Nigeria: As AfCFTA Takes Off - Mixed Expectations Trail Nigeria's Participation

(file photo).
4 January 2021

At the backdrop of the take-off of the African Continental Free Trade Area (AfCFTA) during the weekend, January 1, 2021, Nigerian stakeholders appear to be at discord on the prospects of the Nigerian economy in the $2.5 trillion continental trade bloc.

The continental free-trade zone aimed at tearing down barriers to commerce among African countries is expected to constitute the largest trading bloc since the World Trade Organization (WTO) was formed in 1994.

Two weeks ahead of the take-off, Nigeria re-opened its land borders, a key requirement for the operationalisation of the AfCFTA by any member country. The borders were shut since mid-2019 on account of alleged trade malpractices across the borders.

Positive vibes from FG

Minister of Industry, Trade and Investment, Otunba Adeniyi Adebayo, said there are inherent opportunities in the trade deal to promote made-in-Nigeria goods and boost exports, and urged Nigerians, particularly industrialists, to take advantage of the opportunities.

In a statement, the minister said: "We have worked tirelessly to ensure that Nigeria does not only partake as a signatory in name but also become a major trade and economic powerhouse even more than we have been within the ECOWAS region."

Also speaking on potential benefits to Nigeria, Secretary, National Action Committee on AfCFTA, Francis Anatogu, said from the trade pact, Nigeria aims to double its export trade to $50 billion within the decade

On measures taken by government towards the effective implementation of the agreement, he stated: "We are effectively coordinating with all critical stakeholders to ensure a smooth playing field for Nigerian traders and businessmen to explore the vast market. "We are set to commence a major communication campaign and have tagged January 2021 as AfCFTA Awareness and Sensitization month."

Still on accruable benefit, Minister of State for Petroleum Resources, Timipre Sylva, said Nigeria will leverage the opportunities provided by AfCFTA to reposition the oil and gas sector.

He stated: "Nigeria is willing to leverage on AfCFTA to reposition its oil and gas sector for its next phase of growth. This is in line with the achievement of the vision of our national petroleum policy and national gas policy," he stated.

Cautious optimism by OPS

Members of the organised private sector (OPS) and other stakeholders are however cautiously optimistic in their expectations of the potential benefits of the trade agreement to Nigerian businesses.

President, Manufacturers Association of Nigeria (MAN), Engr. Mansur Ahmed stated: "Some Nigerian manufacturers are quite ready to compete in the continental market especially in cosmetics, food beverages and tobacco, cement and plastics, but others will face stiff competition and will struggle.

"Government must be more serious about its effort to reduce the cost of production and improve the business environment. Our trade related regulatory agencies must also change their attitude from that of gatekeepers and revenue collectors to trade facilitators."

On the AfCFTA impact on balance of trade, Ahmed said: "Intra-African trade represents just about 15% of our trade volume. So in the short run our AfCFTA will not significantly impact our balance of trade but if AfCFTA succeeds it will indeed do so positively.

"If we introduce and sustain the right policies that should promote investment, reduce cost and improve productivity, Nigeria's manufacturing sector has advantages to leverage on and should benefit greatly from AfCFTA, provided the various protocols being negotiated are complied with by all member nations."

Director General, Lagos Chamber of commerce and Industry (LCCI), Dr Muda Yusuf, said the trade deal will produce winners and losers.

He stated: "AfCFTA will produce winners and losers across sectors. The vulnerability risks vary from sector to sector. It calls for a review of business models of many firms and industries in the light of new competition forces that will emerge.

"It presents a significant competitiveness risk, especially for the real sector of the Nigerian economy. Production costs are high, there are issues with costs of logistics, the ports processes and infrastructure, multiplicity of taxes, forex liquidity among others. The benefits and costs of the trade treaty will vary from country to country depending on their economic competitiveness.

"To benefit optimally from this, we need to strengthen the competitiveness of our domestic firms, especially those in the real sector. We need to liberate them from the shackles of constraints putting pressure on their costs and inhibiting their competitiveness.

"The quality of our infrastructure needs to improve, our policies need to facilitate competitiveness, our regulations need to support business growth and our institutions need to demonstrate better appreciation of the value of investment and investors in an economy."

"The government needs to urgently implement the recommendations of its AfCFTA Readiness Committee. If our industries remain uncompetitive, then we would have issues with the continental treaty. However, this is not to diminish the significance of AfCFTA and its potential benefits to the Nigerian economy."

The Nigerian Economic Summit Group (NESG) said the trade creation and diversion effects of the regional fortress are expected to lead to attraction and development of continental transnational corporations headquartered in Nigeria, with affiliates around other African countries.

Chairman, NESG, Asue Ighodalo, in a statement however noted: "Despite the considerable benefits the agreement would offer to Nigeria, it would affect tax revenue as the country would no longer collect import duties from member states."

Also reacting, Director General, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Amb. Ayoola Olukanni, said that access to foreign exchange (forex), irregular electricity supply and poor infrastructure such as power, roads, rail and efficient functioning of the Ports are issues affecting the readiness of Nigeria for AfCFTA.

"We must reposition the Nigerian economy especially the manufacturing sector by improving infrastructure such as power, roads, rail and ensure efficient functioning of our Ports. This is to enable us compete effectively and successfully under AfCFTA."

AfCFTA across Africa

At the last count, all but one (Eritrea) of the 55 nations of the African Union have signed to join the bloc, 36 have ratified the accord and 34 have deposited their instruments of ratification, while 41 countries/customs unions have submitted their tariff offers, including the EAC and ECOWAS.

According to the African Development Bank (AfDB), intra-Africa exports amount to only 16.6% of total trade. By contrast, internal shipments accounted for 52% of total trade in Asia and 72% in Europe in 2019.

AfCFTA is meant to lower or eliminate cross-border tariffs on the majority of goods, facilitate the movement of capital and people, promote investment and pave the way for a continent-wide customs union.

A report by African Export-Import Bank (Afreximbank) noted that Africa's total merchandise trade in 2019 was about $1 trillion, with South Africa accounting for more than a fifth of intra-continental trade at 21.5 percent. Other countries in the top ten share of total intra-African trade in 2019 include: DR Congo 8.2%; Nigeria 6.4%; Algeria 5.2%; Namibia 4.9%; Botswana 4.0%; Egypt 3.8%; Zimbabwe 3.7%; Ivory Coast 3.4% and; Angola 2.5%.

It also stated that the trade pact could help to realize more than $84 billion in untapped intra-African exports.

"If the export potential is tapped under the deal, intra-continental trade could rise to more than $231 billion, or about 22% of total African commerce, even if all other conditions remained the same," Afreximbank stated.

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