• Friday, March 29, 2024
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An evaluation of Nigeria’s stand on AfCFTA

AfCFTA

Nigeria’s stand on the African Continental Free Trade Area (AfCFTA) is clear: No signing until sure that it will not affect the manufacturing sector or the economy adversely.

For starters, the AfCFTA seeks to liberalise trade among African countries. It is targeted at a ‘borderless’ Africa, with an eye on a single market for goods and services on the continent.

Experts believe it is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994 and a flagship project of Africa’s Agenda 2063, targeted at creating a single market for 1.2 billion people and exposing each country to a $3.4 trillion market opportunity on the continent.

The AfCFTA is expected to raise Africa’s nominal GDP to $6.7 trillion by 2030 if all the countries sign up.

Components

The treaty liberalises 90 percent of products manufactured in Africa, meaning that a country can only protect 10 percent of its local industries.

Countries are expected to develop and submit schedules of concessions for trade in goods. This implies that they will submit the particular 90 percent of products that are to be liberalised and the excluded products that are to be exempted from liberalisation. These are goods considered ‘sensitive’ by each country.

Negotiators have developed product-specific rules of origin. The rules of origin determine where a product was made. Products or goods from outside the continent will attract the requisite tariffs according to country-specific laws and customs specifications.

The General Agreement on Tariffs and Trade (GATT) Article XXIV says that tariffs will be eliminated based only on goods originating in the customs territories making up the free trade areas.  Rules of origin are essential for easy identification of goods and are like passports for products to enter a free trade area and circulate without duties or tariffs. GATT is a guide to international trade and represents an agreement between many countries on trade in goods and services.

Africa moves on without Nigeria

The AfCFTA officially came into force on 30th May 2019 when it was agreed that the required number of ratifications had already been deposited and the agreement a binding international legal instrument.

The Gambia had the previous month completed the number of countries to  ratify the trade agreement to 22. South Africa, Ethiopia, Sierra Leone, Lesotho, Burundi, Namibia, Guinea Bissau, and Botswana, among others, had earlier signed up. Of course, there are still few hurdles to cross and necessary adjustments to make to bring it into full force, but the machinery has largely been set in motion.

Questions and answers

There are critical questions that need to be addressed by government officials.

First, has Nigeria really embarked on a study to determine the impact of the free trade on the manufacturers who are the ones opposing the free trade? The Manufacturers Association of Nigeria (MAN) has asked for an evidence-based study on how this will leave this sector that contributes barely eight percent to the gross domestic product, but has it been addressed?

If this has been done, can it be accessed via the Nigerian Office for Trade Negotiations and the Ministry of Industry, Trade and Investment’s websites?

Also, if Nigeria says it will still sign, as many government officials have averred, have these officials said the specific products that will be liberalised and those that will be protected? If manufacturers say they do not know which products are part of the 90:10 window, what then are the criteria for Nigeria’s negotiators to determine what products should be protected and what should not?

Moreover, is there any quantitative research on the consequences of continental import penetration on Nigerian firms as MAN has requested? What is the impact of AfCFTA on government revenue since certain tariffs will be reduced or even removed to encourage free trade?

If Nigeria’s President Muhammadu Buhari refused to sign the agreement because of some of the questions raised above, how far has the country addressed these issues at the moment?

Nigeria has no option

Addressing the questions above is as important as understanding that the world is moving on.

The world is eyeing the Nigerian market. To have 200 million people means market for the rest of the world. Common sense has shown that any restriction on trade leads to smuggling. A typical example is palm oil, which is on the Central Bank of Nigeria (CBN)’s list of 41 items. Even though it is embargoed and cannot easily be imported, Malaysian and Indonesian oil is smuggled through Kano and Contonou, Benin Republic.

The truth is that whether Nigeria signs the AfCFTA or not, these African products will definitely find their way into the country either by hook or by crook, being the largest market on the continent. Smuggling is already a gargantuan challenge for Nigeria and refusal to sign AfCFTA will only more than quadruple it. Aliko Dangote, president of Dangote Group, lamented few days ago at an annual general meeting the impact of smuggling on his sugar segment.

“2018 was quite a challenging year for the company with several negative activities, which include influx of smuggled sugar into the key markets nationwide coupled with the Apapa traffick gridlock which continue to affect evacuation of products from the refinery,” Dangote had said. Free trade often has an internal mechanism for curbing smuggling. The upsides are there. But so are the downsides.

Nigeria cannot continue with its protectionism for long as the wind of globalisation blows from all corners.

What is needed now is a set of incentives from government targeted at cutting production costs and enabling Nigerian manufacturers to compete better.

Odinaka Anudu, Joseph Maurice  Ogu & Gbemi Faminu