Impact of Brexit on Kenya and Nigeria Economies
Britain voted to unanimously leave the European Union. Many people around the globe have criticized the move. Some have even predicted doom for the future of the economy of Britain. The world now seems to be in limbo about the current position of Britain. Some economists feel that Britain’s decision was a selfish one aimed at cutting off some countries from benefitting from her. The Prime Minister David Cameron has already announced that he will be stepping down in the month of October after the vote.
The question, however remains: is Britain’s exit going to impact negatively on the economies of Africa? Some economic analysts have said that only big economies in Africa are likely to suffer from the Britain’s exit from the European Union. Here are two African economies likely to suffer:
Kenya exports cut flowers to the European Union. The market is likely to suffer especially given the fact that Britain was one of the major consumers of flowers from Kenya. The country has been getting an average of four billion shillings a month from the export of flowers in the trade deal between her and the European Union. If the deal is going to change or affected in any way as a result of Britain’s exit, then the country is staring at a loss of four billion shillings a month and an average of 48 billion shillings annually.
The future of Kenya in trading with the European Union looks deem as Netherlands, another key importer of Kenyan flower products threatens to leave the European Union. According to an online magazine, QUARTZ Africa, Kenya faces a capital flight as investors seek safe havens like United States treasuries, falling exports as well the ailing Kenyan shilling.
The Central Bank of Kenya Governor Dr Patrick Njoroge has assured that Kenya is unlikely to be adversely affected by the decision of the Britain to leave the EU. Last month, the governor said that the exit of Britain was likely to affect everyone but added that Kenya would know how to cope up with whatever the outcome. Foreign Affairs Cabinet secretary Ambassador Amina Mohamed during an interview with one of the local TV stations said that Kenya respects the decision of the Britain to leave the EU and said that the ties between Kenya and Britain remain intact and unaffected.
Economic analysts, however, say that Kenya and Britain have a long history of economic ties and that the walk away from the EU may not affect the economic relationship between the two countries. Some have also said that Kenya has an upper hand because Britain, now facing some suspicions and isolations may turn to African allies for bilateral business relationships and that all is not yet lost.
According to Cytonn Investments, having considered the effects of Brexit on the global markets, we now look at the potential impact of Brexit on Kenya. There are a number of areas to consider, most importantly trade and renegotiation of contracts for trade:
- There is another potential impact in terms of tourism. UK is the largest exporter of tourists to Kenya, benefitting our local economy in terms of foreign exchange earnings, visa revenues, domestic spending, and the direct and indirect jobs created through the upkeep of the hospitality sector. UK’s vote to leave the EU has caused a significant depreciation in the Sterling Pound, which will make it more expensive for UK tourists to travel to Kenya, having a negative impact on our tourist arrivals and GDP growth, at a time when the tourism sector is struggling to recover.
- Kenya in 2015 exported 1.3bn euros worth of products to the EU. A downward revision of growth prospects for the EU economies will result into lower external demand for Kenyan products, which may negatively affect the current account position.
- Kenya is likely to face capital flight as investors seek safe havens like US treasuries and gold which may exert pressure on the Kenya Shilling in the short term.
- Kenya exports tea, coffee, and flowers to UK, equal to 27% of fresh produce in UK, 56% of black tea in UK. Any renegotiations of the deals because of Brexit will lead to export delays, and loss of revenue. This is made even worse as it may lead to the current account deficit widening, as well as less inflows of foreign exchange.
Nigeria is the largest economy in Africa. Nigeria is currently struggling economically with the global oil prices, the main export of the country, trading at the lowest. The government of Nigeria has also been struggling to fix the economy as Nigerians increasingly blame the government of President Muhamadu Buhari for the high oil prices in the country as well as the widespread of corruption ever since he took over office. The country is also struggling to fight the terror group, Boko Haram that has since killed thousands of Nigerians and displaced thousands others. Britain’s exit is going to negatively impact on the economy of this African economic giant. Nigeria had entered into a bilateral agreement with Britain under the European Union for economic funding that amountedd to 8.3 billion US Dollars and which was to be increased to around 30 billion US Dollars by the year 2020. With the exit of Britain, the agreement will have to be reworked on since the initial one was under European Union.
Off the Cuff
The exit of Britain was like drama. It is now emerging that most Britons are regretting for the decision they took for voting the walk away from the European Union. In fact, the vote showed some ignorant side of those who were voting for after the vote, Google was breaking with Britons literally searching to know “What is EU?”
The Prime Minister David Cameron has already announced that he yes resigning in the month of October.
The process to completely leave is likely to take two years but member states of EU have called on Britain to leave as fast as possible.