Why Nigeria and India Would Make Excellent Bedfellows

India Nigeria Relations
Nigeria and India have some similarities but are two vastly different countries

AFRICANGLOBE – Like India about 10 years ago, Nigeria stands on the cusp of an economic boom. Many of the traits now exhibited by Nigeria mirror those experienced by India during the initial stages of its high-growth phase between 2003 and 2008. In addition, both are characterised by a demographic boom, rapid urbanisation, a poor and ethnically diverse population and an array of vast economic opportunities.

The similarities in risk factors from a political, socioeconomic, operational and security standpoint are also significant and have the potential to foster greater synergy between the two nations. If properly developed, Nigeria stands to become India’s leading strategic partner in Africa and vice versa.

Politically, the countries have several things in common as a result of their colonial legacies. India was the most populous country in Asia to be colonised by the British, while Nigeria, as Africa’s most populous nation, was subjected to the same fate. Both countries are vastly diverse and suffer complex ethnic structures, large populations, widespread bureaucracy and graft — overlaid with combustible political dynamics.

Additionally, both are parliamentary democracies with a federal system of government in which states have the autonomy to run matters at their discretion. This makes policy-making at the centre a complex and difficult exercise as legislation is often subject to the whims of state governments, whose agendas often oppose the national interest. This is seen in the difficulties in establishing a sovereign wealth fund in Nigeria, which required political dexterity to appease state governors, who threatened to cripple its passage. Similarly, in India, the eagerly awaited Goods and Services Tax Bill has been subject to the same treatment. Resistance from several states due to fear about a loss of fiscal autonomy and potential lost revenue has resulted in stalled progress, leading to uncertainty and declining investor sentiment.

As the world’s largest democracy, India exhibits a number of positive features, with consensus-based politics being one of its key strengths. However, the flip side of such inclusiveness is that it is continuously plagued by bureaucratic inertia — an ailment Nigeria also suffers from in large doses.

Last year, political paralysis in India precipitated a crisis of confidence, which resulted in a severe slowdown in investment and growth — weighing negatively on the country’s sovereign credit rating. Nigeria’s experience is similar. The vital Petroleum Industry Bill has languished in the legislature for almost five years, leaving investment in the oil and gas sector dormant. Oil majors cite uncertainty about the regulatory environment as the key reason for the lack of investment. The delay has also prevented the Nigerian government from being able to sell off new oil blocks or renew contracts. Passage of the bill will clear the way for a new licensing round, which should attract strong interest from multinationals and emerging Nigerian oil companies.

However, both countries are broadly stable. From a security perspective, both India and Nigeria have strong, powerful militaries and are key power brokers in volatile regions. As such, they have assumed the roles of regional hegemons and are key allies of the West in the diplomatic arena. India has neighbours such as Pakistan and Afghanistan on its borders, while Nigeria, as the principal member of the Economic Community of West African States, has had to play a leading role in maintaining stability in the region, especially after the recent bloody conflicts in Côte d’Ivoire and Mali. Further, both Nigeria and India wrestle with the latent threat of Islamic terrorism and have been victims of devastating attacks in recent years. As such, they are key allies in the global war on terror.

Economically, investors casting an eye over Nigeria will see a number of striking parallels with India. Shoddy infrastructure, chronic poverty, a sizeable and growing middle class as well as an array of economic opportunities in the infrastructure, power, farming, telecoms and consumer fields characterise both economies.

Growth is largely organic, buoyed by robust domestic demand and a vibrant parallel economy. Add to this a highly entrepreneurial citizenry and a vast pool of English-speaking workers and the synergies start to become apparent.

From a macro perspective, both countries also require major structural reforms in key areas to unlock the double-digit growth they so desperately crave. India’s Direct Tax Code and Land Acquisition Bill are still pending due to legislative gridlock, while the passage of Nigeria’s Petroleum Industry Bill and reform of the farming and power sectors have been identified as key tenets of President Goodluck Jonathan’s presidency. Both governments also spend significant portions of their finances on inefficient petroleum subsidies, and have faced a public backlash against attempts to curtail such spending.

Further, both countries have established and vibrant corporate sectors with healthy balance sheets, which are looking outward for opportunities. While India has been expanding outward for about a decade, Nigeria is still in the formative stages of this process and its efforts to move up the value chain and develop its manufacturing capability are continuing. Leveraging off India’s experience in this regard and cultivating a pan-African strategy will benefit Nigerian companies and the country’s economy immensely.

Apart from the obvious political and economic similarities, there are a number of “soft” factors in which the two countries mirror each other. Like India, Nigeria has a sizeable diaspora outside the country, which provides a stable flow of remittances, as well as a pool of skilled labour, intellectual capital and technical expertise. Further, with Indian companies looking to establish a foothold in Africa, Nigeria is a market that cannot be ignored. As former Nigerian president Olusegun Obasanjo said: “If you can get it right in Nigeria, you can get it right anywhere in Africa.” This is something of which Indian companies are becoming acutely aware. The presence of established Nigerian conglomerates with Indian roots, such as the Chellaram and Tolaram groups, also acts as an important link into expanding the commercial relationship between the two countries. Bilateral trade has also been on the rise, with figures for last year increasing 36% to $17.3bn, according to official data.

Given India’s vulnerability to oil prices, resource-rich Nigeria can play a pivotal role in meeting India’s sizeable energy needs. India, in turn, can supply the West African nation with cars, pharmaceuticals, textiles and expertise to facilitate its robust non-oil sector growth. Technological and medical expertise are other obvious areas of co-operation.

Nigeria has been compared to India on many levels.

However, viewed through the prism of changing geopolitical and economic landscapes, this comparison has now come sharply into focus.

Granted, there is a danger in comparing two entirely unique countries on two very different continents, noting that each nation has its own specific complexities and challenges. However, a number of similar themes exist in both countries that highlight the need for strategic co-operation between the two, given the shared commercial, political and security interests, as well as the complementary nature of both nations’ economic growth paths.

By: Ronak Gopaldas