Cameroon-Nigeria: The Case for a Strategic Economic Partnership

By Eyembe Elango

In 2008, the American investment banking and securities firm Goldman Sachs identified Nigeria as being one of a dozen emerging economies which have since been dubbed “Next 11” or N11. This designation represents a monumental economic opportunity for Nigeria’s neighbor, Cameroon. Based on vital trade statistics figures (http://www.economywatch.com/world_economy/cameroon/export-import.html) both France (21%) and Spain (19.4%) have been Cameroon’s largest trading partners in 2008 and 2009 respectively. However, Nigeria has since surpassed France and Spain as Cameroon’s largest trading partner in 2013.

In 2013, Nigeria has since surpassed France as Cameroon's largest trading partner. If Nigeria's GDP surge continues at 7% per year, it will become Africa’s largest economy within a decade, eclipsing South Africa. Put together, both countries represent half of the GDP of sub-Saharan Africa (which constitute 46 countries). (It is important to know that the GDP of Lagos state alone with approximately 18million inhabitants exceeds Kenya’s(country) national GDP)!

And as Nigeria’s population continues to surge, and with the cost of trading markedly reduced as a result of proximity of the two nations, it makes better economic sense for Cameroon to strike better trading agreement with Nigeria than with Spain and France (barring any significant trade accord). Similarly, Nigeria’s economic ascent has immediate implications for Cameroon. Now, look at Nigeria’s critical needs which Cameroon can readily supply:

• Energy security to fuel its economic growth

• Raw materials, especially Steel

• Food Security to meet rising demand

It is important to know that Cameroon has abundant supply of these three critical needs of Africa’s largest nation. This unique economic situation provides a historic opportunity for Nigeria’s eastern neighbor, Cameroon. A country which has the capacity to meet Nigeria’s growing strategic needs as cited above.

http://www.youtube.com/watch?v=XVyAGrc3B5I
Energy:

Nigeria’s National Energy Master Plan calls for massive investment in power generation, a process which is now ongoing following privatization of assets in the sector. Long-term plans even address the need to import 5,000MW of energy into Calabar from the proposed Grand Inga project in faraway DRC (Congo). Nigeria’s power generation depends heavily on its considerable national gas resource; however, the cost of constructing and operating thermal powered stations are relatively high and importation makes a better short-term economic sense for Nigeria. Cameroon on the other hand, has Africa’s second highest hydro-electricity potential (55GW). South Africa is the largest and it generates much of its electricity from coal-fired power stations. The O&M costs for hydro power are significantly lower than for gas-fired thermal
http://www.youtube.com/watch?v=XVyAGrc3B5I

stations which Nigeria will depends on.

Now, Cameroon’s domestic market is too small for that nation to fully develop and utilize its own hydroelectric potential. Imagine if Cameroon proposed to develop its hydro-electricity industry on a scale to supply and meet the demand of energy-thirsty Nigerian market (Nigeria’s domestic demand is running on a 10,000MW deficit). http://www.youtube.com/watch?v=XVyAGrc3B5I

How significant could the Energy Trade Agreement between Nigeria and Cameroon be?

As part of a strategic partnership, Cameroon could offer to supply Nigeria’s energy needs with cheap hydroelectricity (discounted to 80% of market rates, hypothetically) for 30yrs or until Nigeria’s national GDP doubles (to US$800Million) – whichever may happen first. In exchange, Nigeria would supply Cameroon with asphalt or bitumen to the tune of 5% of the discount value for the energy exported.

Assuming a price of US$0.07/Kwh (Instead of $0.0875/KwH), Cameroon would supply 1,100MW into Nigeria annually (worth $532Million in revenue). Since 5% of the discount would be paid for with asphalt, Nigeria would supply Cameroon with US$6.65Million in asphalt or 66,500tons of asphalt (which costs between $73-125ton).


 

For Cameroon, this would mean enough asphalt (bitumen) to upgrade 693Km of roads into new modern highways each year (consuming 962Tons/Km) or 9,500Km of secondary and low-traffic roads (consuming 7Tons/Km).

The Cameroon government currently plans to tar 3000Km of new roads each decade or 300/yr! In this scheme, Nigeria would supply enough bitumen to raise that capability by 131%

Cameroon’s energy exports under this arrangement would initially target the six adjoining border States of the Nigerian federation (Borno, Adamawa,Taraba, Cross-River & Akwa-Ibom States) who’s total population of 22.1M people exceeds Cameroon’s national population (20Million).

Cameroon has 20 Large capacity and 150 Small capacity hydro sites located within 100Km of the Nigerian border (see report). These sites are located in six(6) of Cameroon’s ten(10) administrative regions. If some portion of Nigeria’s energy payments to Cameroon were allocated to local governments, this would virtually make those provinces less dependent on financial support from the central government in Yaoundé.

http://www.youtube.com/watch?v=XVyAGrc3B5I
Steel:

As an emerging global economy, Nigeria will need Steel, a commodity which is developed by processing Iron Ore and which Caneroon has a significant amount of reserve.

Cameroon is currently developing half a dozen Iron Ore projects across the country. The largest of it is at Mbalam -on the border with Congo, which has 64.3Million tones of Iron ore reserves at a mine which is expected to remain productive for 50-70years! Two other deposits at Nkout and Mamelles have been

reported to hold 1.42B Tons and 400M Tonnes respectively
In June 2013, Iron Ore traded at $110/ton from its all-time-high of $150/ton on the world market.

Nigeria will need steel, Cameroon has the requisite Iron-ore to produce it!

Food:

Between 2007 to 2010 Nigeria’s food import bill was N98 Trillion or $628 billion i.e. $157Billion/year. Annually, Nigeria spends US$6.3Billion on four commodities alone: Wheat, Rice, Sugar and Fish. With the exception of wheat, all three foods are produced in Cameroon. Regarding the last product, it is no coincidence that Cameroon derives its name from “Camaros” (and remains world-renowned for the bounty of its coastal waters)
Alone, Central-Africa’s bread-basket, in the Mungo-Nkam Agricultural basin in Cameroon currently employs 113,000 farmers in the production of 963,000 Tons of food-stuff annually. They represent 30% of the region’s population and their productivity stands at 8.5Tons/farmer. Access to Nigeria’s food market would require this region to quintuple its output-at the least. Two fertilizer production plants are presently under development in Cameroon, a tractor assembly factory is now operational at the Ebolowa Industrial Complex, the Cameroon government has set-up an SME Bank and a program is afoot to accelerate the development of Agropoles to spur specialization and investment in food production. Nigeria MUST be a market for these initiatives.

Remember too that “80% of Nigeria’s industrial raw materials are imported”

“If trade between these two countries was regularized, Cameroon would be collecting four times more customs duties in a day than it collects from Chad, Central African Republic, Congo, Gabon and Equatorial Guinea in a month”. http://www.youtube.com/watch?v=XVyAGrc3B5I
To support the processing of Iron ore into steel, Nigeria will also need coal, Limestone, Beauxite, Dolomite, Refractory Clay and Manganese. Cameroon has no shortage of these to trade with Nigeria.

Synthesis:

AES-Sonel in Cameroon currently has a customer base of 780,000 clients, 45% of whom live in the urban centers of Douala and Cameroon. Investments to supply energy to the urban population of Nigeria’s five (5) States bordering Cameroon, would expand AES-Sonel’s customers base by 295%! The investment to extend the power grid into these States would be a windfall for Cameroon’s populations who live along the route of the grid expansion: cheaper electricity.

The sustained growth of Nigeria’s economy would demand rapid expansion of supply capacity from Cameroon is these sectors and their allied industries (transportation, roads infrastructure, aluminum production, warehousing, cold-chain facilities etc.). Small-scale farmers would have to become commercial farmers; they must mechanize their production operations, use fertilizers and significantly expand the acreage under production.

Capturing 40% of the value of Nigeria’s annual food import bill would mean $63Billion a year of foreign exchange for Cameroon, equivalent to 2.5times Cameroon’s GDP in 2011!

~All of which translates to jobs and income security for Cameroon farmers, cheap and abundant food supply for Nigeria’s consumers.

~Presently, every employed person in Cameroon is estimated to be the bread-winner for at least five people whom they support financially.

~In 2012, AES-Sonel directly employed 3,000 Cameroonians and had 1,413MW in installed power generation capacity. Power sector investments geared towards closing Nigeria’s current energy deficit of 10,000MW may require hiring 18,231 new direct employees (not to mention their 91,157 total direct financial dependents!)

Full employment for 4million Cameroonians would mean that the entire country’s population would be assured a comfortable standard of living. http://www.youtube.com/watch?v=XVyAGrc3B5I

Conclusion:

Investments in these three areas would be a win-win for both countries. The benefits of economies of scale for investments will mean lower prices for Cameroons domestic consumers (even if 70%+ or the energy, steel and food were exported into Nigeria).

For any of the three strategic areas, access to the Nigeria market could expand the customer base AND the economic justification for those investments by double-digits for Cameroon. Both countries would reap the rewards of robust trade and almost ensure growth for at least two generations, or more.

***Mr. Eyembe Elango is native born Cameroonian based in Atlanta, USA and a holder of a Bachelor's of Science degree in Industrial Engineering. He runs a consultancy firm, which is based in Atlanta.To solicite his service you can reach him at eyembe@gmail.com ***Check Mr. Elango at the Cameroon Professional Society (CPS) Washington DC http://www.youtube.com/watch?v=XVyAGrc3B5I