New UK Prime Minister, Truss’ policy could boost UK-Nigeria trade beyond current £4.4 billion

Mary Elizabeth Truss, the leader of the Conservative Party, taking power as Britain’s next Prime Minister (PM). Her policy trust may just be the tonic to ramp up UK-Nigeria trade beyond the current £4.4 billion mark.  

Truss, aged 47, is the third female Prime Minister of the United Kingdom; following Theresa May and Margaret Thatcher. 

The former Secretary of State for Foreign, Commonwealth and Development Affairs of the United Kingdom signalled during her leadership campaign that she would challenge convention by scrapping tax increases and cutting other levies.  

That was met with a lot of criticism. The Labour Party warned that her plans will push through a “huge stealth tax cut for banks.” Pat McFadden, Shadow Treasurer Minister says her cuts in corporation taxes to boost the UK’s economic growth will come at an estimated £17 billion cost to the exchequer, citing that scrapping Sunak’s corporation tax rise and keeping the 5% point in the bank surcharge would be a big tax cut for big banks in the midst of an economic crisis. 

According to Nairametrics, there is no doubt that Truss faces a long, costly and difficult to-do-list, but what needs to be done has to be done. In her address to the nation on Tuesday, September 6, 2022, she was concise, quick and clear as she set out her tone to an unconvinced country. She spoke of the blustery outlook but with reassurance.  “As strong as the storm may be, I know that the British people are stronger,” she said.  “I am confident together we can ride out the storm.” 

But the 3 priorities; economy, energy crisis and the NHS for her government that she delineated in her speech are each enormously intimidating. 

Already, she has hit the ground running.  Some Ministers have been appointed and in keeping faith to her leadership campaign promises has revealed her energy plans. Sky News Deputy Political Editor, Sam Coates stated via his verified Twitter account that, Truss’s energy plans will involve: 

•  Price freeze of £2,500, 
• £400 universal hand-out remains so 
• Paid by borrowing. No plan to claw back through energy bills 

The energy plan is to freeze energy prices at their current level, £1,971 for the average home.  That is a saving of nearly £1,600 a year on average, or more than £130 a month. The precise amount to be saved by each family will depend on exactly how much energy they use.   

The implication is that though households will be urged to reduce their overall usage if they can because of the serious Europe-wide shortage of the natural gas that powers much of the heating and electricity network, but it will shore up their disposable income, though taxpayers will effectively be paying back the support for bills as government plans to borrow more money in order to fund the intervention, which could lead to higher taxes in the future or a cut in funding for public services. 

On direct support, during her leadership campaign, Ms Truss said she was opposed to “hand-outs’ previously used by Boris Johnson and Rishi Sunak to help shore up household finances, but she is likely to retain some instalments of the previously announced support. 

On taxes, one of her pledges is to reverse the 1.25% point rise in National Insurance that took effect in April this year, earmarked to fund increases in the NHS and social care budget.  The NHS reversal will give workers back some of their pay packet above the national insurance threshold of £12,570. Also, the planned rise in corporation tax from 19 to 25% will be cancelled before it is due to take effect next April.  This could be a boost to big companies’ share prices. 

Considering Truss’s highlighted 3 key priorities, in what way would these policies and Truss’ antecedents in government, politics and diplomacy, impact, shape and strengthen relations with Nigeria?   

A major impact of Ms Truss’ 3-priority policy thrust would be on the UK-Nigeria diaspora remittance market. The lowering of taxes and the reversal of the 1.25% point rise in National Insurance will boost disposable income, which will allow consumers, including Nigerians, living and working in the UK to spend more. Nigerians constitute the largest percentage of black people in the World and by extension in the UK as such, the cutting of taxes would increase their disposable income and remittances to Nigeria.  

Data sourced from the Central Bank of Nigeria show that remittances from Nigerians working abroad continued its upward trend in Q1 2022 rising by 20.3%, Year-on-Year to $5.16 billion from $4.29 billion in Q1 2021, having been on the upward trend since the third quarter of 2020.  Notwithstanding, remittances into Nigeria have been threatened by the economic crisis in the UK and United States. 

Diaspora remittances have been described as “the hidden engine of globalisation” Though not available for governments to invest in building infrastructure; remittances enable households who receive them to spend on improved education and healthcare, thus improving their country’s human capital.   

Truss’s emergence and new policy thrust would equally impact Nigeria’s balance of trade and payment and Gross National Product. This is likely to come from the rise in fiscal deficit.  

Nigeria and Britain share strong, positive and mutually beneficial ties.  Data sources from Department of International Trade (Trade and Investment Factsheet of August 19, 2022) shows that total trade in goods and services (exports plus imports) between the UK and Nigeria was £4.4 billion in the four quarters to the end of Q1 2022, an increase of 44.0% or £1.3 billion from the four quarters to the end of Q1 2021. Of this £4.4 billion:  

• Total UK exports to Nigeria amounted to £2.6 billion in the four quarters to the end of Q1 2022 (an increase of 38.4% or £711 million compared to the four quarters to the end of Q1 2021);  
• Total UK imports from Nigeria amounted to £1.8 billion in the four quarters to the end of Q1 2022 (an increase of 52.8% or £624 million compared to the four quarters to the end of Q1 2021). Nigeria was the UK’s 43rd largest trading partner in the four quarters to the end of Q1 2022 accounting for 0.3% of total UK trade 

Also, according to data sourced from oec.world, in June 2022 the United Kingdom exported £163 million and imported £252M from Nigeria, resulting in a negative trade balance of £88.8M.  Between June 2021 and June 2022, the exports of the United Kingdom increased by £28.1M (20.9%) from £135M to £163M, while imports increased by £249M (9.12k%) from £2.73M to £252M. 

But the concern is Nigeria’s mono-product export and import trend with the UK. In June 2022 for example, UK’s top imports from Nigeria are Crude Petroleum (£204M) and Refined Petroleum (£43.2M).  Similarly, its top exports to Nigeria are refined petroleum (£116M). In 2020, Nigeria exported $1.29B to the United Kingdom, of which the main products were Crude Petroleum ($1.05B, Refined Petroleum ($107M) and Petroleum gas ($49.1M) 

Notwithstanding, with the expected fiscal deficit, aggregate consumption and production demand would rise, necessitating for more imports aside from petroleum products from Nigeria. Consequently, more robust growth in Nigeria’s export to the UK, is better than the 6.5% annualised growth over the past 25%.