Nigeria needs active economic diplomacy as a growth strategy
From September this year, in addition to my long-running visiting fellowship at the London School of Economics (LSE), I was appointed as a Guest Teacher. This is a role LSE creates for experts or professional practitioners invited to teach at the university. I was appointed to teach Economic Diplomacy at master’s level. It is a fascinating course about how nations conduct their international economic affairs.
Some years ago, I taught International Political Economy and International Trade at the same university. But unlike those two courses, which relate to the structure and substance of international economic relations, economic diplomacy is about the methods and process of decision-making and negotiation on international economic issues. Serious nations put this at the heart of their diplomatic activities.
It is, therefore, not surprising that all the students taking the course come from the serious economies like the US, China, Europe, the UK, India and Brazil. Unfortunately, there is hardly any student from Africa, certainly none from Nigeria!
But that’s not surprising. Although Africa recently created the African Continental Free Trade Area (AFCFTA), a significant act of economic diplomacy, it is not an active player or demandeur in economic diplomacy, and Nigeria is not a serious player at all.
Economic diplomacy requires nations to actively engage in negotiating trade and other economic agreements, aligning their domestic processes and international activities towards those ends. But if economic diplomacy is measured by the number of trade and other economic negotiations that nations engage in, Africa lags behind other continents, and Nigeria seems averse to trade negotiations.
Truth is, the orthodox approach to diplomacy, which focuses on interstate high politics, is more prevalent in Africa and Nigeria than economic diplomacy and its subset, commercial diplomacy. For instance, until AFCFTA, the African Union and its precursor, OAU, had developed as a political entity, not an economic one.
In contrast, the European Union started off mainly as an economic community; it was only after its Single Market and Customs Union became well established that the EU started to take a more political nature, with key political institutions established to support and strengthen the economic union.
This is not to say that the diplomacy of high politics does not matter – of course, it does! But in today’s globalised world, commercial interests and market considerations make economic and commercial diplomacy more important than purely political diplomacy. Thus, any country that neglects the economic and commercial dimensions of diplomacy will miss out on their benefits.
In his seminar book, ‘Negotiating the World Economy’, Professor John Odell defines economic negotiations as those in which “parties’ demands, offers and related actions refer to the production, movement or exchange of goods, services, investments, money, information or their regulations.” As Odell points out, all the subjects of economic negotiations are “sensitive to concrete markets”, that is, they shape market behaviour and investor confidence.
So, when a country enters recession, as Nigeria has now done twice in the past four years, a key question is: Would it have escaped recession if it was better integrated into the global economy in the subject matters of economic diplomacy, namely, goods, services, investments, money and information (or technology)?
The answer is yes! Why? Well, because export-oriented nations and countries that are able to attract significant foreign investments are more likely to escape a recession than those that effectively shut themselves out of the global economy.
Truth is, integration into the global economy increases economic growth and productivity, and thus gives countries some resilience against recession. But in addition to the endogenous act of boosting productive capacity, what a nation needs to develop that resilience is active economic and commercial diplomacy.
Indeed, active economic and commercial diplomacy can boost productive capacity because trade and other economic agreements can lock in good reforms at home that help attract inward foreign direct investment, and can create overseas market access that removes anti-export bias at home and thus increase exports.
But Nigeria is not in that space at all. Which is ironic because Nigeria has prominent economic diplomats. Currently, a Nigerian, Yonov Agah, is one of the four Deputy Directors-general of the World Trade Organisation, WTO; and, at some point next year, another Nigerian, Dr Ngozi OkonjoIweala, is likely to become the first African Director-general of the WTO. Nigerians also hold senior positions in other international economic institutions.
Of course, the quintessential Nigerian economic diplomat in recent times was the late Dr Chiedu Osakwe, who left an indelible mark at the WTO as one of its long-serving directors, and also left lasting legacies for successfully leading the AFCFTA negotiations and for establishing the Nigerian Office for Trade Negotiation (NOTN), the first-ever such institutional framework for trade negotiations in Nigeria.
Yet, despite these individual-level achievements, Nigeria itself is not a serious player in economic diplomacy. At the WTO, it is utterly defensive, always saying “no” to new negotiations; it took a year before signing the AFCFTA agreement, and despite recent positive noises by the government, little active steps are being taken on the ground to implement the agreement; and it has no trade agreement with any non-african country and certainly not with any of the major economies, such as the US, the EU and the UK. Furthermore, Nigeria is not active in the field of bilateral investment treaties (BITS) and has no interest in the negotiations of a multilateral investment agreement.
To be sure, trade theories predict Nigeria’s behaviour. When a country is a commoditybased mono-economy, when it exports virtually none of the goods and services that are subjects of economic negotiations, and when its domestic industries are predominantly import-competing, rather than export oriented, that country is not likely to be active in economic and commercial diplomacy.
By contrast, Nigeria is an active member of OPEC. Why? Because it is a major oilexporting country, with oil accounting for over 90 percent of its export.
But export-orientation is a policy choice. Every country can export significant goods and services if it really wants to, by developing its productive and export capacities. But Nigeria has been paying lip service to diversifying its export base for decades, despite being utterly vulnerable to external shocks!
Of course, another reason why Nigeria is not active in economic diplomacy is because its domestic process is not suited to it. As Robert Putnam’s theory of Two-level Game says, economic diplomacy involves domestic and international level negotiations. But at the domestic level, Nigeria is stuck in the statist approach, with its domestic process dominated and driven by the government.
Even so, lack of government effectiveness and poor inter-departmental coordination are key obstacles to progress. The NOTN says that one of its objectives is to “resolve the existing coordination deficit in Nigeria’s trade policy.” Well, with respect to formulating welfareenhancing trade negotiating positions for Nigeria, that remains a tall order!
The statist approach also leads to poor external consultation and engagement. A key feature of modern economic diplomacy is the role of Non-governmental Organisations (NGOS). You cannot negotiate a serious trade agreement, for instance, without actively consulting business stakeholders and key civil society organisations.
In 2007, Costa Rica held a referendum on whether it should join the Central American Free Trade Area. The people voted yes. Of course, trade agreements don’t have to be put to a referendum, but Costa Rica wanted to secure the people’s buy-in and legitimacy for its membership of the FTA. But Nigeria negotiated the AFCFTA agreement without proper stakeholder consultations ex ante, only to spend months “sensitising” them about the deal ex post! That’s not how to conduct economic diplomacy.
Nigeria must embrace active economic and commercial diplomacy, with robust decisionmaking processes and strong negotiating approaches. But that won’t happen unless it sees economic negotiations as a growth strategy.
‘ Nigeria must embrace active economic and commercial diplomacy, with robust decisionmaking processes and strong negotiating approaches