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New test for Nigerian exporters as Africa opens $2.4trn trading door

cocoa

Nigerian exporters face a new test in the new trading opportunities provided by the $2.39 trillion African economy, with the launching of the pan-African travel passport which guarantees free movement of goods and persons.

African leaders gathered in Kigali on July 17 to launch an e-passport, which now removes barriers to trade and movement of persons across 54 African states.

This trading window now positions Africa as a new European Union, with a potential to compete with other economic blocs across the globe. BusinessDay was told that the continent could adopt a new, generally accepted currency called ‘Eco’.

“I can tell you that this is good for us exporters because we can move our goods around Africawithout any barrier,” Tunde Oyelola, chairman, Manufacturers Association of Nigeria Export Group, told BusinessDay in a telephone interview.

“Sometimes people outside West Africa go to Ghana and when they conclude their business dealings, they have Nigeria in their sights. But they cannot come in here to do business easily because they need visas. This may help Nigeria bring in the much needed foreign exchange,” Oyelola said.

He is however disappointed that there was no treaty before the announcement of this new window, adding that Nigeria now needs to assist indigenous exporters by resuscitating the Export Expansion Grant (EEG) to be able to play in the highly competitive world.   

Nigeria’s economy is about one-fifth of the African continent’s economy and is the biggest on the continent, amounting to about $520 billion. The new trading window provides opportunities for Nigerian exporters to capture Southern, Northern and Eastern Africa, having already stamped their feet on West and Central Africa.

Nigeria is among the biggest exporters of rubber, cocoa, aluminium scraps, crustaceans, vegetables and fruits to various parts of the continent, but this new opportunity will test the capacity of the continent’s largest economy to maximise export benefits and earn foreign exchange, amid currency crisis and chronic FX scarcity.

Analysts and who exclusively spoke with BusinessDay exclusively, said this is a make or mar situation for the Nigerian economy, as failure to maximise the potential through export and strong manufacturing sector could make the country a dumping ground.

According to Eric Odinakachukwu Umeofia, CEO of Erisco Foods Limited, for Nigeria to position itself properly, government and the citizens must support the manufacturing sector. Umeofia said his firm would join the league of exporters in 2017, but stressed that competing effectively in the face of opportunities outside Nigeria, requires a proactive strategy.

Manufacturers who spoke with BusinessDay at the weekend, said even though this presents good opportunities for Nigeria, its downsides could outweigh upsides in the long-run.

A managing director in a pharmaceutical firm, who pleaded anonymity, said the treaty must be properly negotiated, lest it turns out like the Common External Tariff (CET), which is already doing more harm than good to the Nigerian economy.

Hamman Aliu Kwajaffa, director-general, Nigerian Textile, Garment and Tailoring Employers Association, told this newspaper that the CET has opened doors to substandard fabrics selling at very cheap prices.

According to the new AU arrangement, there are two passports – one issued by the African Union for officials and people who travel mostly for business, and another for  citizens of member states.

“This development has been what was missing in Africa. West Africa is the biggest economic zone in Africa and it is because West Africa started free movement since 1973. It is easier to move business in West Africa and the bad expectations of free movement has not happened in West Africa,” Ikechi Uko, Nigerian travel expert told BusinessDay.

Uko explained that a game changer and an easier process, which is greater than the African passport, is the Visa on arrival for all Africans, adding that Rwanda has long keyed into this, while Ghana started just two weeks ago, which has helped their economies.

According to the Africa Development Bank report on visa openness, only 13 out of 55 countries allow all Africans to enter either without a visa or to get one on arrival.

Experts say this kind of blockages hinder inter-African trade, which remains very low.

Industry watchers argue that the details of the plan are sketchy and many African countries might be reluctant to open their borders, fearing a huge influx of people from other countries.

This might be especially true of South Africa, which currently hosts large numbers of migrants from across the continent, and has seen xenophobic attacks.

Wole shadare, an aviation sector expert, said infrastructure challenges remain a huge undoing, as many countries have more flights to London or Paris than with other countries on the continent.

Shadare noted that there are very few flights between Abuja and Dakar – two major West African capitals – and passengers sometimes have to travel via Nairobi or Addis Ababa in East Africa, or even Europe.

So, even if the passport is introduced, a lot of work would still need to be done to make African trade easier, he added.

ODINAKA ANUDU & IFEOMA OKEKE