Former UK Foreign, Commonwealth and Development Secretary Mary Elizabeth Truss is now leader of the Conservative Party, taking power as Britain’s next Prime Minister (PM). His political confidence may well be the tonic for accelerating UK-Nigeria trade beyond the current £4.4 billion.
Truss, 47, is the UK’s third female prime minister; after Theresa May and Margaret Thatcher.
Liz Truss signaled during her leadership campaign that she would challenge the convention by scrapping tax increases and cutting other levies.
This drew a lot of criticism. Labor has warned its plans will lead to a ‘huge stealth tax cut for banks’. Pat McFadden, Shadow Treasurer Minister, said his corporate tax cuts to boost UK economic growth would cost the Treasury around £17billion, citing that removing the increase in the Sunak’s corporate tax and maintaining the 5% bank surcharge point would be a big tax cut for big banks in the midst of an economic crisis.
There’s no doubt that Truss faces a long, expensive and difficult to-do list, but what needs to be done needs to be done. In her address to the nation on Tuesday, September 6, 2022, she was concise, quick and clear in setting out her tone to an unconvinced country. She spoke of the windy but confident outlook. “As strong as the storm is, I know the British people are stronger,” she said. “I am confident that together we can weather the storm.”
The news continues after this announcement
But the 3 priorities; the economy, the energy crisis and the NHS for her government that she described in her speech are each extremely daunting.
Already, she hit the ground running. Some ministers were appointed and, true to his leadership campaign promises, revealed his energy plans. Sky News deputy political editor Sam Coates said via his verified Twitter account that Truss’ energy plans will involve:
The news continues after this announcement
- £2,500 price freeze,
- £400 universal aid remains so
- Paid by loan. No plan to recover energy bills
The energy plan is to freeze energy prices at their current level, £1,971 for an average home. That’s a saving of nearly £1,600 per year on average, or over £130 per month. The precise amount to be saved by each family will depend on exactly how much energy they use.
The implication is that although households will be asked to reduce their overall consumption if they can due to the severe Europe-wide shortage of natural gas which powers much of the heating and electricity network, this will bolster their disposable income, although taxpayers will actually pay back bill support as the government plans to borrow more money in order to fund the intervention, which could lead to higher taxes in the future or reduced funding public services.
On direct support, during her leadership campaign Ms Truss said she was opposed to the ‘distributions’ previously used by Boris Johnson and Rishi Sunak to help shore up household finances, but she is likely to retain some slices of the previously announced support.
On tax, one of his promises is to reverse the 1.25 per cent rise in National Insurance which came into effect in April this year, intended to fund increases to the NHS budget and social care. The NHS reversal will return workers part of their pay above the National Insurance threshold of £12,570. In addition, the planned increase in corporation tax from 19 to 25% will be canceled before it comes into force next April. This could boost the stock prices of large companies.
Given the 3 key priorities highlighted by Truss, how would these policies and Truss’ background in government, politics and diplomacy impact, shape and strengthen the relationship with Nigeria?
A major impact of the policy focus of Ms. Truss’ 3 priorities would be on the UK-Nigeria diaspora remittances market. Lowering taxes and reversing the 1.25% National Insurance hike will increase disposable income, allowing consumers, including Nigerians, living and working in the UK to spend more. Nigerians make up the largest percentage of black people in the world, and by extension, in the UK as such, cutting taxes would increase their disposable income and remittances to Nigeria.
Data from the Central Bank of Nigeria shows that remittances from Nigerians working abroad continued their upward trend in the first quarter of 2022, increasing by 20.3%, year-on-year, to $5.16 billion, from $4.29 billion in the first quarter of 2021, after trending upwards since the third quarter of 2020. Nevertheless, remittances to Nigeria have been threatened by the crisis economy in the United Kingdom and the United States.
Diaspora remittances have been described as “the hidden engine of globalization” Although not available for governments to invest in building infrastructure; remittances allow the households that receive them to spend on improving education and health care, thereby improving their country’s human capital.
The emergence of Truss and the new political orientation would also have an impact on Nigeria’s balance of trade and payments and gross national product. This should come from the increase in the budget deficit.
Nigeria and Britain share strong, positive and mutually beneficial ties. Department of International Trade data sources (Trade and Investment Fact Sheet August 19, 2022) show 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 the first quarter of 2022, an increase of 44 .0% or £1.3 billion between the four quarters and the end of the first quarter of 2021 Of this £4.4 billion:
- Total UK exports to Nigeria were £2.6bn in the four quarters to the end of Q1 2022 (an increase of 38.4% or £711m from compared to the four quarters until the end of the first quarter of 2021);
- Total UK imports from Nigeria were £1.8bn in the four quarters to the end of Q1 2022 (an increase of 52.8% or £624m compared to the four quarters until the end of the first quarter of 2021). Nigeria was the UK’s 43rd largest trading partner in the four quarters to the end of the first quarter of 2022, accounting for 0.3% of total UK trade
Additionally, according to data from oec.world, in June 2022 the UK exported £163 million and imported £252 million from Nigeria resulting in a negative trade balance of 88.8 million pounds. Between June 2021 and June 2022, UK exports 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 the trend of Nigeria’s mono-product exports and imports with the UK. In June 2022, for example, the UK’s top imports from Nigeria are crude oil (£204m) and refined oil (£43.2m). Similarly, its main export to Nigeria is refined petroleum (£116m). In 2020, Nigeria exported $1.29 billion to the UK, the main products of which were crude oil ($1.05 billion, refined oil ($107 million) and petroleum gas ( $49.1 million)
Nevertheless, with the expected fiscal deficit, aggregate consumption and production demand would increase, which would necessitate more imports apart from petroleum products from Nigeria. Therefore, more robust export growth from Nigeria to the UK is better than the annualized growth of 6.5% over the previous 25%.