After months of deliberations and the work of committee after committee trying to evaluate the impact of Nigeria joining the African Continental Free Trade Agreement (AFCFTA), the administration finally bit the bullet and signed Nigeria up. About time really. Given that all but three African countries had signed up, Nigeria increasingly looked isolated as the only big holdout.
Officially the reasons given were to address key stakeholder concerns around the rules of origin and market access. These concerns are valid of course. Imagine a company based in Japan decided to import an almost fully built car into Cotonou, paint it, strap on some headlamps, and re-fit the tires, and then tries to brand it as a made in Benin Republic vehicle granting it tariff-free access to Nigeria. Now that would be ridiculous. Yes, I’m looking at you, national automotive policy. The potential for abuse of rules of origin was and is a very real problem. But this problem, and most of the others pointed out by the do-not-sign camp, apply to all the members of the AFCFTA. In fact, deliberations on rules of origin and other such details were only set to happen last June. And how can you tackle these challenges if you are not at the table?
Unofficially, you didn’t need to be a conspiracy theorist to see why there was a bit of hesitancy in signing up. One of the popular slogans of this administration has been “we must produce what we consume”. That is philosophically at odds with the idea of free trade with anyone. You can’t shake off the protectionist leaning tint in policy making over the last few years.
To be fair this administration is not the first to dabble into the protectionist arts. Nigeria has historically been a high-import-tariff country with tariffs across a standard basket of goods roughly 10 percentage points higher than the sub-Saharan African average and double the Middle-East and North Africa average. There was a bit of trade liberalization around 2003 but the protections are rising up again. Given that background it is not surprising that there was some political opposition to Nigeria joining the AFCFTA. The National Labour Congress (NLC) even labelled it an “extremely dangerous and radioactive neoliberal policy initiative”. I did not know trade policies could be radioactive.
Still the fact that everyone else except Benin and Eritrea signed up and Nigeria risked becoming isolated in Africa probably put a lot of pressure on the administration to sign. Also, the work done by the National Office for Trade Negotiations helped in convincing key officials. Finally, we are in.
So, what do we get now that we are in? Well, nothing for now. The agreement is still quite some way from being implemented and there are still many things to negotiate. Don’t expect any overnight effects. Plus, there are many other trade challenges that the AFCFTA will struggle to overcome. But in the medium term there should be benefits. The first of which is that Nigerian consumers should have access to cheaper goods from across the continent. Given that a large fraction of the Nigerian population is poor then having access to cheaper stuff is a big deal. The productivity centred part of our industry should also be licking their lips at the opportunity for access to big African urban centres. Imagine if you somehow managed to be competitive in Nigeria today without any kind of government protection or support. These are probably very exciting times for you.
The flip side to that, however, is with regards to those firms who have historically survived by convincing government to ban or restrict their imported competitors. All those journalists who write those “Nigeria loses x billion naira to imported y” articles may have to rethink their marketing strategy. The firms involved will have to start to think about productivity growth or they might run into trouble. Note: we don’t’ have electricity is not a valid excuse. Given our unfortunate history with protectionism, those firms are not insignificant in number.
The big challenge for policy makers is to work towards enabling us to compete effectively. The lazy policy days of banning imports to boost local production are probably coming to an end. The AFCFTA means we are going to need firms that are as efficient as those in Ghana and as competent as those in Kenya. This is Nigeria though. We can outperform anybody if we really put our minds to it.
Nonso Obikili
Dr Obikili is chief economist at Business Day
