Nigeria has been snubbed by a new research by global law firm, Baker McKenzie and Oxford Economics that ranks countries that will benefit from opportunities to be unlocked by implementing the African Continental Free Trade Area agreement (AfCFTA).
South Africa, Ghana, Côte d’Ivoire, Kenya and Morocco are tipped to be the biggest beneficiaries of the agreement which is estimated to unlock some $3 trillion in growth opportunity.
With the biggest potential economic gain and business opportunities set to come from growth in trade between African nations, SA, Ghana, Cote d’Ivoire, Kenya and Morocco are likely to reap the rewards of significant cross-border trade because they have open economies, according to the report.
Nigeria, which has the continent’s largest economy, didn’t make the cut for top five. Such a pessimistic assessment could come to cost the economy in terms of attracting badly-needed Foreign Direct Investment (FDI) and could see other African countries steal the charge on Nigeria in securing investments.
“The results of our analysis show countries that have already been bold enough to create more open, business-friendly environments stand to make the biggest gains,” Mattias Hedwall, partner and head of Baker McKenzie’s Global International Commercial & Trade Group, said.
“The message should be that freeing up trade is going to be the big engine of African growth through the 2020s and the first movers have the biggest advantages,” Hedwall said.
Back home in Nigeria, a message of free trade is lost on the government.
Nigerian President Muhammadu Buhari recently shut the country’s land borders to all goods in what is an economic anomaly.
Countries rarely shut their borders for trade-related reasons. The countries to have done so in recent memory – Sudan, Rwanda, Eritrea and Kenya – did so when their security was jeopardised or during disease epidemics that had the potential to spread across borders.
However, President Buhari gave the order August 20 that the land borders be shut completely to curb the smuggling of one staple – rice.
Critics argue that improving the efficiency of the Customs service is a better solution to checking smuggling rather than closing the borders altogether and frustrating importers and exporters of legal items.
Since the border closure, the price of food items from rice to frozen foods has jumped, creating all sorts of problems for consumers already reeling from weak economic activity.
The government argues the closure is aimed at protecting local producers of rice and other foods. That protection is coming at the cost of consumer wallets as people now have to pay more for items where supply has been affected by the border closure. The price of local rice has risen by over 50 percent, according to market surveys.
Exporters, unable to bring in raw materials or export their finished products through the land borders, are also affected.
Dangote Group, Unilever and Cadbury have hundreds of containers of inputs and products stuck at Nigeria-Benin border, according to sources close to the firms.
The economy is perhaps the biggest loser, as the border closure threatens to hurt non-oil exports and spur unemployment rate which already sits at a six-year high of 23.3 percent as at the third quarter of 2018, according to the National Bureau of Statistics (NBS).
Olu Fasan, a member of the International Trade Policy Unit (ITPU) of the London School of Economics and Political Science, described the border closure as counter-productive.
“According to one analysis, over 90 percent of Nigeria’s trade with the West African sub-region is by road, with Nigeria exporting several finished products to the sub-region,” Fasan said.
“Surely, closing the land borders will hurt the export trade, not to mention the possibility that other West African countries may retaliate against Nigeria, as the angry reactions in some of those countries against the border closure have indicated,” Fasan said.
Fasan, like many other economists and analysts, had supported Nigeria’s signing of the AfCFTA back in July.
While it was always clear that Nigeria’s low manufacturing output relative to GDP and inadequate infrastructure could mute gains from AfCFTA, the thinking was that signing the agreement would act as a strong impetus for Nigeria to address its infrastructure needs and overhaul regulation relating to tariffs, bilateral trade, cross-border initiatives and capital flows.
“The last thing you want to see from Nigeria is an abrupt border closure that sends a negative signal about the countries readiness to adopt free trade policies,” said a Lagos-based economist who did not want to be named to speak freely.
“It’s no surprise that Nigeria is not ranked as one of the countries to benefit big from the AfCFTA. Policies like these along with infrastructural challenges are a big dampener,” the person said. “That has dire implications for attracting foreign direct investment.”
LOLADE AKINMURELE
