• Thursday, March 28, 2024
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Leveraging opportunities in African Growth and Opportunity Act

African Growth and Opportunity Act

In the year 2000, the United States of America opened its market for sub-Saharan African (SSA) countries through the African Growth and Opportunity Act (AGOA).

The idea was that SSA countries, including 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 was extended to 2025 to enable SSA countries like Nigeria, which did not take full advantage of it, to do so.

The legislation significantly enhances market access to the U.S. for qualified countries.

Some of the products/commodities that qualify 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, of the 7,000 goods listed under the act, Nigeria has not taken advantage of the market opening to export its locally products to the U.S. market. The country has only benefitted from the petroleum products.

Experts attribute this to lack of competitiveness of many companies in Nigeria.

Manufacturers and exporters spend billions of naira sourcing alternative energy to keep their factories alive.

Expenditure on alternative energy sources by members of the Manufacturers Association of Nigeria (MAN) in 2018 was N93.1 billion, according to the association’s economic review.

The country’s poor infrastructural facilities, which include transport system, hurt exporters.

Logistics is also a critical issue. Importing inputs and taking them to factories is a big issue, given the state of Apapa and Tin Can ports in Lagos. Delays and gridlocks in Apapa increase companies’ production costs, thereby lowering their productivity.

Taxes paid by businesses in Nigeria today are up to 54, according to experts. Some of these taxes and levies are multiple and need harmonisation, say analysts.

Funding is also a crucial issue. Nigeria’s benchmark interest rate is among the highest in Africa at 13.5 percent. Ethiopia’s is 7 percent; Kenya is 9 percent; South Africa is 6.75 percent; Zambia is 10.25 percent, and Cameroon is 4.25 percent.

Similarly, Rwanda is 5 percent; Mauritius, 3.5 percent; Algeria is 8 percent, and Senegal is 4.5 percent. Manufacturers are asking the Federal Government to recapitalise especially the Bank of Industry, which provides single-digit funding to them. Doing this, they say, will increase lending to the real sector.

Today, product packaging among SME exporters is relatively average, say experts.

Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry (LCCI), said the major issue is lack of competitiveness. He said efforts must be made to remove business environment-related challenges to spur export firms.

John Isemede, former director-general, Nigerian Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA), once said that Nigeria needs to address its challenges inwardly before thinking of how to benefit from AGOA initiative.

“Failure to do that, whether AGOA is extended for 20 years, we will continue to work for other people,” Isemede said.

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Experts say the country must support exporters, having signed onto the African Continental Free Trade Area (AfCFTA). They say this is a time to promote use of renewable energy while making cheap funds available through the Bank of Industry or other development finance institutions.

Brent Omdahl, commercial Counsellor, US Consulate, Lagos, told BusinessDay in an exclusive interview that participating countries, including Nigeria, need to understand the concept of AGOA, saying that, being a participating country and enjoying tax free do 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.”

Omdahl said the U.S. government, through the US Agency for International Development, has some small resources available to help companies locally to develop their expertise in order to take the advantage of AGOA.

Lamenting, Omdahl said it is unfortunate that crude oil that has benefitted from the AGOA initiative most, which is against the original intent of the act.

He said the intention of AGOA is to create the pathway for a country like Nigeria to move up the value chain.

“It is the Nigerian industry that needs to organise itself,” he said.

Recounting lessons US-Vietnamese bilateral agreement, which is similar to AGOA, Omdahl said Vietnam does 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 their furniture sector and even started importing some hard woods from the U.S. to augment their 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 has a lot of products that can 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.

 

Odinaka Anudu, Joseph Maurice Ogu & Gbemi Faminu