Segun Ajayi-Kadir is the director-general of the Manufacturers Association of Nigeria (MAN). In this interview with Odinaka Anudu, industry editor, he speaks on why the association recently changed its earlier position on the African Continental Free Trade Area (AfCFTA) and how the country should position itself to benefit from it.
MAN was instrumental in stopping the federal government from signing the AfCFTA last year. But in the press release you issued two weeks ago, you said the government answered some of the questions you raised. What did government do differently to convince you to support the AfCFTA signing?
The fundamental objective of trade is to improve the economies of the traders. In any trade agreement, there has to be ‘give and take’. When AfCFTA started, we knew that it offered an opportunity for a 1.2 billion market. We knew also that if we had an environment that was good for business, we should be able to have a beneficial engagement across Africa because we are the biggest economy. We also knew that the government would have to do a few things for us to become net beneficiaries, which is the objective of anyone going into any trade agreement. We did not just want to go into a trade agreement because there was an agreement. When it came and there was clamour for government to sign, we felt that it was not right to just rush into doing that. First, we needed to consult widely with stakeholders, especially those whose businesses would be impacted by the agreement. Second, we felt that we should do a study that was specific on how the country would fare, how it would benefit, and the risks involved, including how the government could mitigate them. We felt that these two things were important. We did it because we had experienced the Common External Tariff (CET) and the Economic Partnership Agreement (EPA). We went into the CET without proper consultations and the fallout was that most countries, including Nigeria, resorted to self-help to be able to operate. That was why we did not have a very successful CET. Africa is significantly important for us and we needed to get it right this time. This was why we made it clear to the government and other stakeholders that there should consultation. Government, in its wisdom, decided to hold on to do consultations, minding the country-specific studies.
Beyond that, government set up a presidential committee on impact and readiness assessment. The committee established many streams of technical groups that looked at all the protocols and tariffs and then made recommendations. This committee suggested that if government would do A,B,C, or D, we could go ahead and sign the agreement. MAN was part of that committee. Government, in its wisdom, said, “We know what we have to do to benefit from AfCFTA. So, it is time for us to go and sign.” So with that background, government signed and MAN does not have any objection. The only thing is that MAN is now highly desirous of a quick implementation of the recommendations which the committee submitted to the government. Government should set up that AfCFTA action committee that was advised in the report and relevant stakeholders, including MAN, should be involved. We look forward to that because negotiations are going on. So, we needed to give our mandate to the negotiators; we needed to determine what the rule of origin would be, and we needed to know what the dispute resolutions mechanisms would be, including the competition laws that would govern the AfCFTA. My friend, NANS president, recently informed me that they have written a letter of protest to the government of Ghana regarding the way they undermine our traders there. Ghana is hosting the secretariat of the AfCFTA and it will be shameful for them to continue with that barbarism taking place there. It is inimical to trade and against what the AfCFTA preaches.
Is MAN convinced that Nigeria is ready for free trade?
There is a moratorium for us to get our acts right, and it could be anything between five and 10 years. I believe strongly that if government is willing, and this president has told us that he is willing, we can mitigate those risks and manage the process robustly and become net gainers of the free trade. The only thing is that if we carry on as business as usual, Nigerian economy will suffer badly.
Can you specifically highlight some of the things you recommended to the government to get Nigeria ready for AfCFTA?
Certainly, there have to be specific and targeted measures to improve our infrastructure. We need to resolve some issues very quickly, notably access to credit. We need to lower our taxes. The plan for increase in excise duties in whatever sector should be forgotten. Other countries are lowering their taxes to get set for an AfCFTA environment and Nigeria should not stay back. Ghana wiped out all taxes that inhibit productivity to get itself ready. That is what we expect the government to do. The various levels of government that engage in multiple taxation should stop. The problem at the ports is having an unimaginably negative impact on manufacturers. There are quick wins that government can resolve. For instance, the Ministry of Finance is currently not signing off on our members importing completely knocked downs (CKDs) and unjustly so because there is no reason why they should not operate the current tariff that we have. This happens especially to those assembling generators. It is negatively impacting on their business and they are suffering demurrage at the ports, as we speak. It is same with automobiles and this is inimical to government automotive policy. Even our foreign counterparts have said that Nigeria must play. We must look for how to rapidly expand a process so that we can backward integrate. If you slow down a process, every other thing that is queuing behind that process gets slowed down. Now, the CBN governor has said the bank would restrict milk from accessing foreign exchange. You see, we support resource-based industrialisation, and this supports local content. But what we are saying is that it should not be done arbitrarily. You need to carry the stakeholders along. You need to do a targeted policy assessment so that you will be able to have enough information. You cannot rush over existing manufacturers.
Nigeria’s revenue is dwindling, but the population is growing rapidly. Salaries are not being paid by many states and debt is rising. Will Nigeria survive in an atmosphere of free trade where a number of tariffs will be adjusted downwards or removed completely?
That boils down to why we need an action committee because one of the negative impacts the AfCFTA will have is reduction in government revenue. So, we need to be able to make up in other areas, otherwise we will be a net loser. Government needs to gain something from our productivity. Everything you will gain from AfCFTA is what you export. But the only surviving incentive for export, which is the Export Expansion Grant (EEG), is grounded now in government bureaucracy. This has to change.
Our list of 43 items not eligible for foreign exchange is still there and tariffs are being increased in several products. One would expect that with AfCFTA, some of these would have been relaxed. Do you think otherwise?
There is a bit of difference. What the CBN governor is doing is not imposition of tariff. He is restricting access to foreign exchange.
But importers have also complained that any moment such a pronouncement is made, like in the case of palm oil, the Customs responds by raising tariff?
That is wrong. You cannot achieve with monetary policy, what a fiscal policy should achieve. That should not continue in our system. It shows our economy is not mature. If you restrict access to FX, it is enough deterrent. The Customs is not empowered to regulate tariff. It is an implementing agency. It should not happen.
What lessons from the CET regime can we carry into the AfCFTA?
Even though we agree there were problems, ECOWAS remains one region that has done well in terms of common tariff. I will not want to condemn what we have achieved. The only thing is that we did not negotiate the process properly, so we were left with incapacity to impose the kind of tariff needed to support our industrial aspiration. There were many other countries that resorted to self-help. Now, I think we have got our acts together and evolved a common market access offer, which we are going into the AfCFTA with. This means we are trying to modify the CET and make it have a regional application and use it to negotiate as a bloc. We are overcoming the challenges we have. It is always a delicate issue because in West Africa, we are asymmetric in terms of our levels of development. All the industries in some countries in West Africa are not even up to the ones we have in Oba Akran (Ikeja, Lagos). MAN has 2,500 members, so you cannot compare us with a country with one or two dozen members. We have been able to agree now and we have made progress.
What strategy should Nigerian manufacturers adopt to enable them maximise benefits of the AfCFTA?
We are not competitive because of our environment. So, government has to remove roadblocks that make companies move to Ghana and other countries. I have spoken about taxes, tariffs and other areas. We are ready, and if we work with government, the challenges are not insurmountable.
