Agricultural output is projected to decline in Nigeria when the African Continental Free Trade Area (AfCFTA) is operational, owing to a number of factors including predicted decline in investments, lower costs of production in other countries, and the threat of dumping if adequate measures are not put in place.
A policy brief by the Nigerian Economic Summit Group (NESG) titled ‘Effects of the African Continental Free Trade Area Agreement (AfCFTA) on the Nigerian Agricultural Sector’, gave this insight using four different scenarios. It detailed several assumptions relating to the gradual removal of tariffs, introduction of special products, increase in government investment in key sectors and inflow of Foreign Direct Investment (FDI) and labour into strategic sectors.
The document stated that under AfCFTA, one major reason for the decline in agricultural output is largely as a result of the lower level of investments into the sector. This is because imported produce become cheaper and creates a disincentive for investment and local production in the sector.
On the investment aspect, the report states; countries will now have to compete for investments since there is a common tariff and more likely, countries with more favourable investment climate will attract large investments than others. The issues of high cost of doing business occasioned by poor infrastructure, poor power supply and concerns relating to poor standards of local and exportable produce will play a major role in influencing investments and outputs in the agricultural sector. Nigeria has a lot of catch up to do in these areas.
For Nigeria to leverage and maximise the benefits of the AfCFTA in the agricultural sector, the NESG policy brief made the following recommendations:
- Government needs to identify key agriculture and agro-processing commodities that Nigeria can build competitive advantages over the medium to long term and summon the political commitment to implement business support reforms. There are several agricultural products with great market value and potential, which have remained untapped and explored either as a result of poor market information or limited government support. Several studies have revealed the potential of produce such as tomato, cassava, cocoa, fish products etc, however, the government and stakeholders must collaborate to address specific challenges across these products’ value chain.
- Proper monitoring and enforcement of standards for agricultural produce by government agencies such as SON, NAFDAC, NAQS among others needs to be prioritised. There are no local standards for produce such as tomatoes, yam, garri etc, which are large consumables in Nigeria. To improve safety of Nigerians, local standards must be established and enforced for both locally made goods and imported products. In addition, to improve market access of Nigerian agricultural produce, regulatory agencies need to step up particularly in areas of process simplification and monitoring & enforcing standards for exportable produce.
- One major risk for Nigeria when the AfCFTA comes into force is the abuse of rules of origin, a situation where traders or producers disguise that goods are produced within Africa so they can qualify for tariff-free treatment. To address this risk, there is need for strict and enforceable mechanism within the trade agreement. Nigeria must also improve border scrutiny and security to prevent dumping.
