This seems an inauspicious time to discuss a non-election issue. But with the last-minute postponement of last Saturday’s Presidential and National Assembly elections, I would like to discuss another important issue that is also causing Nigeria huge international embarrassment: its refusal to sign the agreement establishing the African Continental Free Trade Area (AfCFTA).
Last week, the number of signatories to the agreement reached 52. Given the African Union has 55member-states, that leaves only 3 who haven’t signed. And who’s among the laggards? Nigeria, of course! The others are Benin and Eritrea. This also means that Nigeria and Benin are the only two ECOWAS member-states (out of 15) that haven’t signed the agreement.
It’s bad enough that Nigeria, Africa’s largest economy, is in the same refusenik camp as Benin and Eritrea. But it’s unbearably embarrassing as Nigeria led the negotiations for the AfCFTA agreement; its trade minister and chief trade negotiator were the linchpins of the negotiations. The launch of AfCFTA in Rwanda in March last year was hailed worldwide as an epochal event, but Nigeria, its main architect, was shockingly absent. Put it this way, Nigeria helped Africa create a historic Continental Free Trade Area but won’t join it itself!
Of course, Nigeria’s refusal to sign AfCFTA won’t stop it from going ahead. As I said, 52 out of AU’s 55 member-states have signed the agreement, and 18 out of the 22 ratifications needed for its entry into force have been received. The remaining 4 ratifications look likely to be secured within the next three months. What Nigeria’s behaviour means, however, is self-harm, particularly entrenching its international reputation for having an environment hostile to business and investment. There’s also the continuing shame and embarrassment. Last week, Judd Devermont, Director of Africa Programme at the Washington-based Centre for Strategic and International Studies (CSIS), tweeted: “Nigeria – it’s time to quit dragging your feet and sign (and then ratify) the AfCFTA”. That reflects the perceptionof Nigeria as a Perfidious Albion, an unreliable partner,in Africa’s quest for economic integration.
In November 2017, Ambassador Albert Muchanga, African Union Commissioner for Trade and Industry, gave a speech in Abuja. “We have some people who attempt to be assassins of our progress to establish the Continental Free Trade Area”, he said, before adding: “Let me be clear, none of those people are in this room”. He continued: “Our CFTA critics are from within and outside Africa”; again, adding: “but let me stress, they are not in this room”. I wondered why he kept saying the enemies of AfCFTA were “not in this room”. Of course, they were! Most of the Nigerian officials and business people listening to him were among the “critics” and “assassins” of AfCFTA he was talking about.
But why is AfCFTA so unpopular in Nigeria? Well, at the heart of the problem are three failures: the failure of policy-making; the failure of policy choices; and the failure of political leadership. Let’s start with the policy process.
As the negotiation expert Robert Putnam pointed out, every international negotiation is a “two-level game”, involving pleasing international and domestic audiences. But Nigeria negotiated AfCFTA without engaging with its domestic stakeholders, and then, after concluding the negotiations, tried to “sensitise” them to the outcome. Essentially, it put the cart before the horse.
Some years ago, I represented the UK at the European Union’s Trade Policy Committee in Brussels, where member states meet weekly to discuss and shape EU trade policy, including negotiations. Before the mandate for any trade negotiation was agreed and throughout the negotiation itself, the UK would engage actively with key domestic stakeholders from all sectors, as well as civil society groups, to formulate the positions it would feed into the mandate and the negotiation. Every member state did the same. As a result of securing the buy-in of domestic stakeholders, once a trade negotiation was concluded, the signing and ratificationof the agreement by each member-state were almost automatic. Nigeria’s top-down, government-dominated policy process didn’t allow that to happen with AfCFTA.
Of course, in multi-stakeholder consultations, officials must have the skills to deal with heterogeneous interests and arrive at informed positions, without being captured by any vested interest. Given its distributional consequences, trade policy is particularly susceptible to capture. But the government’s role is to prevent this, by developing a trade policy and a trade negotiating position that reflect its rational and collective national interest. As the Oxford University don Emily Jones says in her book, Negotiating Against the Odds, “The most fundamental step in preparing for an international trade negotiation is to know your interests”. Are you interested in import-substitution or export-orientation?
This is where the second failure, the failure of policy choices, come in. Nigeria doesn’t know what is rationally in its national interest. It is resisting trade reforms that would increase aggregate welfare and supporting socially inefficient protectionism. Put simply, Nigeria is behaving irrationally: pandering to its protectionist forces at the expense of economic efficiency and welfare gains.
Of course, it’s not surprising that the Manufacturers’ Association of Nigeria (MAN) opposes the AfCFTA. That’s exactly what political economics tells us to expect from import-competing industries. But why is the government pandering to them? What about the consumers who are being denied the welfare benefits of free trade? What about the productive export sector, including farmers who need foreign markets for their produce?
According to the National Bureau of Statistics, the share of non-oil exports in total export fell from 12.1% in 2015 to 4.6% in 2017. Is that good for export diversification? Last week, BusinessDay reported a government economic adviser who said that foreign countries were rejecting Nigerian major export products and blamed this on “trade politics”. How naïve? Is it rocket science that protectionism provokes tit-for-tat retaliations?International trade is about interdependence, but if you want to be self-sufficient, if you want to be an autarky, then don’t complain if other nations shun your products!
Sadly, there are too many pointy-heads in Nigeria’s government, supposed experts who really don’t know much. For instance, they use the terms “comparative advantage” and “dumping” loosely. But comparative advantage means you can produce something more efficiently, i.e. at lower opportunity cost and better quality, than your competitors, and dumping has a legal meaning in international law, and requires a rules-based trade remedy response. So, saying that AfCFTA would undermine Nigeria’s comparative advantage and increase dumping, smuggling and import surges is sheer ignorance and/or protectionism. AfCFTA should, in fact, trigger the reforms that would address all those concerns.
Which leads us to the failure of leadership. President Buhari is a mercantilist, who believes export is good, import is bad. He is instinctively opposed to AfCFTA and ignores evidence of its benefits. Last year, a 3-month “AfCFTA Sensitisation and Consultation” exercise, led to active engagement with 27 groups and 1,751 people. The Nigerian Office for Trade Negotiations (NOTN) also commissioned an independent study which shows that 78% of businesses believe AfCFTA would benefit local businesses. Then, last October, Buhari set up the “AfCFTA Impact and Readiness Assessment Committee”, asking it to report in 12 weeks, i.e. in early January. To date, there’s no report. Obviously, Buhari is avoiding a decision on AfCFTA, preferring to kick it into the long grass.
Yet, AfCFTA won’t go away. Nigeria’s dithering is deeply embarrassing and harming its economic interests. It will suffer irreparable reputational damage if it rejects AfCFTA. After this election, Nigeria must sign and ratify the agreement.