Nigeria has entered into bilateral and multilateral trade deals with many countries, but questions have arisen as to the level of benefits derived from a number of such deals. In some cases, benefits from such deals elude Nigeria because of lack of capacity to compete. In others, the country’s business community lacks the necessary knowledge and finesse needed to gain from them. Even in cases where there are benefits, much of the activity is in oil and minerals, which does not support the country’s vision of revenue diversification.
According to European Union data, the volumes of trade between Nigeria and the European Union (EU) were almost €20 billion in 2016, €26 billion in 2017 and €34.4 billion in 2018. This may look expansive and big for a newcomer, but over 70 percent of Nigeria’s export constituted oil while the EU’S were mostly finished products such as machinery, finished shoes, and vehicles, among others.
The non-oil export products, which should benefit from such a trade deal, are suffering rejections at the EU borders. The EU rejected 24 exported food products from Nigeria in 2016, according to the National Agency for Food And Drug Administration and Control (NAFDAC).
Up till today, groundnuts, beans and several agricultural products are on the EU prohibition list and there is little hope that the bans will be lifted. Many Nigerians often see the bans as an EU conspiracy. While this may be partly true in the light of the role played by Nigeria against the Eu-proposed Economic Partnership Agreement (EPA) with West Africa, the truth remains that many exporters from Nigeria fail to follow rules and standards, according to experts.
“The exported palm oil did not scale through the EU’S test because it also contained a colouring agent that was carcinogenic,” Abubakar Jimoh, NAFDAC spokesperson, said in 2016.
“Beans was banned by EU some time ago but it was illegally exported to European countries.
“Beans was initially banned for one year, when EU was not satisfied with our exported beans in terms of quality assurance, it extended the ban by another two years, which expires next year,” he further said.
Apart from the EU, Africa’s largest economy and most populous country is benefitting little from the United States- supported African Growth and Opportunity Act (AGOA).
In 2000, the US opened its market for sub-saharan African ( SSA) countries through the
AGOA. The idea was that countries like Nigeria would export up to 7,000 products to the U.S. without paying any duty or tariff.
The arrangement was supposed to end in 2015 but it was extended to 2025 to enable SSA countries, which did not take full advantage of the first tranche, to do so.
Some of the products/commodities eligible for export to the U.S. market are poultry, bees, meat of goats, fresh, chilled or frozen, turkeys, live ornamental fish, other than freshwater, mackerel and sardines.
Others are fresh or chilled swordfish other than fillets, milk and cream, yoghurt in dry form, butter, cocoa powder (sweetened or not), guava, apples, ginger, juice and pine apple, among many others.
Unfortunately, despite this opportunity, Nigeria is yet to take advantage of the market opening to ship its local products to the U.S. market. Only petroleum products have benefitted from this trade treaty.
The US goods and services trade with Nigeria amounted to an estimated $12.1 billion in 2017. Its exports to Nigeria were $4.6 billion, while Nigeria’s exports to the U.S. were $7.5 billion, according to the Office of the United States Representative.
In other words, the U.S. goods and services trade deficit with Nigeria was $2.9 billion in 2017. This may look good on the face value until one understands that oil and minerals were basically what Nigeria offered the U.S.
In 2014, Nigeria non-oil exports to the U.S. were $2.6 million while South Africa exported in excess of $1.2 billion.
Brent Omdahl, former commercial counsellor, US Consulate, Lagos, told Businessday in an exclusive interview in 2019 that participating countries, including
Nigeria, needed to understand the concept of AGOA. He said being a participating country and enjoying tax free did not mean not following due processes.
Omdahl said products exported to the U.S. would still undergo and pass through necessary regulatory tests, among which are phytosanitary regulations.
“There are some minimum standards that countries have to adhere,” he said.
“Zero duty access does not mean you have to just start exporting. You have to organise yourself.
“In exporting agricultural products, for example, such products would have to be subjected to all of the Food and Drug Administration (FDA) regulations and comply with sanitary and phytosanitary regulations,” he explained.
Omdahl pointed out that the U.S. government, through the US Agency for International Development, had some small resources available to help companies locally to develop their expertise in order to take the advantage of AGOA.
Omdahl said it was unfortunate that crude oil that had been the biggest beneficiary from the AGOA initiative most, which was against the original intent of the Act.
He said the intention of AGOA was to create the pathway for a country like Nigeria to move up the value chain.
Read also: Impact of free trade area in Africa will be huge
“It is the Nigerian industry that needs to organise itself,” he noted.
Recounting lessons Us-vietnamese bilateral agreement, which is similar to AGOA, Omdahl said Vietnam did a very good job by adding value to their products in order to meet up with the U.S. standards.
In doing this, Vietnam attracted investments from Taiwan in the textile sector in order to develop their textile industry as well so as to take advantage of exporting it to the U.S., he explained.
The country equally developed its furniture sector and even started importing some hard woods from the US to augment existing local woods, turning them into furniture and sending them to the US to sell in big outlets, he added.
“With this arrangement, Vietnam created wealth and employment,” he said.
Omdahl said Nigeria had a lot of products that could make it to the U.S. markets if properly harnessed and improved upon.
“Nigeria needs to look inwards to find those products, develop them, increase their value addition, export them, and through that, create wealth and employment for the country.”
“So, the question for Nigeria is, what are the products that are going to do that? I can think of some. Talk about the shoes. There is a history of making shoes here. The sky is really the limit,” he concluded.
Apart from AGOA, the Common External Tariff (CET) agreed upon with West African countries is not working. Due to poor negotiations, pharmaceutical firms in Nigeria initially suffered losses as their raw and packaging materials were levied five to 20 percent tariffs while finished products from West Africa entered Nigeria without duty payment. The textile industry in Nigeria also felt the pains with smuggling hurting the industry between 2016 and 2017.
“There were many countries that resorted to self-help,” Segun Ajayi-kadir, director-general of the Manufacturers Association of Nigeria (MAN), said in an interview with Businessday.
“We did not negotiate the process properly, so we were left with incapacity to impose the kind of tariff needed to support our industrial aspiration,” he further said.
Apart from the CET, many trade agreements with China are lopsided. While Nigeria sells raw materials and foods to the country, the Asian superpower exports finished products to Nigeria. This is not peculiar to China but extends to the EU, the US and other blocs.
Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry (LCCI), believes that the major challenge is lack of competitiveness of manufacturers and exporters due to lack of infrastructure such as power, rail and good roads to aid their production.
Africa’s largest economy also lacks cheap capital like China to support its entrepreneurs.
South Africa’s Reserve Bank cut repo rate by 25 basis points to 6.25 percent last Thursday.
Nigeria’s Monetary Policy Rate (MPR) has sat at 13.5 percent since March 2019.
In November 2019, Kenya’s central bank cut its benchmark interest rate for the first time in 16 months to 8.5 percent from 9 percent. In February 2018, Zambia’s central bank cut its benchmark lending rate to 9.75 percent from 10.25 percent. Ethiopia benchmark interest rate is currently 8 percent.
At least the benchmark interest rate of most sub-saharan African (SSA) countries have remained single digit, barring few, meaning that it is cheaper for businesses to access funds in those countries than in Nigeria. Experts call for cheap capital to fund the real sector of the Nigerian economy.
Border closure has fuelled inflation to 11.98 percent in December, making rate cuts nearly impossible. Many exporters now move their goods to other countries by sea owing to the closure of Nigerian-benin border. Analysts call for opening of the border to support the growth of all sectors of the economy—not just agriculture and manufacturing. But they urge proper policing of the border when open, including heavy sanctions on corrupt immigration and Customs officials found to have breached rules.
“There is a need for new exporters to go through orientation before starting,” an exporter, Emeka Udeh, advised.
He also called for understanding of global and country specificrules of destination countries before embarking on exports.
“In a place like Saudi, you cannot bring in kola nuts. In some areas, you cannot import products sold by some small businesses. This is why training and information are important,” he said.
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