Brexit’s looming contagion: What do we do? (1)

 ‘With very little control over external affairs, African policymakers need to continue diversifying their economies, implementing structural reforms and presenting compelling growth opportunities for investment, whilst articulating clear and consistent policies.’

The signs of possible negative effect of the historic referendum are there. Comments by leading erudite elites say it all.

Professor of Political Science and Nigeria’s former minister for Foreign Affairs, Bolaji Akinyemi, has described the outcome of the United Kingdom’s referendum to exit the European Union (EU) as a ‘calamity,’ saying his worst fear was how Nigeria would manage the cascading impact in the next two years, should Scotland also exit the UK in protest. He said this in a recent interview with the Guardian.

For the don and diplomat,  “The British has made a fantastically calamitous decision,” that would negatively impact the global community, especially the African Union and the Economic Community of West African States (ECOWAS). Shuaibu Idris, former deputy managing director of Dangote Flour Mills Plc says so too. He asked rhetorically, “Is it right to have a plebiscite of this nature on  issues like this? It was too risky a project to undertake.”

Scotland and Northern Ireland, which share border with the Republic of Ireland, an EU loyalist country,  voted massively against Brexit (62 per cent of Scots voted to remain in EU), but the overwhelming votes,  from the conservative population in England and Wales,  carried the day, forcing Prime Minister David Cameron to announce that he would be stepping down in October this year.

Prof. Akinyemi, argued that the exit of Britain from the EU and the potentiality of Scotland and Northern Ireland leaving the UK could trigger unexpected problems, first within the African Union and the ECOWAS and then Nigeria. For Akinyemi, “Brexit is a calamity” born out of a “boyish” referendum and a process that could have negative spiral effect on AU and ECOWAS regional blocs that we are still striving to firm up. Possible fallouts listed: copycats in Europe and Africa who will sing breakaways. For him Nigeria could get hurt. Shuaibu Idris will not buy into this, citing the case of the breaking up of octopus USSR and Ethiopia/Eritrea splitting which were not stir other breakaways.

He therefore advised that Buhari’s government should go for immediate restructuring of Nigeria and dialogue with dissident groups in South South and South East, saying he had fears for the country if Scotland should, for instance, strengthen the hands of self- determination by opting out of the UK in the next two years. “I see Scotland leaving the UK in the next two years,” he said, advising Nigerian government to make use of the two-year window to address local challenges more clinically.

Balarabe Musa, a former governor of Kaduna State, also called on President Buhari to consider restructuring the country along regional groups with the centre retaining more power for equitable development and distribution of wealth.  Secretary of the Lower Niger Congress (LNC), Mr. Tony Nnadi, also endorsed the position taken by Akinyemi and Balarabe Musa. In reaction to the comments made by them,  he said his understanding of their positions “is that it will now be a lot more difficult for Nigeria to ignore the push for a grand renegotiation of the Union of Nigeria and that having postponed this necessity for so long, things are cascading to where those who sought the grand renegotiation are now simply seeking exit, buoyed by Brexit.”

Nnadi described the LNC as “a self-determination platform aggregating all the agitations for self-determination in the Lower Niger Delta territory — the old Eastern and Mid-Western regions — as ethnic nations.”

Nigerian shares fell on Monday as local funds sold on concerns that Britain’s vote to leave the European Union may slow foreign interest in the market, traders said, Reuters has reported.

The main stock index shed 2.2 percent to 29,982 points by 1252 GMT, dragged down by banking shares, which fell 3.7 percent while consumer and oil stocks each fell 2.1 percent.

Ronak Gopaldas , the Head of Country Risk at Rand Merchant Bank, in a piece he wrote for CNBCAfrica, argued, “The violent reaction of financial markets will continue for the immediate future.  Contagion will persist and probably intensify, with sentiment towards emerging markets likely to sour as the financial world moves into a “risk off’ mode.  Typically, in periods of elevated uncertainty, risk aversion spikes and triggers a flight to safety and investors demand a higher premium for riskier assets…Capital flight, lower commodity prices, a slowdown in exports, higher debt servicing costs, greater currency volatility and dollar liquidity issues are some of the challenges African economies are likely to experience in the immediate aftermath of the leave vote. Already hard hit by the Chinese slowdown, this is another hefty blow to Africa’s prospects, particularly for its commodity exporters.”

He added  that already, the South African rand depreciated by over 5 per cent  against the US dollar in a single day’s trading, whilst Nigeria, which last week devalued its currency, partially in a bid to attract portfolio investment, will face difficulties in achieving its objectives due to global risk aversion. “Brexit may also affect the country’s plan to tap international capital markets again this year.