The Federal Executive Council (FEC) recently approved the ratification of the African Continental Free Trade Agreement (AfCFTA). With the approval of the agreement, Nigeria joins other African nations that have already ratified the agreement to become a State Party to the Agreement, which is expected to be the largest market in the world with the population of about 1.2billion people. The approval by FEC came less than two months to the effective date of the commencement of the implementation scheduled on January 1st, 2021. AfCFTA seeks to create a single market for goods and services and free movement of persons within Africa.
Unfortunately, Nigeria’s international borders are closed to international trade and one wonders how AfCFTA would be implemented without opening the borders to trade and commerce.
For some months, Nigerian Stakeholders were able to reach a common ground on the need to get on the AfCFTA train, believed to spur growth, boost job creation as well as eliminate barriers against Nigerian products and allow for free movement of “made in Africa” goods. President Muhammadu Buhari and the FEC by their action had taken a bold step by signing the framework agreement.
But they should go further by opening the borders to business as their continued closure is causing serious hardship to both local producers, importers, exporters and our west African neighbours. Food items produced in Nigeria cannot be exported through the land borders while goods from other West African countries are not entering the country. Today, one small piece of onion costs N100, (One hundred naira).
AfCFTA will boost Nigeria’s export, spur growth and boost job creation as well as eliminate barriers against Nigeria’s products and provide a Dispute Settlement Mechanism for stopping the hostile and discriminatory treatment directed against Nigerian natural and corporate business persons in other African countries.
It is noteworthy that the ACFTA is a brainchild of the African Union to deepen regional integration. It had been in the works since January 2012 – with Nigeria as one of its major promoters. However, local labour unions and big corporations have always been against it. The agreement entered into force on 30th May 2019, within 14 months after its signature on 21 March 2018 in Kigali. It was negotiated in just over two years.
With COVID-19, falling crude oil revenue and dwindling tax non-oil tax returns, Nigeria is challenged on several fronts with economic handicaps as the most biting of them all. For a long, development and expansion of manufacturing capacities was neglected even with more than 40 free trade zones in the country. The lapses range from non-adherence to international best practices in the running and management of FTZs to a dysfunctional legal framework. More instructive is the lack of deeper understanding of what FTZs stand for as well as how strategic the model is to ramp up development of industrial capacities, creation of employment and expansion of national earnings.
The pandemic was, however, a game changer as its jolted government leaders to an economic emergency requiring as one of the most potent tool responses the revival of trade agreements and closer inter-country relations. The paralysis of world economy and the hard impact on oil-based economies promoted a fresh look into other sources of revenue generation. All stakeholders now accept that Nigeria’s quick gain ahead of the expected AFCTA regime is a revival, reform, and expansion of trade zones.
At a time, South Africa, East Africa, and North Africa are ramping up their FTZs in anticipation of the AFCTA, Nigeria as the biggest economy on the continent is compelled to have a rethink on its FTZs. If Nigeria’s FTZs are not allowed to function in line with standard practice, the country under AFCTA will be flooded with goods from FTZs based in South Africa and other regions of Africa.
It is exciting that the Nigerian Custom Service is gradually realising that FTZ all over the world is duty free territory.
The early the custom service fully endorses the FTZ as an international model, the better for Nigeria that has little time in view of mounting pressure from the AFCTA and the imperative of post-pandemic recovery.
The Buhari administration should support further reforms around a renewed legal framework to create a single authority. Multiple agencies competing at the entry points creates impediment for foreign investors. Despite her rapid economic strength, the Chinese administration is widening her trade through enhanced benefits for investors and generous state support. Nigeria can borrow a leaf from the Asian economies.
