BusinessDay
Nigeria's leading finance and market intelligence news report.

AFCFTA seen as game changer for manufacturers

…while inherent challenges remain a hitch

After six months of delay on the back of the Coronavirus pandemic, Nigerian manufacturers are expectant regarding the commencement of the African Continental Free Trade Area (AFCFTA) which is seen as a game changer for players in Nigeria’s manufacturing sector. It is seen bearing opportunities, which will position the sector for expansion, innovation, growth and development wielding significant impact on the economy.

Amidst the excitement, stakeholders in Nigeria’s manufacturing industry are sceptical about the ability of local manufacturers to take part of the trade agreement and even advance to a competitive position due to various challenges inherent in the system..

Frank Onyebu, chairman, Manufacturers Association of Nigeria ( MAN) Apapa branch, told Businessday that Nigerian manufacturers despite their hard work and ability are not properly positioned to harness the benefits of the trade agreement as they lack the necessary policies and infrastructure to thrive amid such competition with other countries with competitive advantage and better infrastructure.

“We have a lot of problems in Nigeria including infrastructure deficit, unfriendly business policies, epileptic power supply which forces us to self-generate electricity at a higher cost, the almost inaccessible ports, and many other challenges, which has caused us to increase our cost of production as we have to solve the problems ourselves.

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“The government needs to put in urgent measures and policies that will aid the competitiveness of local manufacturers, Beyond that the government should provide incentives that will boost productivity in the sector as well and ultimately address the infrastructure challenges ” Onyebu said.

Similarly, in its economic outlook for 2021, the Lagos Chamber of Commerce and Industry (LCCI) states that the trade agreement will provide local industries with a new and larger market, which will establish a strong supply chain with other African countries across borders. It added that the country’s manufacturing sector will be exposed to more competitors which will require players in the sector to become innovative and unique.

“The AFCFTA poses new competitiveness risk for Nigeria firms, especially for those in the real sector of the economy as it serves as an avenue for local industries to penetrate new markets and establish strong cross-border supply chains with other African countries.” it states.

The LCCI also affirms that the trade agreement will be beneficial not only to the manufacturing sector but also to the trade sector as well as it states that the performance of the trade sector in year 2021 will be shaped by the direction of government policies regarding the AFCFTA.

Jide Babatope, a Lagos based economic analyst, said while players in Nigeria’s industrial sector may be adequately prepared to participate in the trade agreement, it is necessary for the government to create an avenue for manufacturers to fully harness the benefits of AFCFTA. “Only countries with open, pleasant, and enabling business environment will benefit from the agreement, and this highlights the need for Nigeria to tactically position itself for significant trade benefits,

As the AFCFTA kicks off, the government should provide adequate support in order for manufacturers to penetrate new African markets and fully enjoy the benefits of the trade agreement, if not properly addressed; inherent challenges will dampen the chances of the sector going forward.” Babatope said.

The United Nations Economic Commission for Africa (UNECA) projects that the trade agreement will boost intra-african trade by between $50bn and $70bn in monetary terms, with a 40 percent to 50 percent increase over the first 20 years of its implementation. In addition, the trade agreement is hoped to expand a market of 1.2 billion people and a gross domestic product ( GDP) of $2.5 trillion across all 55 member states of the African Union.

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