With Nigeria signing the African Continental Free Trade Area (AfCFTA) agreement on July 17, 2019, the free trade area agreement is set for take off. PAUL OGBUOKIRI, however reports that Nigeria’s low manufacturing capacity, unreliable power supply, high interest rate and unattractive investment climate will hamper Nigeria’s capacity to compete successfully in the AfCFTA regime
…urge govt to fix corruption, power to boost manufacturing
•Say S/Africa, Morocco, Egypt, others to maximise gains
•‘Like ETLS, AfCFTA could be abused’
AfCFTA enters into force; other phases to last through 2020–2021
The African Continental Free Trade Area entered into force on May 30, 2019, with the first phase of the deal taking effect for 24 countries. The Phase II negotiations on intellectual property rights (IPRs), investment and competition policy are expected to take at least another year.
The AfCFTA aims to establish “a single market for goods, services, facilitated by movement of persons in order to deepen the economic integration on the African continent,” according to its final text. The agreement also states as an objective the “sustainable and inclusive socio-economic development, gender equality and structural transformation of the state parties.”
Other objectives include eventually developing a customs union spanning the continent’s countries; slashing tariffs and removing non-tariff barriers; and improving intra-country cooperation in investment, IPR, customs and trade facilitation, competition policy and other trade-related areas.
The text now in force does not yet include tariff schedules for goods, nor does it have completed schedules for services, which are both still under negotiation.
Gains inherent in AfCFTA
When the African continental free trade area finally commences, it will give Nigerian producers opportunity and access to a bigger market of over 1.3 billion people, create $3.4 trillion economic bloc and increase goods exchange inside the continent.
At the moment, intra-African trade is only about 16 per cent of their goods and services, compared to 65 per cent among European countries according to AFP news agency.
AU believes that if African countries follow the African continental free trade area plan, it will lead to 60 per cent boost of trade among African countries by 2022.
They said AfCFTA will create the world’s largest free trade area when it comes on stream.
Crude oil, Nigeria’s only product for AfCFTA
According to a recent BBC analysis of Nigeria’s opportunities in the free trade area, it said that it seems the key product Nigeria has to give in the arrangement is her abundant crude and gas. This is even as they said that though Nigeria is oil rich, it however imports refined petroleum products as none of the country’s refineries can refine crude oil. “With this free trade arrangement other African countries will sell their refined crude even to interested Nigerians,” the analysts said.
Also, with the country still struggling to maintain a merger 4,000MW electricity supply for a country which is estimated to have about 200 million people; they argued that for businesses to boom, the country needs steady power to keep business running.
According to the BBC analysts, addressing that challenge must be part of the areas the government of Nigeria needs to address otherwise the other African countries which have steady power supply will take better advantage of this free trade pact.
With regards to the automobile industry, Nigeria imports over 90 per cent of the vehicles used in the country and will therefore be market for South Africa, Morocco and even Kenya and Ghana.
“Bringing down the tariffs on imported vehicles will enable other African countries to enter the free market and export cars to Nigeria.” The analysts said with the exception of Innoson Motor Manufacturing Company at Nnewi, at the moment, Nigeria has only SKD assembling plants which are having difficulty surviving the import of cars (new and fairly-used) from Europe and Asia.
The BBC analysts concluded that for Nigeria to make money from export of cars in the AfCFTA regime, it must strike deals that will enable the country commence manufacturing g of cars and auto parts as soon as possible.
Meanwhile, the Nigerian textile industry has been in comatose in recent years, but Sunday Telegraph reports that government will only need to take few steps for the sector to bounce back and if Nigeria must benefit from this free trade area, the textile industry must wake up again and begin production because it is one of the country areas of comparative advantage in terms cotton and cloth making.
Manufacturing, agriculture the way forward
Speaking at a recent conference in Lagos, on ‘Maximising the Benefits of AfCFTA’, the National President of Association of Nigerian Licensed Customs Agents (ANLCA), Hon Iju Nwabunike urged the Federal Government to expedite action in preparing the country for the African continental free trade area.
Nwabunike who decried the poor production (manufacturing and mechanised farming), and export capacity of the country; he said that Nigeria is not fully ready to take advantage of the AfCFTA pact.
He said there is urgent need to address issues of corruption power supply and insecurity, which according to him, can inhibit the flow and growth of business activities within the country and inside the continent.
Nwabunike said aside from oil, the country has not shown enough capacity and comparative advantage to produce things for export to other African countries.
He said other African countries are moving at a faster pace in building their local manufacturing capacities by encouraging greater production, expanding chances for their local manufacturers and promoting entrepreneurship.
He said: “The agreement will benefit countries that are producing more than countries whose factories are struggling to survive and have little or nothing to export.
”For now, apart from oil, what do we have to give other African countries? There is urgent need to get our agricultural and manufacturing sectors running better than they are doing now.
“I have been to Niger, Ghana, Cameroun and many other African countries in recent times and I can tell you that we are behind them in terms of preparation for a robust participation in intra African trade.”
In a paper presentation at the event organised by The Journal of Freight and Energy, Chairman of the Council for the Regulation of Freight Forwarding in Nigeria (CRFFN), Alhaji Abubakar Tsanni said his council will move to collapse barriers stopping Nigerian customs brokers and freight forwarders from practicing in other countries.
Tsanni also called for greater attitudinal change and deployment of goods vehicles on roads to support logistics and supplies for freight forwarders in the country as a way to conform with trading community expectations.
He said: “Looking for funds to clear consignments after they have arrived our ports increases risks of port congestion and cost of demurrage.
“Under the AfCFTA regime trucks and tankers from outside Nigeria may have cause to be coming to Nigeria in increased volume,” he said..
Chief Executive Officer (CEO), The Journal of Freight and Energy, Ismail Aniemu, organizers of the event, had said that the conference was “as a first step at engendering interactions aimed at preparing the Nigerian business community in the maritime industry for the AfCFTA regime.”
Also speaking, Founder, National Association of Government Approved Freight Forwarders (NAGAFF), Dr Boniface Aniebonam decried the absence of Standards Organisation of Nigeria (SON) at the conference, saying their participation at the event would have benefitted stakeholder more as according to him, the agency has a lot of questions to answer as regards ensuring that Nigeria does not become a dumping ground for substandard products from other African countries when the AfCFTA agreement becomes fully operational.
He noted that the regulators must raise the bar in blocking the country’s borders “to ensure that the abuse seen in the ECOWAS Trade Liberalisation Scheme (ETLS) which has made the scheme a failure, does not repeat itself with the larger African continental free trade area.”
Nigeria, the natural leader in shipping under AfCFTA regime
Speaking at the conference, the Director General of the Nigerian Maritime Administration and Safety Agency (NIMASA), Dr Dakuku Peterside said as African continental free trade area grows trade between African nation, so will shipping grow. “In this new trade arrangement, any country that is able to dominate the shipping industry will reap more than its proportionate share of the benefit accruing from the new arrangement…any country with an efficient maritime infrastructure and tonnage capacity will eventually become the major gateway to Africa,” he said.
According to him, with a single market and uniform tariff, the rest of the world will treat Africa as a single entity with a single-entry point. “Most shipping companies will not be calling at multiple ports in Africa the way they do today. They will only drop their cargoes through a single corridor from there it will be moved to respective African countries in small ships or by other modes of transport.”
Dakuku stated that Nigeria with great maritime potentials is a natural choice to lead in shipping when the free trade area takes off.
Meanwhile, in a paper he presented on Tuesday, at The Platform, titled: “Re-Designing the Nigerian Economy with New Ideas,” Professor Chukwuma Soludo said: “Economic restructuring of the future is about positioning Nigeria to compete and win in an increasingly complex world thereby guaranteeing the security, prosperity and happiness of the 400 or 752 million Nigerians, in a world without oil.”
It is against this backdrop that it is worthy to note that the African continental free trade area agreement serves as an opportunity for the Federal Government and its agencies to catalyse industrialisation of the country by providing the environment for manufacturing and mechanised agriculture to thrive and the time to start is now, otherwise, Nigeria will remain where it is now; a consumer nation.