On Nigeria, President Uhuru Kenyatta is making all the right moves for Kenya

President Muhammadu Buhari of Nigeria jetted into Kenya last week on a three-day visit to Nairobi.

His visit is perceived to have continued building up bilateral relations that the two countries have been working on since 2013, with a visit from Nigeria’s then President Goodluck Jonathan, and President Uhuru Kenyatta’s visit to Nigeria in 2014.

The work done by Mr Kenyatta’s administration since 2013 has laid the foundation for bilateral trade and foreign relations between Kenya and Nigeria that portend a lot of good in terms of trade and investment for Kenya.

So far, trade and investment between the two countries remains minimal. Kenyan exports to Nigeria in 2014 were worth only about $22.4 million (Sh2.3 billion at current exchange rates), while imports from Nigeria into Kenya were worth about $14.8 million (Sh1.5 billion.

This was 30 times less than the $691 million (Sh71.2 billion) worth of Kenyan exports to Uganda and 10 times less than the $153 million (Sh15.8 billion) worth of Ugandan imports in 2014. Uganda remains Kenya’s largest bilateral trade partner.

Nonetheless, significant progress appears to have been made so far with Nigeria. Already, 17 instruments of co-operation have been signed between the two countries to facilitate partnerships in trade, agriculture and immigration, and address issues of double taxation that investors in both countries have said are stifling business.

Others agreements have been around co-operation in the police service, a five-year, multi-entry visa for prominent business persons, and curbing trade in narcotics, money laundering and other contraband.

Some initial tangible outcomes include the commitment by Nigerian business mogul Aliko Dangote to invest $400 million (Sh41.2 billion) in Kenya’s mining sector.

Movie industry

There has also been agreement on cross-border trading in shares — signed last year between Nigeria’s Central Securities Clearing System and Kenya’s Central Depository and Settlement Corporation — to facilitate clearance and settlement of sales, and reduce transaction costs.

Significant opportunities for trade and investment for both countries lie in the energy sector, manufacturing (value addition), export processing, business process outsourcing, technology and innovation, and new media (including the movie industry).

While Nigeria has a more developed banking sector, Kenya has a fairly robust service sector in tourism, hospitality and aviation. Also, Nigeria has a huge population (about 177 million), with a significantly expanding middle class population that could provide a new market for Kenyan tea and coffee.

Moreover, Kenya has warmed up lately to discoveries of oil and other minerals that are latent areas for investment for Nigerian businesses.

Growth in both countries has been largely stable, averaging more than 5 per cent over the past five years.

However, continued turmoil in the petroleum sector presents perhaps the greatest challenge to increased trade between Kenya and Nigeria. This is mainly because Nigeria’s export structure — unlike Kenya’s fairly diverse one — is dominated by fuels, which account for 94 per cent of the country’s total export portfolio.

There are prospects, however, for increased diversification in Nigeria that would improve its export structure and increase opportunities for trade.

Divergence in macroeconomic and monetary policy responses to collapsing commodity prices could present challenges to future trade relations.

Another hurdle would stem from walking the tight rope to ensure bilateral trade deals do not violate agreements signed with other trading blocs.

Also, in the past, relations between the two countries have been strained by accusations around money laundering, drug trafficking and contraband trade. These are issues the two countries will have to resolve.

Maybe it is also time for Nigerians to begin playing more Sauti Sol, eating some choma and learning Swahili, just as Kenyans marvel at Joloff rice, pidgin English and Nollywood movies. This stuff is good for cultural diplomacy, and promotes collegiality and the deepening of relations.

The writer is director of policy and research at Africa Centre for People Institutions and Society (Acepis).

[email protected]