The United States has reauthorised the African Growth and Opportunities Act (AGOA) for another 10 years. This may have opened a fresh window of opportunity for Nigeria to drive her non-oil export business. But there are fears that unless poor infrastructure, lack of adherence to standards, value addition, and product packaging are resolved, Nigeria may yet again fail to benefit optimally from the trade policy, which allows exportation of products to the US market, tariff and quota-free. Asst. Editor CHIKODI OKEREOCHA reports.
The’s a trade policy bodes well for Nigeria’s plan to diversify her economy by promoting the non-oil export business, especially agriculture. But Nigeria failed to maximise opportunities under the US trade policy, known as the African Growth and Opportunities Act (AGOA) within the last 15 years. The Act initially covered eight years (October 2000 to September 2008), but with amendments signed by former US President George Bush in July 2004 AGOA was extended to September 2015. Yet, Nigeria still could not ride on the back of the programme to boost non-oil export.
AGOA, seen as the cornerstone of US trade and investment in Africa, was aimed at giving Nigeria and other eligible African countries opportunity to build capacity in global markets. It offers tangible incentives for African countries to continue their efforts to open their economies and build free markets. Essentially, the trade policy sought to increase market access to Nigeria and 38 other eligible Sub-Saharan African countries to export about 7, 000 product lines tariff and quota-free to the US market.
However, issues around Nigeria’s mono-product economy centered on oil, and perceived lack of adherence to standards and product packaging methods as well as weak manufacturing base and infrastructural challenges, among others, are said to have conspired to rob Africa’s largest economy the opportunity of riding on the crest of AGOA to become globally competitive.
But a second chance came the way of Nigeria to exploit the opportunities in AGOA when the US Congress on Thursday, June 11, renewed the Act for another 10 years. The Nation learnt that the renewal of the trade agreement enjoyed the overwhelming support of members of the US Congress, with 392 members against 32, voting for the endorsement of AGOA. The programme, which was to expire on September 30, 2015, now ends in 2025. It has since been signed by US President Barack Obama.
Expectedly, the 10-year extension of the programme is music in the ears of President Muhammadu Buhari including stakeholders and operators in the private sector. Governments of other eligible African countries are no less excited. Already, because of the passage of US legislation reauthorising AGOA for an additional 10 years, a ‘2015 AGOA Forum’ is scheduled to take place from August 24 to 27 in Libreville, the capital of Gabon. The Forum will be an opportunity to celebrate AGOA’s success over the last 15 years, and explore strategies to maximise impact over the next decade. It also hopes to launch a dialogue on Africa’s shared vision for the post-AGOA future of US-Africa trade.
At a ‘Live At State’ online video press conference held at the Public Affairs Section of the US Consulate General, Lagos, on Tuesday, August 18, Assistant Secretary of State for African Affairs Linda Thomas-Greenfield and Assistant United States Trade Representative for Africa Florizelle Liser, both expressed hope that the reauthorisation of AGOA would allow African countries including Nigeria to improve their trade and investment environments to take advantage of AGOA to boost non-oil export. According to Liser, this is particularly so considering the fact that oil export from Africa to the US is declining.
For Thomas-Greenfield, African countries must work on their safety and other industrial standards and tackle constraints to meet US specifications. She said the forum would seek how Africans can work together to utilise and maximise the benefits of AGOA in the next 10 years. According to her, the implementation of the trade policy in the last 15 years has created several jobs not only in Africa, but also in the US.
For Nigeria, the 10-year extension of AGOA and the upcoming AGOA Forum could not have come at a better time. This is so considering the current emphasis on growing the non-oil sector. This was sequel to the economic downturn caused by the plunge in oil prices, which put the nation’s finances under severe pressure. Even before the crisis in the international oil market, which forced Nigeria to look towards the non-oil sector for succour, experts had acknowledged the non-oil sector as being more inclusive and sustainable, growth-oriented and also characterised by high economic linkages.
However, despite the strategic focus on the non-oil sector and the expectation that the sector would receive a major boost on the strength of the renewal of AGOA, there are fears that the same issues that stood in the way of maximising the full benefits of the Act before the 10-year extension might yet again conspire to throw spanner in the works unless they are resolved. “Quality is number one. It is the first thing that ought to be considered as the nation focuses on building a robust export-based economy,” the National President, Association of Systems Management Consultants, Mazi Coleman Obasi, said.
Obasi told The Nation that at present, locally manufactured products and services lack global quality certification hence, they are denied access to markets in developed economies. The situation, he said, explains why the productivity and competitiveness of manufacturers suffer. He said Nigeria is not making progress under AGOA because of poor standards arising from poor packaging, which makes it difficult for manufacturers especially the Small and Medium Enterprises (SMEs) to penetrate the US markets.
The Director General, Enugu Chamber of Commerce, Industry, Mines and Agriculture (ECCIMA), Sir Emeka Okereke, could not agree less. While describing AGOA as ‘a right and brilliant policy,’ he said: “The challenge has to do with standardisation. America being a developed nation will not take the second best in terms of quality products.” He told The Nation that Nigeria failed to take advantage of the policy to boost her export drive to the US market due partly to her failure to improve on products standardisation especially in the area of packaging.
The ECCIMA DG added that although many local businesses tried to export products under the scheme, most of them met with stringent US import measures. He, therefore, said there is need to critically look at the Act again to smoothen the grey areas in its implementation. Sir Okereke, who estimated Nigeria’s export drive to the US at about 30 per cent, while putting Ghana’s at about 60 per cent, noted that it was possible that the US had more confidence in Ghana’s method of processing products for export than Nigeria’s.
“I think there is a systemic lack of confidence on Nigeria by the US. Ghana may be having a cutting edge because she has the ears of the US. The image of Nigeria before the US is different from Ghana,” he said, recommending that “We need to work on our trade diplomacy with the US; we need to work on changing that negative perception if we must benefit from the extension of AGOA this time.”
Similarly, former Director-General, Nigerian Association of Chambers of Commerce, Industry, Mine and Agriculture (NACCIMA), Mr. John Isemede, said although, he is not condemning AGOA, there is need for Nigeria to assess how she started and where she is today to see whether to go ahead with the old system or there will be some adjustments. He noted that the programme has not contributed in any way to the development of Nigeria’s economy, neither has it raised the business potential of any Nigerian entrepreneur.
The NACCIMA chief decried a situation whereby America dictates the price of what they buy from the exporting countries under AGOA. He said: “If you are taking produce from Nigeria and we can’t meet your standard, you had better come and invest in Nigeria or bring your own experts to come and teach us the standard. You asked for ABCD products and you have every right to determine the quality and quantity, but you don’t have every right to determine the price for what you don’t produce. What is the essence of determining quality when you have not even worked with our people?”
The Nation learnt that under AGOA, there are three sectors, namely ‘energy-related products,’ ‘textiles, apparel’ and ‘transportation equipment.’ These account for over 90 per cent of exports currently qualifying for AGOA benefits. However, in the last 15 years of the implementation of the policy, Nigeria was only able to feature prominently in the energy-related products sector. The country performed woefully in the textiles and apparel, agricultural products and mineral and metals sectors. Unfortunately, these are areas Nigeria has huge potential.
The crux of the matter, according to experts, is that Nigeria shot herself in the foot by refusing to diversify her economy away from its over-dependence on oil. The oil & gas sector, which provides the bulk of Nigeria revenue, contributing as much as 95 per cent of foreign exchange earnings and about 80 per cent of its budgetary revenues, made it difficult for agric exports to play an important role in Nigeria-US trade under AGOA.
According to experts, agriculture provides 70 per cent of employment in Sub-Saharan Africa and 30 per cent of the region’s Gross Domestic Product (GDP). Yet agric products constitute less than one per cent of AGOA exports. As if that is not enough, the few agric products Nigeria would have exported were faced with the challenge of quality and standard. Because of the country’s poor infrastructure and lack of laboratories to ensure that exportable agric products and other goods meet required international standards, as well as lack of value addition, among others, Nigeria failed to maximise opportunities under the scheme.
Poor infrastructure particularly power supply, which has continued to push up cost of production is also believed to be partly responsible for the lack of competitiveness of the manufacturing sector especially SMEs. For instance, at a recent Bank of Industry (BoI- AGOA training programme in Lagos, high cost of production, lack of adherence to contractual terms, and ignorance of local and U.S. customs regulations were identified as some of the hindrances to the export capacities of most Nigerian SMEs.
With the 10-year extension of AGOA presenting a new window of opportunity for Nigeria to give her non-oil export business another push, stakeholders and real sector operators insist that the time has come for government to improve the competitiveness of the manufacturing sector.
