Nigeria is not new to trade pacts. Before the African Continental Free Trade Area (AfCFTA) it belonged to the ECOWAS Trade Liberalisation Scheme (ETLS). Experience from the pitfalls encountered in implementing the West Africa free trade agreement signed over 40 years ago offers lessons on what should be avoided if AfCFTA must deliver on the expected outcomes.
The ETLS was established in 1979 as a tool to facilitate the working of a Free Trade Area and ensure the free movement of products (agricultural and industrial) among West African countries. Four decades later it has been described as largely ineffective. It didn’t boost the exports of companies within the region.
Unlike ETLS, AfCFTA involves more countries. It will involve trading among countries three times more than the 15 in West Africa which makes it the largest free trade area in the world. It will connect 1.3 billion people and economies with a combined economic output valued at $3.4 trillion.
To make the best of AfCFTA which is barely a month old, Ede Dafinone, chairman, export group of the Manufacturers Association of Nigeria (MAN) highlighted some obstacles which inhibited the implementation of the ETLS and should be avoided in the course of AfCFTA. Dafinone was speaking during the AfCFTA Export Opportunities for Manufactured Products, an event organised by MAN.
For instance, if the challenges around rules of origin, for instance, are not fixed, Nigeria may once again be at a disadvantage of having local manufacturers compete against products coming into the markets at low entry price points, without being produced on the continent.
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For AfCFTA to work, goods have to be produced on the continent and sold among other African countries, not produced in Asia and disguised as coming from an African country. More importantly, for Nigerian businesses to export to the rest of Africa, the process of securing documentation has to be devoid of the bottlenecks, which during ETLS made it tiresome and uninspiring for intending exporters.
First, according to the Nigerian Office for Trade Negotiations, a number of documents are required under the new trade agreement like the certificate of origin, bill of lading, certificate of analysis, etc. However, there are reported delays in getting access to these certificates due to rigid routines and processes, a move, which delays export processes and trade activities.
Second, is the constrained movement of goods and services due to roadblocks, several checkpoints and high logistics costs. According to the African Development Bank (AfDB), between Badagry (the exit port from Nigeria to Benin) and Noe (the entry port from Ghana to Côte d’Ivoire) there are about 120 border posts and security checkpoints. This mandates individuals crossing these borders to switch recurrently from one official language to the other and exchange currencies several times across borders, an act which slows down the movement of goods and services leaving exporters to incur more cost in moving products.
Third, is the non-adherence to agreement conditions by participating countries. This increases the influx of foreign products into the local market under the guise of being produced in Africa, thereby creating room for unhealthy competition and putting locally made items at a disadvantage.
“Our experience has been that apart from Nigeria and Ghana no other West African country respects standards, so products are often mislabeled in order to penetrate markets at lower prices. Competition would be unfair where there are no harmonized standards,” Dafione said. According to him, unscrupulous companies in Europe and Asia may still find ways to smuggle goods into Nigeria after bypassing the rRules of oOrigin. There are already many examples of products being cloned in Asia at cheaper production costs and being sold in Nigeria as locally manufactured, he said.
Fourth, is the lack of follow-up and accountability procedures on member states following agreement commencement, which may dampen trade activities especially as it requires consistent monitoring to avoid contract breach in cases where member states refuse to cooperate and adhere to the provisions of the trade agreement.
Fifth, is unfavourable government policies like product bans, border closure as well as currency multiplicity with unfavorable exchange rates all of which will hurt trade and export activities between member countries.
The ECOWAS trade policy, according to information on the regional bloc’s website, was meant to foster the smooth integration of the region into the world economy with due regard for the political choices and development priorities of states in the desire to engender sustainable development and reduction of poverty.
The total trade of the region has averaged $208.1 billion. Exports are projected at approximately $137.3 billion while imports total about $80.4 billion. The main active countries in trade are Nigeria, which alone accounts for approximately 76 percent of total trade followed by Ghana (9.2 percent) and Côte d’Ivoire (8.64 percent).
Nigeria’s dominance in this regard has largely been on account of oil exports and the picture begins to change when non-oil and trade in manufactured goods is considered. The future of African trade is not expected to be driven by oil exports, which has been Nigeria’s forte
.
Olusegun Omisakin, chief economist and director of research & development at the Nigerian Economic Summit Group (NESG) told BusinessDay that Nigeria still has a lot to do before fully participating in the trade agreement stating that the country’s latest revised trade policy was in 2012, and needs to be updated.
According to Omisakin, there are four things Nigeria should focus on so as to effectively participate in the trade agreement. They are data availability for goods and services in order to know what trade partners need and what the country also needs from its trade partners; improved infrastructure; policy and legislation modification that will suit intra-African trade, and; reforms for easing export processes and attracting investments.
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