Did Russia Extend Trade Preferences to Nigeria

By Kestér Kenn Klomegâh

More than a decade ago, Russia’s Foreign Affairs Minister, Sergey Lavrov, held a review meeting with his Nigerian counterpart Minister, the late Mr Ojo Mbila Maduekwe, who paid a three-day working visit to Moscow. After the closed-door bilateral talks, both ministers held a brief media conference, and one of the significant questions raised there was Moscow was prepared to offer trade preferences to Nigeria.

Extending trade preferences was interpreted as an integral part of strengthening bilateral economic and trade cooperation between the two parties. During the Soviet days, Nigeria benefitted tremendously from Soviet assistance. And without a doubt, Russia has cordial post-Soviet relations with Nigeria.

Mr Maduekwe headed the delegation for the ‘business-as-usual’ intergovernmental commission on economic and scientific-technical cooperation on March 17. They agreed on a broad range of bilateral economic issues, many of which are still not implemented.

But then, Russia has never honoured its promise of extending trade preferences in practical terms to Nigeria. That media conference was held in March 2009.

Professor Dmitri Bondarenko, deputy director of the Russian Academy of Sciences’ Institute for African Studies, told Inter Press Service (IPS) interview that as cooperation between Nigeria and Russia was strengthening, Russia should seriously consider extending preferences to some goods from Nigeria to boost trade between the two oil producers further.

Bondarenko told IPS that the intergovernmental commission could become a tool for the revival of Russian-Nigerian economic cooperation.

This possibility is symbolised, albeit ambivalently, by the Ajeokuta plant, which could become the largest metal-producing plant in Africa. The building of the steel plant started in 1970 during the Soviet era. According to Bondarenko, it was “‘unfortunately stopped in the late 1980s due to problems on both ends.”

This has made the Ajeokuta project “a painful topic in discussions among Nigerian policy experts on Russian-Nigerian relations.”

For trade relations between Russia and Nigeria and other African states to improve appreciably, Bondarenko suggested that ‘”Russia gives some trade preferences to African countries – for example, tax exceptions or reduction among other measures. This can become an effective political step to strengthen relations with African countries.”

However, at least two points should be taken into account: firstly, such measures should only apply to specific goods so as not to discourage non-African partners. For example, if Russia gives preferences to African imports of pineapples and bananas, it would have to do the same with Latin American importers of the same goods for economic and political reasons.

Secondly, such preferences should apply to direct imports by African companies but not to trade mediated by Russian or third countries companies. The value of trade, having practically doubled in 2008 to about 300 million dollars, and the allowance for re-exports – more than one billion dollars – serve as an indicator of current growth.

Today, Nigeria is Russia’s second-largest trade partner among sub-Saharan African countries. Russian business circles show an ever greater interest in entering the promising market of that large country.

Dr Bashir Obasekola, a prominent Nigerian economist and the outgoing president-general of an organization representing the Nigerian community in Russia, told IPS that the trade current trade statistics of about $300 million seems peanuts given the potential of both countries and the size of their economies.

“The volume of trade should be in the billions of dollars, even without military hardware. One of the major hindrances to free trade and a significant increase in trade transactions between Nigeria and Russia is the lack of direct air flights,’” Obasekola said further. “This makes it more inconvenient and expensive for potential investors to travel easily to both countries. Besides, there are no adequate economic and social statistics available to potential Russian and Nigerian investors.”

He explained that Russian industries need raw materials, agricultural produce and other consumer goods that are cheaply available in Africa. Without special incentives, these things cannot easily get to the Russian market.

“Such measures as changing import-export tariff policies could encourage buyers and sellers in both countries to trade. Adequate legal protection should be made available for investors in both countries. The lack of legal mechanisms is sometimes being exploited by criminals in both countries,” he said and added that this led to fraud and the illegal seizure of properties and investments.

Apart from the differences in the level of economic development and climate, Russia and Nigeria are similar in several ways. Both countries have large populations with a variety of mineral resources. Nigeria and Russia are both suppliers of oil, and both play significant roles in regional and world affairs.

Both countries are emerging economies, although Russia is far ahead in economic development, a member of the Group of Eight industrialized countries (G-8), while Nigeria is aspiring to be part of the 20 most-developed economies by the year 2020.

The Russian private and public sectors could also play significant roles in the infrastructural development (energy, housing, roads and railways) of Nigeria, Obasekola said finally.

The two governments hoped that the commission would help them to actualize the existing rich potential that both Russia and Nigeria possess in the trade and economic field and in the sphere of large investment projects.

These would include projects related to the development of infrastructure; the ferrous and non-ferrous metals industry; electric power, including nuclear energy; and the extraction of hydrocarbon and other mineral raw materials.

“We agreed to speed up work on modernizing the legal base of our relations. A whole array of important draft documents are in the stage of elaboration, including an agreement on the encouragement and protection of investment,” Lavrov said after their official meeting.

Russian foreign ministry’s spokesperson, Andrey Nesterenko, said at the start of the diplomatic talks that, “economic and trade ties between Russia and Nigeria have been picking up in recent years, which is consistent with the two leaderships’ policy of taking the partnership to a new qualitative level.”

Nesterenko added that “key aspects of Russian-Nigerian cooperation are to bring all the available suggestions for large projects in the energy sphere, the ferrous and non-ferrous metals industry and other sectors onto a practical footing.”