Nigeria’s President Muhammadu Buhari refused to travel to Kigali, Rwanda, on March 21 to ratify the African Continental Free Trade Area (AfCFTA) treaty.
The trade treaty was targeted at liberalising 90 percent of products manufactured in Africa, exposing each country to a $3.4trn opportunity and raising Africa’s nominal GDP to $6.7trn by 2030.
Buhari opted out at the last minute owing to the opposition of the Manufacturers Association of Nigeria (MAN), the Lagos Chamber of Commerce and Industry (LCCI) the Nigerian Labour Congress (NLC) and other pressure groups.
The opposition groups argue that Nigeria’s manufacturing sector is vulnerable and uncompetitive; therefore, exposing it to external shocks will lead to job losses and factory closures.
However, the reality on ground is that economic benefits of integration far outweigh its downsides as seen in the European Union (EU).
A study published in July 2014 by the Bertelsmann Stiftung, a German foundation, showed that German real GDP jacked up at an average of €37bn per year since 1993, translating into a yearly income rise of €450 per person. Danish citizens’ yearly income rose by €500 over that same period.
One study showed that over 10 years (1993-2003), the single market swelled the EU’s GDP by €877bn (£588bn). This represented €5,700 (£3,819) of extra income per household.
Free trade and removal of non-tariff barriers have cut costs and prices for European consumers, which is why they are looking for new markets everywhere. Many firms have achieved economies of scale. More than 52 percent of UK exports are linked to the EU. Trade within the EU has increased 30 percent since 1993, and inward investment from outside the EU rose from €23bn (£15.4bn) in 1992 to €159bn (£106.5bn) in 2005.
Despite Brexit moves by the UK, studies show that up to 10 percent of all employment opportunities in that country are directly linked to the EU.
Checks show that EU member states own the estimated second-largest net wealth in the world after the United States. They own 25 percent ($72trn) of world’s wealth as of 2016 against US’ 33 percent.
Twenty-seven out of 28 EU countries have a very high Human Development Index, which is rated by performances in education, health and income, according to the United Nations Development Programme.
The euro is today the second-largest reserve currency as well as the second most-traded currency in the world after the US dollar.
Less than 10 African countries today have stronger manufacturing and trading sectors than Nigeria, which means Nigeria can still fare better than many African economies. Nigeria, like France, Spain and Denmark, stands a better chance than Malawi, Central African Republic, Cameroon and at least 42 other countries on the continent in trade competitiveness.
The truth is that whether Nigeria signs the AfCFTA or not, these African products will definitely find their way into the country by hook or by crook, being the largest market on the continent. Smuggling is already a gargantuan challenge for Nigeria and refusal to sign AfCFTA will only more than quadruple it.
Nigeria should sign the AfCFTA but must renegotiate the percentage of local products that will be protected. Rules of origin must also be clearly negotiated and spelt out to checkmate sharp practices that may emanate from outside the free trade area.
The country cannot continue on its protectionism for long as the wind of globalisation is blowing from all corners. What is needed now is a set of incentives from government targeted at cutting production costs and enabling Nigerian manufacturers to compete better.
ODINAKA ANUDU
