• Thursday, April 25, 2024
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Manufacturers bet on ACFTA to expand market reach

Analysts see sustained protest worsening manufacturers’ revenues

Nigeria manufacturers are banking on the African Continental Free Trade Area (AfCFTA) to expand their market reach and raise capacity.

They told Real Sector Watch over the weekend that they are ready and are eagerly awaiting the AfCFTA to capture the African market.

“Our group presence in the export trade zone, especially in the oil and vegetable oil, is an indication that we are ready,” Osaro Omogiade, managing director of Nosak Distilleries, which manufacturers food-grade ethanol, said.

“We have commenced export of food-grade ethanol to the neighbouring West African countries, particularly Ghana. It is an expression of our readiness. We believe in living global because of the associated advantages. If you do export, you will hedge against the foreign exchange problems,” he said.

He said the firm now focuses on countries such as Togo, Benin Republic, and Cote d’ivoire as the AfCFTA nears.

“We are also looking at Angola and Central African Republic. Those are the countries we are looking at, and we have the capacity to do that.”

The African Continental Free Trade Area(AfCFTA) is a trade treaty that promises to liberalise trade among African countries and create a single market for goods and services on the continent.

It is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994 and a flagship project of Africa’s Agenda 2063.

The treaty is expected to raise Africa’s nominal GDP to $6.7 trillion by 2030 and liberalise 90 percent of products manufactured in Africa. This means that a country can only protect 10 percent of its local industries.

Nigeria’s President Muhammadu Buhari signed the AfCFTA in July after months of dilly-dally. He had earlier refused to sign it owing to protests by the Manufacturers Association of Nigeria (MAN) who said it would harm their sector.

But some of the players in the Nigerian manufacturing sector have welcomed the agreement, expressing satisfaction about its potential.

They, however, say some policies need to be in place to protect local manufacturers.

Oluwafunmilayo Bakare Okeowo, chief executive officer of FAE Limited, which produces envelopes, said in a phone interview that the signing of the agreement is a good idea as it provides better market opportunities for manufacturers.

She said, however, there is a need to protect the local producers from possible unexpected downturns and the economy from becoming a dumping ground.

Speaking on the capacity of FAE envelopes, she said, “At FAE, we produce 10 million envelopes daily and we had a sizeable market in Ghana before the border closure. We are capable of supplying a much larger market. We just need protection and policies to create an enabling and competitive environment.”

She further said local manufacturers need better infrastructure to reduce their cost of production, stressing that the issue of tariffs should be properly addressed.

Segun Ajayi, chief executive officer of Luxury Feet, a small-scale shoe production company, said working with the agreement will provide a larger platform for locally-made products to thrive.

“For producers of our kind, it will provide a larger market. However, meeting with demand might be quite tedious, considering the hurdles it takes to produce for a local market, because lack of basic infrastructure has increased our cost of production and reduced daily output,” he said.

Export-focused companies and small businesses in Nigeria are expected to gain from the imminent AfCFTA, according to experts.

Companies that are likely to take a large chunk of the AfCFTA include: Flour Mills of Nigeria, De-United Foods, British American Tobacco, Indorama Eleme Fertilizer & Chemicals and Dangote Group.

“Mostly multinationals and large enterprises are in a better position to gain from AfCFTA because their economies of scale will improve. They have the big market and the capacity,” Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), said in a telephone interview.

“The continental trade is more about economies of scale and the amount of what you produce. The higher you produce, the lower the unit cost, which is why small companies will benefit but not as much as large firms,” Yusuf said.

British American Tobacco Nigeria Limited has dominated the tobacco space in Africa, earning $145.48 million in 2017 from exporting tobacco products to Liberia, Guinea, Ghana, Cameroun, Cote D’ivoire and Niger, according to the CBN Annual Report.

Indorama exports urea to South America, Brazil, West Africa, Central Africa and other parts of the world.

De-United Foods Industries Limited exports noodles to Ghana and Cameroon. In 2017, it earned $30.568 million from exporting to these countries, including the United States. Analysts say the AfCFTA provides an opportunity for companies like De-United to double or triple their earnings with free trade across the continent.

Guinness Nigeria Plc will be a big beneficiary with some of its products selling like cakes in some African countries. The brewer earned $15.06 million just for exporting Malta Guinness and Guinness FES to Ghana and Cameroon, including the United Kingdom.

Dangote Agrosacks Limited sells printed cement sacks (S50 X 69 X 11cm), printed laminated cement sacks to Djibouti, Ethopia, Ghana, Sierra Leone. It earned $15.5 million in 2017 exporting to these markets.

Beta Glass shipped out bottles estimated at  $14.134 million to Sierra Leone, Ghana, Liberia and Cape Verde.