In its recently released report, titled “The Economic Development in Africa Report 2023: The Potential of Africa to Capture Technology-Intensive Global Supply Chains,” the United Nations has affirmed that Nigeria is highly dependent on the imports of goods, such as refined petrol, cars, smartphones, cereals, and pharmaceuticals. This was disclosed by the United Nations Conference on Trade and Development. The revelation comes as the UN opined that Africa could position itself as a geographic alternative and optimize its strategic value for future leading-edge supply chains as many companies across the world rethink their supply chain strategies to address gaps and mitigate risks.
According to the UN department, Africa needs to play a more impactful role in the global supply chain and build resilience, especially because of its large consumer market. However, the UN agency noted that Africa has to fulfill the precondition addressing its supply chain vulnerabilities before the continent can play a more impactful role in the global supply chain as well as build resilience to the disruptive nature of shocks. Also, the key barriers to logistics and supply chains on the continent include poor infrastructure (transport, warehouse and other facilities), informality, weak institutions and regulations, fragmented markets, limited sources of capital, low levels of technology and political risks.
Barriers increase cost and make nations depend on import.
These barriers can significantly increase the cost of doing business and trade in many African countries, especially those that rely heavily on foreign imports of goods and services. Nigeria, for example, with its population exceeding 200 million, is one of the biggest economies in the region. But it still depends on the importation of goods, such as petrol, cars, smartphones, cereals, and even pharmaceutical products. This is according to the 2022 report by the Observatory of Economic Complexity and the 2023 report by Statista.
Premium motor spirit (PMS) is one of the key products which the Nigerian economy needs for survival. Since the implementation of the policy to remove fuel subsidy, the absence of a functioning refinery in the country resulted in the hike of the price of this product. So, for petrol, the country lacks adequate infrastructure for refining crude even though it is one of the biggest exporters of oil on the continent. This barrier has led the nation to depend on refiners in Europe and elsewhere to meet the needs of consumers.
Africa can position itself strategically using its resources.
Secretary-General of UNCTAD, Rebeca Grynspan, said the continent’s growing population and large consumer market presents it with an advantage, as firms look for new destinations. However, countries must tap into these opportunities by addressing the barriers to making an impact in the global supply chain. She said that Africa’s growing population, increasingly large consumer markets, and expanding business opportunities are major sources of growth and prosperity for the world as well as key factors that position Africa as a strategic region in the drive for geographically diversified supply chains.
Also, Africa’s large reserves of critical minerals are vital for global supply chains of high technology-intensive industries. They can turn African economies into key suppliers of parts and components in the automotive, electronics, renewable energy, and medical devices sectors. For instance, the UN Environment Programme says that Africa has 40 percent of the world’s gold and up to 90 percent of its chromium and platinum. As well, the largest reserves of cobalt, diamonds, platinum and uranium in the world are in Africa. It holds 65 percent of the world’s arable land and ten percent of the planet’s internal renewable fresh water source. These are resources that the continent can tap into.
Nigeria needs to address the challenges of doing business in the country.
The agency further revealed that many factors can influence a company’s decision to relocate parts of its supply chain to another country or region, and this includes a conducive environment for increased productivity, high-growth markets, high-profit entrepreneurship, an active and technology-oriented workforce, and a dynamic consumer base. Many companies in Nigeria have been met with so much increase in cost of doing business that they had no choice but to shut down operations and relocate to another country. When these barriers are addressed, the country will begin to see an inflow in foreign direct investment.