• Thursday, July 25, 2024
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New test for economy as CET begins this month


Nigeria’s economy is set face more pressure amid falling oil prices  and dwindling revenue,  as the Economic Community of West African States (ECOWAS) implements the Common External Tariff (CET) regime this month.

The continued dependence on oil as the main foreign exchange  earner, poor capacity in the manufacturing sector and ineffective anti-dumping measures, among others, are likely to undermine Nigeria at the take-off of the project, which is aimed at uplifting the economy of the region.

With uniform tariffs, revenue accruing to the Federal Government through the Nigeria Customs Service(NCS), which reached N3 trillion in 44 months preceding September 2014 and N977 billion between January and December 2014 , will likely plunge, according to analysts. This will put more pressure on the economy which depends on oil, whose price has already fallen to below $50 per barrel, about $15 less than Nigeria’s budget benchmark of $65.

Nigeria depends on oil for 75 percent of budget and 95 percent of foreign exchange earnings.

“There is a likelihood that revenue could fall, though I know a few measures are in place to ensure no country loses out,” said Tunde Oyelola, vice-chairman, PZ Cussons Nigeria plc.

The manufacturing sector and non-oil exports will be worst hit, as the twin sectors suffer from significant lack of competitiveness. While many sub-sectors in manufacturing have low capacity, non-oil export is mainly dominated by raw agricultural commodities, rather than finished manufactured goods, stakeholders say. For the CET regime, countries that do not have strong manufacturing base may lose out, as they will only become  dumping grounds for other economies in the sub-region.

Stakeholders say this could affect output, employment and capacity utilisation in manufacturing.

Frank Jacobs, president, Manufacturers Association of Nigeria (MAN), said the implementation of cross-border policies such as the Common External Tariff (CET) and Economic Partnership Agreement (EPA) could throw up fresh challenges that might further complicate the current lacklustre performance of the country’s manufacturing sector.

According to Jacobs, who spoke during the 43rd annual general meeting of the MAN Apapa branch, held in Lagos, the CET and the EPA regimes would challenge the Nigerian economy, particularly the manufacturing sector, as local markets would be flooded with products made under favourable business environments at relatively lower prices.

The fear of real sector players is that CET will create an avenue for the adoption of the EPA, which is a trade liberalisation agreement between ECOWAS and the European Union.

Under the EPA agreement, 75 percent of  the West African market will be gradually be liberalised in favour of the EU export products over the next 20 years.

The EU is contributing up to 6.5 million Euros to support development programmes in West African countries during the first five years of EPA implementation.

The fear of manufacturers is that EPA will open the door to an influx of European products which will box local commodities to a corner. Stakeholders thus see EPA as an agreement between two unequal halves.

Babatunde Odunayo, chairman, MAN, Apapa branch, said the EPA could lead to revenue loss of $1.3 trillion to the Federal Government, while the country stands the risk of being flooded with European products. Odunayo  said  adopting CET or EPA like other West African countries, would require the government finding a way of imposing special levies on certain products to protect certain industries.

Ademola Oyejide, chairman, the Centre for Trade and Development Initiatives (CTDI), recently said the government should establish mitigating measures, such as anti-dumping laws, labour market reforms, technological support to private firms to improve ability to compete, social safety nets to compensate displaced workers, and  tax reforms to increase collection efficiency and the tax base.