Nigeria will likely face more competition from African neighbours as it prepares for the Continental Free Trade Area (CFTA) scheduled to start in January 2018.
The CFTA is a pan-African trade pact targeted at increasing intra-regional trade beyond its current 12 percent. The regime is expected to remove tariffs of most goods for the 54 African countries.
The CFTA is expected to close in on intra-European trade which currently stands at 60 percent, North America’s internal trade of 40 percent, as well as trade in the Association of Southeast Asian nations (ASEAN) which stands at 30 percent.
This is coming at a point when Nigeria and14 other ECOWAS countries have begun the Common External Tariff (CET) regime.
A document seen by BusinessDay shows the CFTA will be finalised and formally launched in January 2018 while it will be domesticated by member countries in February of the same year.
While Nigeria is expected to play a leading role in CFTA, experts say Africa’s largest economy must strengthen its real sector in order not to expose the economy to shocks.
“We believe that there is a great deal to benefit from the promotion of global trade. However, in all of these, our domestic policies must be right to strengthen the capacity of the private sector to take advantage of the foreign policy benefits,” said Remi Bello, president, Lagos Chamber of Commerce and Industry, at a foreign policy dialogue.
The benefits of multilateral trade arrangements to Nigeria at the moment seem uncertain, as 89 percent of country’s export sector is still dominated by unstable crude oil, which is still not locally refined.
Export of rubber, which is the best non-oil export in the last five years, accounts for only four percent, according to BusinessDay’s calculations of the International Trade Centre data.
Solid minerals still contribute less than one percent to the gross domestic products, just as manufacturers face tough times in a tough business climate, influenced by high cost of alternative power and funds, poor infrastructure and regulatory excesses. Nigeria currently ranks 170 out of 189 in World Bank Ease of Doing Business index.
Akin Oyebode, professor of interntional law, University of Lagos, said the country must reinforce key human development indicators if it is to gain from future multilateral trade.
“Nigeria can definitely enjoy a more visible profile internationally, if it can get its act together by strengthening its industrial production base, spiral up its power generating capacity, improve education and medical care delivery and close the gap between material production and consumption,” said Oyebode, at the foreign policy dialogue organised by the Lagos Chamber of Commerce and Industry in Lagos.
The ongoing ECOWAS tariff regime is already characterised by port delays, according to Frank Udemba Jacobs, president, Manufacturers Association of Nigeria (MAN).
Already, local drug makers are frustrated, as import of finished drugs currently attracts zero tariff, while that of raw and packaging materials go with between 5 and 20 percent duty.
Okey Akpa, president, Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria, said the regime is already threatening to close down 150 drug firms in the country and demolish over N300 billion invested in the sector.
But experts say the Nigerian private sector groups should share the blame for this, as they were fully involved in the ECOWAS tariff negotiations from start to finish.
“It is about having the technical capacity, skills and the right information. Nigeria must begin to train trade negotiators,” said an expert in a multinational agency, who preferred anonymity.
The private sector says even though these trade negotiations are on, the country must avoid the Economic Partnership Agreement of the European Commission.
“EPA will confine the Nigerian economy to a mere market extension of the European Union, since we cannot compete with Europe on all grounds,” said Jacobs, in a July 28 note.