In view of the findings by the Nigerian Economic Summit Group (NESG) that Nigeria’s economy may be negatively impacted when the AfCFTA agreement comes into force, the NESG has outlined measures given the need to make the economy more competitive.
The policy advocacy group says it recognised the potential of AfCFTA to broaden and strengthen the scope for intra-African trade as well as improve the well-being of African people and thus, conducted an impact assessment study of the AfCFTA on Nigeria’s industrial sectors, agriculture sector, and the Nigerian economy at large.
On the back of the findings from the survey, the Lagos-based Group recommended massive infrastructure upgrade, institutional reforms, a more business-friendly environment and reduction of existing binding trade constraints as catalysts that can make Africa’s largest economy a top gainer of the free trade.
“Given the finding that Nigeria’s GDP will be negatively exposed to free trade if the country joins the AfCFTA, and considering the need to make the economy more competitive; we recognise that relying on the inflow of foreign saving to grow the economy may not readily pay-off,” NESG noted in a recently published technical report.
President Muhammadu Buhari signed the African Continental Free Trade Area (AfCFTA) agreement in July 2019, several months after the Nigerian leader initially refused to sign, which was already signed by 52 other African countries.
While acknowledging the free trade agreement as pivotal to job creation, growth and health of the economy, Buhari said he delayed in signing the agreement because more consultations were necessary before Nigeria could append its signature to it.
Commenting on the several policy recommendations that emanated from key findings of the study by NESG, the Group noted that because Africa was still characterised by significant non-trade barriers such as transportation challenges, high transaction costs at the borders, the policy implementation would help exploit the benefits accruable to the Nigerian economy.
“We strongly believe that the recommendations are feasible,” it said in the report.
Addressing Nigeria’s infrastructural challenges, the study by NESG suggested that infrastructure upgrade could be realised through the concession of major infrastructural projects (electricity, roads, bridges, airports, seaports, etc.) to the private sector. “The concessions must, however, be complemented by strong institutional reforms to effectively regulate the operations of the private sector,” the report read.
According to the report, producing highly competitive products in the foreign market also requires strengthening government regulations and internal quality control of products produced in the country.
It, therefore, stated that the Standards Organisation of Nigeria (SON) and the Nigerian Agency for Food and Drug Administration and Control (NAFDAC) had a crucial role to play in this respect. “These regulatory institutions must be reoriented to effectively perform their constitutional regulatory functions.
“Nigeria needs to maximise the opportunities that are available to it in the AfCFTA agreement by enhancing the space for both domestic and foreign investment,” it said.
Thus, there is the need to create a more business-friendly environment and also reduce existing binding trade constraints in the country that has so far deterred the growth of foreign investment in different sectors of the economy, the NESG said.
The report also stressed the need for measures to counter the expected negative impact of AfCFTA on government revenue. The recommended policy measure, according to NESG, is to combine trade liberalisation with increased drive for the inflow of foreign saving/investment into the Nigerian economy.
“The government can complement this with a programme of diversification of the Nigerian economy. If successfully pursued, diversification of the Nigerian economy will, in turn, boost the tax revenue base of the Nigerian Government,” it projected.
Indeed, with a combined GDP of over $2.3 trillion and a population of 1.2 billion – of which most are below the age of 30 – African countries stand to gain substantially from intra-regional trade, according to economists.
“The government may begin to undertake deliberate measures that will strengthen various sectors including health, education, electricity, transportation, textile, apparel and footwear to maximise the benefits that are likely to accrue to them,” NESG said.
