well – many of whom will be in the audience – how and if they intend to make trading across Nigeria’s borders a little easier.