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Tag: free trade

  • Why Nigeria may not benefit optimally from free trade deal

    Nigeria’s delay in signing the African Continental Free Trade Area (AfCFTA) agreement hurt her chance to host the body’s headquarters. By losing the opportunity to Ghana, some experts fear, Africa’s most populous and largest economy may be holding the short end of the stick in a deal that holds the key to maximising her economic potential. They also note that without addressing the country’s decrepit infrastructure, lack of value addition and insecurity, among others, the envisaged benefits of AfCFTA may elude Nigeria. Assistant Editor CHIKODI OKEREOCHA reports.

    The Director-General, Nigerian Office for Trade Negotiations (NOTN), Ambassador Chiedu Osakwe, is upbeat. To him, the signing of the African Continental Free Trade Area (AfCFTA) agreement by President Muhammadu Buhari was a reaffirmation of Nigeria’s leadership on African trade integration. An obviously excited Osakwe added that the president’s signature was a bold step forward for Nigeria African trade integration and Nigeria’s leadership in the African Union (AU).

    Recall that 16 months after foot-dragging on the signing of the hotly-debated AfCFTA agreement, Buhari finally signed the free trade deal on Sunday, July 7. This was at the 12th Extra-ordinary Summit of AU Heads of State and Government in Niamey, Niger Republic. The agreement, which has put Osakwe and indeed, other proponents of the trade libralisation deal in a joyous and expectant mood, was expected to create a continental trade bloc of 1.2 billion people, with a combined Gross Domestic Product (GDP) of about $3.3 trillion.

    It was also envisaged that AfCFTA – the largest since the creation of the World Trade Organisation (WTO) in 1994 – will boost intra-African trade by about 60 per cent by 2022. It hoped to achieve this by committing AU’s 55-member states to liberalising services and trade and removing tariffs on 90 per cent of goods. Aside its inherent capacity to promote economic growth and development, reduce poverty in the partnering countries, it was also expected to help increase domestic and foreign investment.

    So, with the signing of the trade liberalisation deal by Buhari, Osakwe, who is Nigeria’s Chief Trade Negotiator, was emphatic that the Federal Government has reaffirmed Nigeria’s leadership on African trade integration. Listen to the acclaimed international trade policy expert: “The President has demonstrated a remarkable leadership commitment to due process of the rule of law for trade integration, openness to trade and investment in a period in the global economy characterised by protectionism.”

    However, Osakwe’s hope that Nigeria would ride on the back of the trade treaty to reaffirm her leadership on African trade integration may have come under serious doubts, even before its implementation goes full stream.  The Nation learnt, for instance, that Nigeria’s sloppy economic diplomacy, as well as its fragile economy may have put her in a disadvantaged position where she may not reap the full benefits of the free trade deal. Her economic powerhouse and leadership position in Africa has also come under threat.

    Indication to this emerged penultimate week, when, in what will perhaps go down as one of Nigeria’s low points in international economic diplomacy, she lost the chance to host the headquarters of the AfCFTA to Ghana. The thinking of critical stakeholders is that given Nigeria’s vantage position as Africa’s most populous and largest economy with a GDP of $405 billion, hosting the headquarters of the AfCFTA would have been a walk over, if she had bided. But because Nigeria could not muster the political will to sign the treaty early enough, it could not bid to host the AfCFTA secretariat.

    This gave Ghana, which bided, the leeway to be selected as the host of the AfCFTA secretariat. The West African nation, according to a review committee, was awarded the right based on regional balance formula. Ghana edged out six other countries that submitted bids to host the secretariat. They include Egypt, Eswatini, Ethiopia, Kenya, Madagascar and Senegal.

    Perhaps, as confirmation of Ghana’s strategic positioning to host the secretariat, Senegal President Macky Sall was said to have yielded his own nation’s bid in order to support Ghana’s. Egypt and Ethiopia also showed solidarity with Ghana over the selection. According to the AU, the secretariat’s primary mandate will be the implementation of the agreement, which has been ratified by 25 countries.

    An economic expert, Dr. Patricia Auta, expressed regrets that Nigeria’s delay to sign the AfCFTA agreement cost her chance to host the headquarters of the AfCFTA. She said Nigeria would have contested and probably won the bid to host the secretariat because of the role it played from the beginning of the AfCFTA. “If we had signed on time and contested, there is no way we wouldn’t have won,’’ Auta said.

    The expert added that it was sad that a heavyweight like Nigeria remained conspicuously on the sidelines for long at a time of increased momentum towards continental integration. “This state of affairs contrasts sharply with Nigeria’s prior activist roles on African matters in years gone by. In the past, Nigeria used its political, economic and diplomatic power….to seize the mantle of leadership that changed the course of African history, she lamented.

    It is easy to see why Auta and indeed, other concerned experts and stakeholders are agonising over Nigeria’s loss. For one, the positive economic spin-offs from being home to AfCFTA are too obvious and numerous for Nigeria to miss. For instance, hosting the secretariat will boost job creation, as the secretariat will come with full complement of staff, ranging from economists to translators, administrators, technicians and a range of service providers.

    The hospitality sector will also receive significant boost. With Ghana having the opportunity of hosting various regional and continental meetings and other events associated with the AfCFTA, various operators in the country’s hospitality sector are set to enjoy economic prosperity. The boosts that will come the way of the hospitality sector – and more broadly, the services sector – will also generate increased international exposure for Ghana.

    Push for regional trade hub

    Encouraged by her selection as host for AfCFTA Secretariat, Ghana has moved to leverage the opportunity to become Africa’s new commercial capital, a regional trade hub and an economic epicentre. The West African country is also positioning itself as the new gateway to the continent. And these are aspirations that challenge Nigeria’s dominance of the continent’s economic and investment landscape.

    Ghana Vice President Dr. Mahamudu Bawumi put this challenge in perspective when he told a group of Canadian investors: “By next decade, if you are not in Ghana, you are not in Africa.” Addressing a group of investors at the Canada-Ghana Economic Summit organised by the Canada-Africa Strategic Investment Group Inc. in Vancouver, Canada on Monday, July 22, 2019, he said Ghana is the best investment destination in Africa for both local and foreign investors.

    According to Dr Bawumia, not only do Ghana’s political stability and security, as well as benign legal and regulatory environment offer the best investment climate, the large domestic market and macroeconomic stability of Ghana puts it high as a favourable investment destination of choice in the African continent.

    The vice president pointed out that Ghana’s large domestic market and the coming into force of the AfCFTA suggest that the country’s domestic market is no longer confined to West Africa alone. “The multiplier effects of hosting AfCFTA provides an even greater opportunity for businesses to rapidly launch into the rest of Africa from Ghana”, he noted.

    He added that recent economic developments in Ghana also presented huge opportunities for diverse investment types and called on Canadian investors to direct their attention to Ghana. He said apart from the supportive legal/regulatory environment in Ghana, the country ranked 48th (out of 126 countries) on the World Justice Project’s 2019 Rule of Law Index.

    Yet, there are other noteworthy global comparisons that present positive judgements on Ghana’s investment potential. For instance, Ghana has been ranked ahead of countries such as South Africa in the 2019 A.T. Kearney Global Services Location Index (GSLI), a measure of the attractiveness of a location for offshore services.

    The country also maintained a consistent position as the second highest ranked country (out of 20) in the Absa/Barclays Africa Group Financial Markets Index for two years running. It also ranked as the fourth highest (out of 25) African countries in Ernst & Young Africa’s Attractiveness Survey (2017), ahead of Cote d’Ivoire, Mauritius, Rwanda and wait for this, Nigeria.

    Lack of infrastructure, fragile economy is sore point

    As if Ghana’s consistent push to become Africa’s preferred trade and investment hub is not enough to get the Nigerian authorities worried, Nigeria’s fragile economy caused partly by lack of supportive infrastructure particularly power supply, little or no capacity for value addition and insecurity, among others, are clearly grey areas that could stand in her way of maximising AfCFTA potential.

    For instance, the Director-General of the Nigeria Employers’ Consultative Association (NECA), Mr. Timothy Olawale, is one of those who believe that given the fragile nature of Nigeria’s economy, the country may not derive much benefit, if any, from AfCFTA. He observed, for instance, that with the economy lacking in key infrastructure, it was too fragile to withstand competition from other countries.

    Although Olawale described AfCFTA as laudable, with lots of inherent benefits including its capability to engender capital inflow into the country, he, however, said Nigeria signed on to the deal from a disadvantaged environment with regards to issues of infrastructure, among which is power and the issue of road network – that is, transportation for goods and services and accessibility to the different business environments.

    The DG, who spoke with reporters after the leadership of NECA met with Buhari at the Presidential Villa, Abuja, recently, warned that rather than benefit from AfCFTA, the deal would turn Nigeria into a dumping ground for all manner of goods, unless stakeholders and government put all hands on deck to address issues around the fragile nature of the economy.

    Hear him: “Before we start talking about benefits derivable from it (AfCFTA), we must also talk of the likely damage it can do to an economy that is fragile like ours, which behoves on us as stakeholders and government to put all hands on deck to address those issues.

    “Those issues border on those variables that will ensure the competitiveness of Nigerian businesses and industry. We don’t want a situation where our businesses are not competitive due to the disadvantaged environment they operate.

    “What we are saying is that if all these issues are not addressed properly, to make our business competitive, definitely we are going to be at the receiving end, to the extent that our nation will become a dumping ground. Some of the factories that are even struggling presently may end up folding up.

    “Of course, we know the history of the textile sector and that can be repeated in any other sector and we don’t want us to get to that extent. That is why we are saying government should put mechanisms in place to address these issues, so that we can be competitive and take our rightful place by maximising the benefits of the AfCFTA.”

    Recall that as part of efforts to make businesses competitive, President Buhari’s administration set up the Presidential Enabling Business Environment Council to make the country a progressively easier place to start and grow business. Olawale, however, accused some government agencies of frustrating the ease of doing business in Nigeria through their contradictory regulations.

    Power crisis is spanner in the works

    Power Generation Companies (GENCOs) have also expressed fears that until Nigeria’s power problems are adequately addressed, the country may not benefit much from the recently signed AfCFTA.

    The electricity firms under the aegis of Association of Power Generation Companies (APGC) said despite signing the AfCFTA agreement, the benefits it poses to Nigeria may not be fully reaped until the problems of the power sector are fully addressed.

    According to APGC, “Goods and services offered by Nigeria may not be comparatively/competitively priced, when compared to other nations with better power supply. Thus, the cumulative result of a significant boost in trade and, therefore, the economy, may not be realised.”

    The association added: “For instance, steel mills consume a huge amount of power to convert pig iron blocks to liquefied iron, mixed with ingredients such as carbon, alloys and chemicals to change into a different type of steel, alloy, bars, rods, H-beams, sheet metals, etc.”

    It also said in the mining industry, changing the mineral deposit and ores from the mines to concentrate metal blocks also required a huge amount of power. Hospitals also need uninterrupted electricity supply 24 hours a day for many health care functions and operation of patients, and universities require constant electricity to undertake high level research and development works.

    The power firms, however, noted that AfCFTA was a welcome development and an indication that the Buhari administration was ready for business. They said the government, through the signing of the agreement, had shown commitment to addressing the challenges that might hamper this laudable move, including hurdles faced by the power generating companies.

    Heartache over lack of value addition

    A public policy analyst and development expert, Mr Jide Ojo, did not mince words when he said if Nigeria must take advantage of AfCFTA, she must incentivise the private sector for value addition. “We cannot continue to export raw materials and get peanuts in return,” he said.

    Continuing, Ojo said: “We may just be signing on to something that may be like paper tiger; something good on paper alone. Unless we develop capacity for value addition, we may not profit maximally from AfCFTA.”

    Ojo echoed the position of the President of the African Development Bank (AfDB), Dr. Akinwumi Adesina, who has consistently maintained that for for Nigeria to fast-track industrialisation and create jobs, she must prioritise value addition.

    Listen to Adesina: “The formula for the wealth of nations is clear: rich nations add value to all they produce; poor nations simply export raw materials. Nigeria and Africa need to industrialise and add value to everything they produce – from agriculture, to minerals, to oil, gas and metals. There is need to move from the bottom to the top of the global value chains.”

    Both experts are right. At present, virtually all the basic raw materials to feed the industries in Nigeria are available locally. The snag, however, is that they are not available in sufficient quantity and quality. More importantly, most of the available local raw materials are said to be in unusable form, requiring value addition before they can be used by industries.

    The value addition, The Nation learnt, is done mostly by Small and Medium scale Enterprises (SMEs) because they are the off-takers, taking the materials from the unusable form to the next intermediate stage. It is the intermediate raw material that industries require for production.

    However, because of the low capacity of the SMEs to add value to available local raw materials, coupled with lack of access to capital to set up processing facilities, process technology and techniques, and spare parts, among others, they have not been able to fill this gap.

    The consensus is that local raw materials in their natural forms do not have any value and would not attract any market demand hence, there is need to process them to meet internationally accepted quality and standards for use by manufacturers.

    What currently obtains is that most of the local raw materials are being exported and later imported back into the country as finished products with the addition of certain additives at great cost. Therefore, experts say there is the need to encourage the local supply of raw materials to halt the huge foreign exchange spent on raw materials importation when they can be sourced locally.

    Interestingly, Nigeria’s potential for production of a wide range of raw materials and products has never been in doubt. The country boosts human and natural resource endowments as well as good climatic conditions to support the production of agro-raw materials and products required by industries.

    Sadly, however, most of these resources, if not all of them, are exported in their raw form, without any value addition. The country does not process them from primary produce to secondary or intermediate products. Rather than do so, the raw materials are taken to factories in other parts of the world where they are processed and sent back to Nigeria.

    The implication is that Nigeria ends up losing money that could have been made from finished products produced locally. More importantly, the country creates jobs for nationals in other parts of the world, while it continues grappling with unsavoury socio-economic consequences of rising unemployment particularly amongst graduates.

    To Ojo and indeed, other development experts, therefore, the time to truly transform Nigeria into a primary, productive market and not a secondary market for the dumping of goods has come. This, according to them, means that Nigeria must prioritise the implementation of policies and strategies to boost the capacity of the private sector to add value to raw materials, if Nigeria must benefit optimally from AfCFTA.

  • On moves towards continental free trade

    SIR: The 2019 African Export Import Bank annual meetings took place in the beautiful city of Moscow, in the Russian Federation with the theme: Transforming Africa’s Trade. The words of Prof. Ha-Joon Chang resonated particularly where he stated at the meeting that “We must reject the idea of a level playing field between developed and developing countries. Free trade is only beneficial between countries with the same level of development’’ This again highlights the importance of the African Continental Free Trade Agreement.

    Free trade, comes with its own idiosyncrasies and often times in the short run, brings benefits to most countries. In the long run, it is bad for the economically backward, developing countries and impedes productivity. This supports the infant industries argument, a classic theory in international trade, which states that new industries require protection from international competitors until they become mature, stable, and are able to compete competitively. The infant industry argument is commonly used to justify domestic trade protectionism. An infant industry is in its early stages of development, a newly established industry. Therefore, infant industries lack the experience to compete effectively against established competitors abroad. An infant industry is characterized by a lack of efficiency, competitiveness, and a high vulnerability to sudden market changes, hence the need to be protected.

    The key constraint to the African free trade is infrastructure. It is easier to transport oneself from one country in Europe to another and that cannot be said for Africa. Africa partakes with 2.5% of global trade despite accounting for 16% of the global population. The need to improve the infrastructure in the aviation sector, rail and road networks is crucial in the implementation of the African free trade.

    The Russian Federation, taking center stage and partnering with Africa through the African Export Import Bank and seeking partnership in also providing the infrastructure that will aid the continental free trade agreement is commendable. Power and sufficient transport networks must be improved upon to sufficiently harness the benefits of the free trade agreement. I do look towards a prosperous Africa, in which economic and social development is sustained and not a continent which continues to remain stagnant amidst vast abundance of natural resources and technological advancement.

     

    • Folawiyo Kareem Olajoku, PhD Lagos.

  • Should Nigeria sign continental free trade deal?

    Arguably the continent’s most ambitious integration initiative, the African Continental Free Trade Area (AfCFTA) is a deal between 44 members of the African Union. Its goal is to create a single market to be followed by free movement and a single currency union. Nigeria, however, is yet to sign it. A huge debate on whether Nigeria should sign the agreement or not took the bront burner at the 12th Annual Business Law Conference of the Nigerian Bar Association Section on Business Law (NBA-SBL) in Abuja last week. Vice President Yemi Osinbajo, who opened the conference, led others weighed in on the debate. JOSEPH JIBUEZE was there.

    It is an ambitious dream. The objectives are also grand. Yet, there are fears. But proponents of the African Continental Free Trade Agreement (AfCFTA) argue that the merits outweigh the risks. The AfCFTA has been hailed as capable of transforming Africa’s economy. But the question is: Should Nigeria sign the agreement?

    No fewer than 44 African Union (AU) member states have signed the AfCFTA agreement. The goal is to create a single market, followed by free movement and a single currency union.

    The deal was signed in Kigali, Rwanda on March 21. Signing the agreement does not yet establish the African Continental Free Trade Area. It will function as an umbrella to which protocols and annexes will be added.

    Once all documents are concluded and ratified by 22 states, the free trade area will formally exist.

    Negotiations will continue this year with Phase II, including competition policy, investment and intellectual property rights. A draft shall be submitted for the January 2020 AU Assembly.

    Kenya and Ghana were the first countries to deposit the ratification instruments on May 10 after ratification through their parliaments.

    Whether Nigeria should sign the AfCFTA agreement and its benefits were the subject of discussions at the 12th Business Law Conference of the Nigerian Bar Association Section on Business Law (NBA-SBL) which held for three days in Abuja last week. Its theme was: “Bringing down the barriers: the law as a vehicle for intra-Africa trade”.

    Featuring over 70 speakers with session chairs and panellists, the conference had four plenary and eight breakout sessions with sub-themes around AfCFTA.

    Some of the sub-themes were: “Financing intra-African trade and development”; Continental trade and the imperative of unimpeded movement of goods, labour and services”; AfCFTA and transformative industrialisation of Nigeria”; Enhancing transport connectivity in Africa”; and Marching in lockstep: Building sub-national competitiveness for global investment”.

    Others were: “Law practice in the time of the AfCFTA: reimagining African lawyers”; Standardising continental regulations on consumer protection and competition law”; Enabling e-commerce across the African continent”; Institutionalising reforms in the ease of doing business in Africa”; and Establishing a framework for resolving intra-African commercial disputes”.

    The conference ended with a debate session with four topics: Should there be ladies at the Bar? Pupillage in law: Should it be mandatory? Should lawyers continue to self-regulate? Should Nigeria accede to AfCFTA?

     

    Lofty objectives

     

    When AfCFTA takes effect, there will be a single continental market for goods and services in Africa. There will be free movement of business persons and investments. The agreement will pave the way for accelerating the establishment of the continental Customs Union.

    According to the Common Market for Eastern and Southern Africa (COMESA) Competition Commission Chief Executive Officer George Lipimile, AfCFTA’s objective is to expand intra-African trade through better harmonisation and coordination of trade liberalisatiion.

    It is expected to enhance competitiveness at the enterprise and industry level, and support economic transformation through exploitation of economies of scale, continental market access and better reallocation of resources.

    AfCFTA’s Continental Competition Rules, Lipimile said, will introduce a “one-stop shop” for cross-border transactions, expectedly easing the cost of doing business on the continent.

    There will no duplicated legal hurdles to cross. There will be reduced filing fees for registration requirements, and the risks of different decisions from different competition jurisdictions will be eliminated.

    Unlike the national competition authorities whose jurisdiction is limited by national boundaries, AfCFTA competition rules would provide extra-territorial jurisdictions powers to investigate restrictive business practices across the continent.

     

    Understanding AfCFTA

     

    Nigerian Chief Trade Negotiator/Nigerian Office for Trade Negotiations Director-General Ambassador Chiedu Osakwe, who played a major role in AfCFTA negotiations, allayed the fears that the agreement could bring negative consequences.

     

    He said AfCFTA establishes a legal order for trade within Africa previously not had, balances rights and obligations and has no fewer than nine safeguards, including opportunity to waive obligations, as well as what he called, “iron-clad” trade remedy provisions.

    The provisions include the anti-dumping policies that allow for offsetting of duties.

    “AfCFTA is about the rule of law in trade. It’s about mordenising our trade environment, about mediation rather than militancy,” he said.

    Osakwe said that following a directive from President Muhammadu Buhari, he and his team went round the country from March 15 to June 14 to engage with stakeholders.

    According to him, he and his team went to all the six geopolitical zones, had 27 dedicated consultations, and spent approximately 190 hours talking to stakeholders.

    “What did we get? There is significant support that Nigeria goes ahead with this for much of the reasons they gave – our leadership, our geo-political standing, market access, an opportunity for growth, among others,” he said.

    He, however, added that stakeholders raised long-standing competitiveness issues on power, transport infrastructure, difficulty in the domestic market arising from undue obstruction by security forces, trans-shipment and branding, how to integrate women and the informal market, among others.

    The Regional Integration & Trade Division Director United Nations Economic Commission for Africa (UNECA), Dr Stephen Karinga, AfCFTA “is a demonstration of Africa’s ownership of its development agenda”.

    He said the agreement was designed to break trade barriers and provide enterprise opportunities.

    Karinga said: “If we don’t break down the barriers now, we’re limiting the opportunities available to young entrepreneurs in years to come.

    “The African market today comprises 1.2 billion people. Conservatively, the continental GDP (Gross Domestic Product) is about $2.5 trillion. Now, by 2050, this market is projected to reach a population of 2.5 billion people and it is estimated that the African economy will actually be growing faster than the global average as we go to 2050. The African businesses today face higher tariffs within the continent than they face with the rest of the world.

    “So, if you have a growing market and economies that are growing faster and you are facing barriers within this market, then the AfCFTA is actually meant to address these barriers so that they can optimize the one-Africa market.

    “So, in terms of the business case for the AfCFTA, it actually provides opportunities for enterprise and all of us Africans know how enterprising Nigeria is and how enterprising African businesses are.”

    Former South Africa Representative to the World Trade Organisation (WTO) Ambassador Ishmael Faizel described AfCFTA as a realisation of Africa’s founding fathers’ dream about a united continent.

    Among other benefits, he believes AfCFTA would spur industrialisation. “Our challenge in Africa is to build industrial capacity,” he said.

    Special Adviser to the President on Economic Matters, Dr. Adeyemi Dipeolu, was of the view that Nigeria needs to articulate an industrial strategy that balances import and export.

    AfCFTA, according to him, can spur Nigeria to create continental infrastructure, but added that there was the need for “architecture for trade remedies”.

     

    Our concerns, by Osinbajo, Enelamah

     

    Opening the conference, Vice President Yemi Osinbajo said there were concerns that Nigeria could become a dumping ground with AfCFTA’s signing. He, however, emphasised that its signing has not been foreclosed.

    He said: “Due to the prevalence of dumping on the continent and the potential for its escalation, one would argue that free trade in Africa may not necessarily be fair.

    “Our decision to delay the signing of AfCFTA and to extend consultations is to ensure that our participation does not adversely impact on the progress that we have made to date.

    “We have to ensure that the theories assumed are adjusted to the realities that Nigerian businesses face, especially when it comes to dumping, and in some instances, smuggling.

    “It is important for us to work on internal arrangements and to ensure that by no means do we just simply become an easier target for dumping and smuggling by signing the continental free trade agreement.

    “Nonetheless, wide-ranging consultations are ongoing to determine how best the framework and the protocols will deliver the best results for stakeholders.”

    Osinbajo said that while Nigeria remains open to more input from stakeholders, the country has more interest in free movement of goods made in Africa.

    He said: “Our vision for intra-Africa trade is for free movement of made-in-Africa goods – goods made by Africans using a significant proportion of African raw materials; not just free movement of goods.

    “On our part as government, we take quite seriously our duty to focus on expanding Nigeria’s economic influence and our reach while also ensuring that the domestic front is nurtured into a stimulating and enabling environment for business and investment.”

    Industry, Trade & Investment Minister Okechukwu Enelamah noted that some existing regional agreements have not delivered on their promises, adding that signing the AfCFTA agreement does not guarantee success.

    The minister said: “Our most pressing objective is to ensure that Nigerian businesses and our economy generally are not disadvantaged by this whole new world order that we’re creating.

    “The issues around smuggling, dumping and unfair trade practices are what we need to address. A lot more work is required to make sure stakeholders understand how it will work.”

    Chief Justice Walter Onnoghen, represented by Justice Olukayode Ariwola, believes that Nigeria stands to benefit by signing the agreement.

    He said: “The need for collaborative relationship among African nations is indisputable, more so, given our common resolve to build a new Africa, founded on common identity, integration, common economic development, tenets of social justice and accountable leaderhip.

    “The theme is timely especially so in the light of the recent resolve by African states to break the barriers in the movement of goods and services. Africa is the second largest continent in the world, but when viewed from the perspective of its economy, it is quite small.

    “Therefore, commercial engagements between African countries will be crucial for enhancing economic growth and raising the standards of living for many.”

     

    Oyebode, Utomi: Nigeria better off with AfCFTA

     

    Professor of International Law and Jurisprudence Akin Oyebode said Nigeria seemed to be cutting its nose to spite its face by not signing the AfCFTA. He said he was appalled when Nigeria “disinvited” itself to the Kigali meeting.

    “We must resume negotiations to ensure we continue to play the role that destiny has placed on us. It’s not too late to resume discussions. We should stop underrating ourselves. My plea is that we should cut our losses by resuming negotiations for AfCFTA. We have to do whatever makes us competitive so that we’ll never apologise for being Africans,” Oyebode said.

    To him, it is disserve to Nigeria’s image and reputation not to be signatory to AfCFTA. He said that instead of building a wall, the borders should be tightened.

    He urged lawyers to “engage” with the Federal Government to sign the agreement, noting that no country can be compelled to sign.

    Political economist Prof Pat Utomi who believes there will be winners and losers with AfCFTA signing, spoke of the need to find a win-win balance.

    Explaining that the benefits are worth the risk, Utomi said: “We need to change our mind-set. We have an elite still living in a rent economy. We need to grow intra-Africa trade. We could co-produce. We have to find a way to encourage manufacturers to play in a global value chain where they will be more enriched.

    “Trade leads to increased prosperity for all, but there is always a short-term interest to protect the gains that come. And this is how we need to understand the plight of manufacturers in Nigeria because many of the things they are dealing with are compounded by factors somewhat beyond their control.

    He said: “There will be winners, there will be losers. The challenge is to make sure that we encourage those who see themselves as immediate losers to rethink and have a win-win abundance kind of mentality.”

     

    Former Nigerian Institute of International Affairs Director-General Prof Bola Akinterinwa believes Nigeria could sign anytime despite fears that it could be left behind.

    He said: “We have to decide whether to participate.

    “If the agreement enters into force without Nigeria, what is the likely relationship between Nigeria and particularly Benin Republic? Why Benin Republic? Benin Republic has a policy according to which the budget will never be passed, monetary policy will never be adopted until Nigeria has come out with its own policy. So, if the tariff in Nigeria is $10 on a given product, then Benin Republic will reduce its own $4 or $5.

    “And in terms of business, you know quite well that you can travel by road to Benin Republic and get it cheaper; it is even possible to settle, find your way out without paying any tariff or anything. So, for the businessman, there is no way they will not be going to Benin Republic. So, by not signing already, the first implication is that smuggling that government is trying to prevent will find a very fertile land to grow,” Akinterinwa said.

     

    ‘Lawyers stand to benefit’

     

    Pioneer SBL chairman George Etomi thinks that Nigeria stands to gain by signing AfCFTA.

    Etomi said: “We need to get our own fair share of the world trade, not only goods, but services,” he said, adding that when trade barriers are opened, more opportunities would open for lawyers.

    “There will be myriads of agreements to be drawn and dispute resolutions to be handled.”

    Former Nigerian Bar Association (NBA) General Secretary Mazi Afam Osigwe believes signing the AfCFTA agreement should be a fait accompli. However, he said for Nigeria to be competitive, states must invest in public education and carry out reforms on areas like land titling.

    There are also needs to be consistent in policies. “We must improve the integrity of our processes,” he said.

    A lawyer and partner at KPMG, Wole Obayomi, believes that law firms would benefit when they adopt continental partnership models that will enable them develop capacity to handle complex high-end deals.

     

    Obayomi said: “The legal profession needs to be transformed by allowing international firms to join up with you. Corporate organisations want firms that can deal with them cross-border. If you’re part of an international network, opportunities will be vast. To create more jobs, the structure of the profession needs to change.”

    SBL chairman Olumide Akpata said Nigerians were better informed about AfCFTA and what it portends for the country following consultations undertaken by the Inter-Ministerial Committee on AfCFTA as directed by President Buhari.

    “It thus became the case that rather than throw a spanner in the works, the decision by Nigeria not to sign the agreement served to further validate the need for this conference,” he said.

     

    Udom, Amosun: states will benefit

     

    Gombe State Governor Ibrahim Dankwambo, represented his Commissioner for Finance Hassan Muhammadu, blamed poverty in the North to the severance of the region’s trade with the rest of the world.

    He recalled that hide and skin used to be exported through the North, adding that had such policies been sustained, the region would have been better off.

    Akwa Ibom State Governor Udom Emmanuel, represented by his deputy Moses Frank Ekpo, said the state has simplified its legal process and framework to encourage businesses.

    He added that creating the right environment would encourage foreign investment.

    With his state engaging in various manufacturing endeavours, he said signing the AfCFTA would afford it more export opportunities.

    Former Federal Inland Revenue Service (FIRS) executive chairman Mrs. Ifueko Okauru backed AfCFTA, saying there was need not only for country integration and corporation, but regional integration.

    Ogun State Governor Ibikunle Amosun, represented by the Secretary to the State Government Taiwo Adeoluwa, believes AfCFTA would create more trade opportunities for the state’s industries and lead to more investment. He said Ogun remains a destination of choice for investment

    Former Edo State Governor Oserhieme Osunbor, who chaired the session, said: “Intra-Africa trade will lead to the creation of wealth and employment.”

     

    What if Nigeria does not sign?

     

    Regional Trade Adviser at the African Union Commission (AUC), Babajide Sodipo, said there was the need to balance the ongoing debate on the AfCFTA.

    According to him, rather than focus on what manufacturers may lose, it was better to take a more holistic view and consider the opportunities AfCFTA will provide lawyers, bankers, designers, programmers, entertainers and others.

    Sodipo informed that before the AfCFTA idea was mooted, “55 African countries sat together in a room over the course of three years to negotiate, agree and determine every single line, every single word, every single comma, and even the paragraph length.

    “So we must understand, and we must realise that every single fear, whether it is related to trans-shipment, anti-dumping, smuggling, trade facilitation, every single thing, every single concern that have been raised in the debate about AfCFTA has something within the agreement that attempts to address it, that attempts to mitigate it.

    “What will happen if Nigeria does not sign the agreement? First of all, the world will not end. The agreement will come into force. The agreement will be ratified by 22 other countries apart from Nigeria, and it will come into force and it will work.

    “So, instead of having a market of 1.2 billion people, you have a market of a billion people, which is still a very large market; still a very fairly strong chunk of the African economy. What that means is that the fact that Nigeria does not sign does not mean that anybody will wait for Nigeria.

    “It will simply mean that life will go on without Nigeria, and then it becomes progressively much more difficult for you to catch up because eventually, to the extent that you do not want to cap your growth, to the extent that you do not want to lose the market opportunities that you have, you still have to sign.”

    Besides, he was of the view that Nigeria’s competitive advantage as the largest market in Africa could be eroded as investors would either invest in Nigeria’s market of 200 million people or in an AfCFTA-compliant country with access to a billion people. “It is an easy choice,” he added.

  • Our grouse about free trade pacts, by OPS, NLC, others

    Nigeria is the beneficiary in the trade liberalisation pacts involving it, and the partnering countries and the economic blocs. From the European Union (EU)-sponsored Economic Partnership Agreement (EPA) to Morocco’s push to join the Economic Community of West African States (ECOWAS);  and now, African Continental Free Trade Area (AfCFTA) agreement, some developed countries and neo-liberal institutions appear determined to open Nigeria to free trade. But, members of the Organised Private Sector (OPS), labour movement and investment experts are apprehensive. They warn that the agreements, if signed, will jeopardise the local industrial sector, Assistant Editor CHIKODI OKEREOCHA reports.

    BUT for the sustained agitation by members of the Organised Private Sector (OPS), labour movement, academia, international relations experts and various stakeholders in the economy, President Muhammadu Buhari, would have been in Kigali, the Rwandan capital, to sign the framework agreement for the establishment of the African Continental Free Trade Area (AfCFTA).

    As adopted by the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union (AU) in Addis Ababa, Ethiopia, in January 2012, AfCFTA was designed to create a continental trade bloc of 1.2 billion people, with a combined Gross Domestic Product (GDP) of about $3 trillion.

    The agreement, seen as an important milestone in promoting Africa’s regional integration and helping to increase intra-African trade, commits countries to removing tariffs on 90 per cent of goods and to liberalise services. It has its main objective as the creation of a single continental market for goods and services, with free movement of business persons and investments.

    But, before Buhari’s scheduled visit to Rwanda for the Extra-Ordinary Summit of the AU on March 21, during which he was to sign the AfCFTA, a groundswell of opposition by OPS members, labour and other critical stakeholders in the economy, had trailed the proposed agreement.

    The OPS, which included Manufacturers Association of Nigeria (MAN), Nigeria Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMMA), labour movement, particularly the Nigeria labour Congress (NLC), as well as international relations experts, unanimously warned the President against signing the agreement. They insisted that it will hurt Nigeria’s productive sector and the economy generally.

    Those pushing for AfCFTA argue that the supposed benefits of the trade pact are too good for Nigeria to ignore. Apart from its inherent capacity to promote economic growth and development, reduce poverty in the partnering countries (Nigeria inclusive), the promoters believe it would expand and diversify trade and increase domestic and foreign investment.

    Africa, according to experts, is not trading within itself, despite its potential in terms of population and rich agricultural and mineral endowments. Trade among African countries accounts for a meagre 10 per cent of their total external trade, the lowest of any world region, according to United Nations (UN) Economic Commission for Africa (ECA).

    The continent’s share in world trade is also not impressive, standing at less than three per cent. That informed the move to stimulate intra-African trade by at least 25-30 per cent to raise the continent’s share in global trade and competitiveness, African leaders came up with the idea of establishing AfCFTA.

    Essentially, their hope was that AfCFTA would lead to a significant growth of intra-Africa trade and also assist Africa use trade more effectively as an engine of growth and sustainable development. It was expected to help Africa participate in global trade as an effective and respected partner.

    Other expected deliverables by the agreement include, enhancing competitiveness at the industry and enterprise level, through exploitation of opportunities for scale production; continental market access and better re-allocation of resources; provision of a comprehensive framework to pursue a developmental regionalism strategy for the continent.

     

    MAN, labour, others kick

     

    But the private sector has refused to be swayed, insisting that the likely negative impacts of the agreement on private businesses and the economy far outweigh its supposed benefits.

    Before Buhari’s had a rethink on the trip, the labour movement, led by the NLC, raised the alarm that the AfCFTA, if signed, will turn Nigeria into a dumping ground for repackaged and re-bagged foreign goods from Europe and other developed countries.

    The NLC specifically warned the Federal Government not to sign the policy document, warning that it will cripple the economy and leave more Nigerians unemployed.

    Besides, it expressed fears that the agreement will expose the economy to foreign intervention, which will allow foreign firms to operate in the local market without employing Nigerians.

    NLC President Ayuba Wabba aligned with MAN’s President Frank Udemba Jacobs argument that the proposed agreement lacked the inputs of relevant stakeholders, including the organised labour.

    He said ordinarily, proponents of the trade document ought to consult all relevant stakeholders, because of its likely implication on the economy.

    Wabba said: “We find it confounding that at a time nations, including the United States (U.S) are resorting to protectionism in defence of their local businesses and protection of jobs, we have the audacity to want to fling open our doors, windows and roof tops.

    “We have no doubt that this policy initiative will spell the death knell of the Nigerian economy. Accordingly, we urge Mr. President not to sign this agreement either in Kigali or anywhere.”

    According to him, the national interest takes precedent and nothing should be allowed to compromise it.

    He said: “The AfCFTA, rather than unite Africa will only divide it the more.  Rather than enrich Africa, it will only pauperise it the more.

    “Those pulling the strings of this radioactive agreement are somewhere, well concealed and protected in the metropolis of the world. They have had this all thought-out and profits computed well ahead.”

    The United Labour Congress (ULC) faction of the NLC commended Buhari for putting a halt to its hurried signing of the trade deal.

    In a statement by its General Secretary, Didi Adodo, ULC said: “Nigeria is not only an importer nation, but also an economy with weak infrastructural base thereby increasing the cost of the products produced in Nigeria.

    “If signed, the AfCFTA will only encourage industrialised countries to use other African nations to push their products to the Nigerian market thereby killing locally produced goods. We reject it in its entirety.”

    To the Vice President, IndustriAll Global Union, Issa Aremu, the agreement could undermine the country’s development aspirations. He lauded what he described “the vigilance of all stakeholders such as manufacturers, NLC and business in calling for caution on international trade agreements.”

    According to him, while intra-African trade could bring economic benefits to member states, there should be broad consultations and participations in the AfCFTA negotiations.

    He said it was necessary to avoid “pitfalls of past trade agreements, which have turned to be more devastating and negative.”

    Aremu recalled that Nigeria’s membership of the World Trade Organisation (WTO) in the 1990s, with its attendant lowering of tariffs led to the collapse of labour intensive industries, like textile and automobile.

     

    Manufacturers fret

     

    Dr. Jacobs also expressed worries that the agreement will open the floodgate for the influx of the European Union (EU) and other foreign goods into the local market and turn the country into a dumping ground.

    According to him, the Rules of Origin (ROO) in the AfCFTA cannot be adequately enforced to guard against the influx of goods into the Nigerian market.

    The ROO are used to determine the country of origin of a product for the purpose of international trade. But, Jacobs expressed fears that the ROO cannot be adequately enforced because goods from the EU can find their way into one of the African countries that have bilateral agreement with the EU.

    The MAN chief said: “When the goods get into the African country, they can repackage them, change the label from made in Europe to that of the African country. Those same goods will surely find their way to Nigeria, which is the main target market for the EU.”

    He explained that the agreement’s market access was a concern to manufacturers as it leaves low protection to locally produced goods.

    “The agreement says that 90 per cent of the tariff plan would be liberalised, leaving only 10 per cent to protect manufacturers. That 10 per cent is too low,” Jacobs said.

    Adding that the 90 per cent will remain open and duty-free because people can import, he said: “What we are saying is that the 10 per cent is too small. Even at the current Common External Tariff (CET) regime, we enjoy more than 10 per cent.”

    Jacobs noted that although, he and other MAN members were not oblivious of the benefits inherent in the establishing the AfCFTA could improve intra-African trade and enhance economic growth and sustainable development, Nigeria must be cautious before rushing into a free trade agreement with other African countries.

    He, therefore, urged the government to renegotiate trade conditions that could impede economic growth in its review of the (AfCFTA) agreement.

    Jacobs, who spoke in Lagos, last week, said the trade pact will result in job losses, as most manufacturing companies in the country will close shop.

    He explained that the private sector’s agitation was because of the lack of consultation and inclusion of inputs of key stakeholders before Nigeria’s position was presented at the meetings of the AU-Technical Working Group on CFTA in the build-up to AfCFTA negotiation by Nigeria.

    Jacobs urged the government to set in motion a process that will enable all stakeholders on the international trade value chain in Nigeria to quickly review the text of the draft AfCFTA agreement and come up with comments on areas that are not in the best interest of the economy and sectors.

    He said: “The government should, as matter of urgency, convene a special meeting of the relevant stakeholders, including experts on trade policy, to consider tariff lines rates along the line of efficiency, sectoral and sub-sectoral preferences that would be most beneficial to Nigerian businesses under the AfCFTA dispensation.

    “It will also reconsider the national position on EPA vis-a-vis the AfCFTA, especially on tariff lines of products on the sensitive/exclusion list, with a view to ensuring that the EU-EPA is not reintroduced through the AfCFTA’s back door.

    “Review presentations and prepare a detailed submission for the Government on ways and means of participating in the AfCFTA in a manner that our national interest and that of the budding manufacturing sector are effectively protected.”

    Commending Buhari for refusing to sign the trade deal, Jocobs reiterated that MAN will not support the government’s adoption and ratification of the agreement establishing the AfCFTA until the issues of market access and enforcement of ROO are addressed.

    Some of these arguments and opposition by the private sector are believed to have forced President Buhari’s hand to withhold consent to the controversial agreement.

    The President, however, explained that his administration will not be in a hurry to enter into any agreement that will make the country a dumping ground and jeopardise its security.

    The Nation learnt that at the AU meeting in Rwanda, 44 African countries signed the AfCFTA framework agreement. The continent’s two biggest economies, Nigeria and South Africa, refused to sign.

    South Africa’s President Cyril Ramaphosa reportedly said his country will join the agreement when the necessary legal processes are concluded. He said he will sign once the legal and other instruments associated with the trade bloc are processed and ratified by South African stakeholders and parliament.

    Morocco’s membership of ECOWAS, EPA also sore points

    Although, Buhari said his administration has set up a committee to review the controversial AfCFTA, there are other trade liberalisation schemes being forced down Nigeria’s throat allegedly by some developed countries and neo-liberal institutions bent on opening the country to free trade for which critical stakeholders have been up in arms.

    Since June last year, when the ECOWAS leaders were said to have agreed in principle to consider a request by Morocco to become a member of the regional trade bloc, the OPS, especially MAN, has been mounting intense pressure on the government to forestall the North African to join ECOWAS.

    Jacobs, who has been the most vociferous in the OPS campaign to halt Morocco’s membership of ECOWAS, noted that by reason of its geographical location, Morocco does not qualify to be admitted into the ECOWAS. Besides, its trade agreement with the European Union (EU) makes it harmful to allow her join the regional body.

    Relying on the information that shows an exixting trade agreement between Morocco and the EU, the MAN chief warned that Morocco, if allowed into the ECOWAS, will encourage the infiltration of EU-made products into the local market.

    He said: “This is so because Nigeria is the biggest market amongst the 15-menber countries in ECOWAS.

    He noted that by extension, admitting Morocco into ECOWAS will be equivalent to signing the controversial Economic Partnership Agreement (EPA) between ECOWAS and the EU through the back door. “This, he said, will negatively affect the Nigerian economy as locally manufactured goods will find it extremely difficult to compete with imported products from the EU.”

    OPS members and other stakeholders have been warning Nigeria to resist the EU to sign the EPA, which, according to them, will be counter-productive as it will leave Nigeria, especially industrial sector operators, with the short end of the stick. They argue that endorsing the EPA deal will hurt Nigeria’s industrialisation and job creation drive.

    Under the EPA terms, which triggered the suspicions of OPS members, the EU will immediately offer ECOWAS 15-member countries full access to its markets. In return, ECOWAS will gradually open up 75 per cent of its markets, with its 300 million consumers, to the EU over a 20-year period.

    That was not all. The EU will also offer a package valued at about Euros 6.5 billion (about $8.94 billion) over the next five years to help ECOWAS countries cushion the effects and costs of integrating into the global economy.

    The proverbial carrot notwithstanding, the OPS insisted that the proposed agreement was a union of unequal partners.

    They have consistently warned that signing such a pact will undermine the local industrial sector. They, specifically, argued that it will impact negatively on local manufacturing and result in shutdown of industries with heavy job losses, because of the imbalance competition that will follow.

    To Jacobs and other real sector operators, Morocco’s alleged surreptitious move to join ECOWAS and the EU’s push to get Nigeria endorse the EPA, are two sides of the same coin.

    They believe that admitting Morocco into ECOWAS will give the EU, which already enjoys unfettered access into the North African region, unfettered access to the Nigerian market and probably make it a dumping ground.

    Despite the agitation against Morocco’s admittance into ECOWAS, the government said it has not made up its mind on the knotty issue.

    The Minister of State for Commerce, Industry, Trade & Investment, Hajia Aisha Abubakar, recently said that the government will in due course, make its position known on it, pledging that government remained poised towards protecting indigenous manufacturers.

    Weak industrial base, infrastructure

    The weak industrial base and inadequate infrastructure justified the apprehension of stakeholders and operators in various sectors of the local economy. According to experts, the key elements of trade liberalisation within the ambits of most Free Trade Agreements (FTAs) are trade in goods and services as well as investments.

    The FTAs also open new export markets and facilitates speedy movement of investment and people. Africa is one of the fastest-expanding economic regions in the world. With a population of 1.2 billion people, Africa is a huge market. And evidently, big market is good for every economy, including Nigeria. Besides being growth drivers, big markets have capacity to foster inclusive economic growth.

    The odds against Nigeria

    While these portend bright prospects for Africa, the snag, however, is that Nigeria appears to hold the short end of the stick, due to the current structure of her economy. At present, Nigeria is mainly a commodity goods producing country with very limited capability to produce and export industrial goods.

    Most of the industries in the country are undeveloped and are plagued by lack of supportive infrastructure. The production plans of industry players are constantly distorted by the interplay of macroeconomic variables such as inflation, exchange rate and interest rate variations.

    To manufacturers, AfCFTA, EPA and indeed, other trade pacts may appear to be a good course in their document proposals, they, however, fear that they may be catastrophic if implemented as they will stifle the slowly recovering manufacturing sector in the country. Their implementation could worsen the unemployment situation and the standard of living of the people.

    Putting the fears in perspective, Jacobs said that MAN has nothing against free trade, as it could be better done in a situation of equal economic development as any attempt to coerce the country into a free trade arrangement would only succeed in killing the fledging manufacturing sector.

    To him, the government’s industrialisation goal, through the Nigerian Industrial Revolution Plan (NIRP) would be a mirage if EPA, for instance, is embraced. Besides, he said it would increase social unrest and insecurity, due to surge in unemployment.

    Rather than EPA or any other free trade arrangement, the Director-General of the Lagos Chamber of Commerce & Industry (LCCI), Mr. Muda Yusuf, said real sector operators have been concentrating on promoting competitiveness on a sustainable basis.

    He spoke of the need to put in place the right policies and infrastructure either in the context of EPA or ECOWAS to achieve this.

    The belief is that with the prevailing state of the economy, the free trade pacts may not mean much to the country. Already, many manufacturing companies have left Nigeria to other neigbouring West African countries such as Ghana where the business environment is considered friendly.

    What these mean is that for Nigeria to significantly benefit from the avalanche of international trade agreements being dangled before her, there is urgent need to improve the ease of doing business, for instance, why efforts must be made to address the nation’s dearth of infrastructure particularly electricity supply.

    Beyond addressing poor infrastructure and the import-dependent nature of the economy, Aremu said: “It’s time for Industry, Trade & Investment Minister Okechukwu Enelamah to do ‘first thing first’ – prepare to engage all stakeholders on the trade pacts, answer critical questions on the implications of the AfCFTA, for ECOWAS treaty and Common External tariff (CET) and the contentious EPA.”

    He said whatever the outcome of the deliberations, AfCFTA should allow Nigeria the domestic policy space so that the policy objectives of job creation and industrialisation, as contained in the Economic Recovery and Growth Plan (EPRG) and Nigeria Industrial Revolution Plan (NIRP), are not jeopardised.

     

  • ‘EU’s $89b free trade pacts funds idle’

    A new report by the United Nations Conference on Trade and Development (UNCTAD) and the National Board of Trade, Sweden has revealed that the full potential of European Union’s Free Trade Agreements (FTAs) remains untapped to the tune of almost $89billion.

    According to the report, this is the cash European exporters overpaid, because they did not take full advantage of the reduced tariffs offered by the FTAs that the EU as a bloc has signed with a variety of developed and developing countries.

    Nigerian exporters may have also contributed to this figure as the Economic Community of West African States (ECOWAS) has refused to sign the Economic Partnership Agreement (EPA) proposed to it by the EU the report added.

    As governments hurry to negotiate or review FTAs, it is important to understand if businesses are fully using the agreements, said the report, which is the first to use the concept of utilisation rates to systematically analyse FTAs entered into by the EU.

    President, Manufacturers Association of Nigeria (MAN), Frank Jacobs, has consistently opposed Nigeria appending its signature to the EPA fearing that goods from the advanced nations would crowd out local products, already suffering from the incidence of dumping from Asian countries.

    His concerns were based on the fact that infrastructure challenge had left Nigeria’s manufacturing sector in a perpetual state of infancy.

    According to Jacobs, any agreement that opens Nigeria’s markets to foreign goods would render the local industry vulnerable and signal death to the economy as well.

    The report showed that a large proportion of this under-utilisation is in exports from the EU to major free trade partners such as Switzerland, and the Republic of Korea, while the biggest share of unused tariff reductions to the EU is in imports from Switzerland, Turkey, South Korea and Mexico valued at an estimated $12.9billion.

  • Africa free trade area coming

    African countries have finally adopted a framework for a Continental Free Trade Area (CFTA) for the continent.

    The CFTA is expected to boost Africa’s industrialization, which has been hampered by tariff and non-tariff barriers.

    The adopted framework would necessitate a common continent-wide approach to six substantive components of the CFTA agreement namely, non-tariff barriers; rules of origin; investment and cross-border movement of persons, services; liberalisation and regulation; trade remedies and monitoring evaluation.

    With the adoption of the CFTA framework, Africa will now be dealt with as a single entity rather than the old practice of negotiating with individual countries, which had always left the continent with fragmented trade regimes.

    This was achieved at the end of a two-day African Ministers of Trade (AMOT) conference in Niamey, Niger Republic to deliberate on the much sought after Continental Free Trade Area (CFTA).

    The meeting in Niamey was initially designed to conclude the outstanding issues of the Modalities for Tariff Liberalisation that were adopted at the third Meeting of AU Ministers of Trade in June 2017 as well as consider the draft texts of the CFTA Agreement, protocols, annexes and appendixes, expected to come to fruition by the close of 2017.

    May countries did not believe the framework would be adopted at the meeting giving that some countries had expressed strong reservations.

    Nigeria’s Chief Negotiator Ambassador Chiedu Osakwe, who also served as the Chair of the Senior Trade Officials (STOs) and Negotiating Forum (NF) stated that with the adoption of the framework by the AMOT, “Africa is in a pole-position to actualize a continental free trade area and zone. Niamey is a turning point and a breakthrough. Our priorities have been met and we have made significant progress.”

    He said the first crucial pillar of realizing the full commencement of the CFTA Agenda by 2063 as set out by the AUC has been attained.

    According to Ambassador Osakwe, “in January next year, the report would be laid for signature and the timeline of March, 2018, for the ratification and operationalisation of the CFTA according to AU’s end game calendar will be anchored.”

    giving content to the AU Agenda 2063 of a fully operational CFTA.

    The United Nations Under Secretary General and Executive Secretary of the Economic Commission for Africa (ECA) Ms. Vera Songwe estimated that “by eliminating tariffs the CFTA can boost intra-African trade by 52%, and by reducing non-tariff barriers it can be doubled, benefiting African welfare to the tune of $22 billion.”

    This is forecast she said is “to especially benefit Africa’s industrial and value-added exports, which tend to generate more employment opportunities than does Africa’s trade outside the continent, which is instead concentrated on capital-intensive raw materials and extractive resources.”

    Songwe noted that “such export diversification in turn produces more sustainable growth, rather than that reliance on the vicissitudes of international commodity prices. The enlarged continental market fostered by the CFTA can also help to attract more Foreign Direct Investment (FDI) for promoting African output and productivity, while improved agricultural trade is needed to help enable ‘Africa to feed Africa’.”

    Intra-African trade she said “remains concentrated on only a limited number of products. As such, ECA research shows that even a exclusion list of 52 products-equivalent to 1% of tariff lines- would have the potential to exclude from liberalization 74% of intra-Africa imports for the average African country.”

    Songwe called for caution “in ensuring that even small exclusion list do not erode the value of the CFTA. If due care is not taken on this matter, it is clear that we will fail our objective of doubling intra-African trade.”

    “To ensure the meaningful liberalization of goods, we must keep exclusion list to a minimum. The best way to do this is by double-qualifying any exclusion lists so that they cannot be used to exclude all of the most valuable imports” she said.

    For a meaningful CFTA, Songwe advocated that Africa “must be ambitious in limiting the use exclusion list and focus on the long-run and the bigger picture; that of a unified and consolidated common market in Africa.”

  • CBN dollar policy, cement and free trade zones

    The opportunity to be heard is a remarkable difference from what happened few weeks back when we all dressed to our various offices only to be told by our employees that our businesses has been decreed out of existence by the CBN. Not only were the channels of communication wrong, the powers to technically ban those 41 items were highly questionable. Such is the impunity and hostility that has beclouded our business environment and inhibited its growth. Today we live in an economic environment of confusion, policy summersaults and inconsistencies. In most cases, you see yourself standing face to face with, and against the law. We have gotten to a level where our law and the constitution say one thing, and our operators say a different thing.

    The Free Trade Zone is a creation of statute. Its activities are governed by Decree No 63 of 1992. Going by the provisions of this Decree, business enterprises within the zone enjoy some incentives and exemptions.

    Some of these incentives include exemption from all federal, state and Local Government taxes, duties, levies, VAT and foreign exchange regulations. This is clearly written in Section 26A of the decree setting up the free trade zone. By law, the free trade zone and the CBN are institutions of coordinate jurisdiction. Free Trade Zone enterprises are in theory, regarded as a country within a country. The CBN therefore has no legislative authority over the zones. The CBN in realization of this had washed its hands off the fiscal responsibilities of the zones until this recent attempt on the annexation and colonization of the zone. The status confers and imposes certain restrictions as well as obligations on mode, module and medium of exchange. For instance, companies within the zone are incentivised to import foreign currency of any amount and export 100% of same. They are exempted from the buying of forex from the CBN, among others, thereby affirming their quasi autonomy. This suggests that the only avenue open to the operators for the sourcing and procurement of forex was the free funds, or the BDC’s. Depositing and withdrawal of dollar cash was a way of life and has never been under the sledgehammer of the CBN.

    But the dollarization policy which is now being enforced across board and borders has laid comatose the operation of the Free Trade Zone, as the only foreign exchange window open to operators had been shut, padlocked and the key flung into the ocean.

    The immediate dire consequence of this unfortunate, ill-conceived policy is the suffocation of investments within the zone leading to business closure by investors and foreclosures by banks and other lending institutions. The fall out of this would be litigations arising from breach of contracts, mass retrenchment of workers, loss of revenue by government and loss of face in the international community, and of course, the short circuiting of technology transfers – which is a cardinal factor for the setting up of the Free Trade Zone.

    Why would CBN ban 41 items in the guise that they do not have sufficient dollar to fund their imports only to turn around to ban deposit of the same currency in our banks as a result of excess dollar?

    As the CBN continues to reap from where they did not sow with regards to foreign exchange regulations within the Free Trade Zones, one needs to remind them of the ripple effect of their actions. Secondly they need to observe the thin line that separates the various organs of government as contained in the principles of separation of powers.

    When the CBN cannot give long term loan to a young graduate to buy equipment and commence the production of toothpick, why would they stop the same boy from importing N10,000 toothpick from China where the investment climate is not only conducive but predictable? To do otherwise is impunity and starvation.

    To put up an average cement plant of one million to two million metric tonnes one requires a capital outlay of about $300 – $400 million. This used to be an average of N50 billion to N60 billion. To accomplish this, using the current exchange rate, an intending investor needs an average of N80 billion. It does not stop there: The ugly side of it is that as long as this policy remains, no Nigerian can ever invest again in the cement sector. How, you would ask?

    To put up an investment of this magnitude where banks’ lending is on short-term and double digit interest rate is practically impossible in an economy of today. Let us agree that you get a willing bank to help syndicate the financing, you would be required to put down an equity contribution of about 30%. This translates to about N24 billion. The implication is that you require 10 banks to syndicate your equity alone, and another 20 banks to syndicate the remaining 70%. This is impossible. In addition you need to have your market share and popularize your brand before any bank can take this huge risk on you. What is possible is what has been the practice where backward integration policy was designed for new entrants. These new entrants had attracted an investment of over $20 billion tied to various strategic trade partnerships. These investments are threatened by this dollarization policy.

    As a member of the Presidential Committee that produced the 2009 cement policy, our recommendation was that new entrants should be encouraged to embark on backward integration with some government incentives. This was how Lafarge, Dangote, Unicem, Flour Mills etc started. They formed strategic trade partners who signed technical and business agreements towards local investments. This is how the near success story we have today in the sector

    If we have a success story in cement, why are we buying a bag of cement at N2000 in 2015? In Asia, a bag of cement sells for as low as N350 a bag; in Europe it sells at N500 a bag; in neighbouring West African countries a bag of cement sells for between N1200 and N1400 a bag. When the lie of Nigeria being a net exporter of cement was told by several persons, in several quarters, including the former coordinating minister of the economy, some of us who know covered our faces in shame.

    In a recent survey, the World Bank predicted Nigeria’s cement consumption to be 45 million metric tons. Mind you, consumption is different from demand and supply. With a total installed-not production capacity of cement at over 20 million, Nigeria still has a huge demand gap of between 15 – 20 million metric tons.

    The reality of this deceitful situation will soon hit us when government solves the insurgency situation in the North-east and commences rehabilitation works; moves to fill the over 15 million housing deficit, tackles our huge infrastructural decay; and starts the cement – base road construction, by then, existing cement plants would have started growing old, I bet you, Cement may sell as high as N3000 in this country.

    In my honest opinion, government needs to open the cement space for investors of all sizes to come in. Monopoly should be discouraged. A limit should be set as to maximum investment an individual can invest in any sector of the Nigeria economy to create room for others’ participation. This would also ease credit tension and whittle down risk appetite of banks and other lending institutions.

    This what countries like China and India have done. In China, you have over 9000 functional cement plants and over 800 in India. China for instance, manufactures over 2.42 billion tons of cement per annum, representing 58.6% of global production. In reality Nigeria produces a little above 25 million. What the government of these countries did was to liberalize investment in the sector, encourage and incentivise investors.

    What the CBN Governor has done with the recent foreign exchange restriction on cement and 41 items amounts to a ban and criminalization of businesses.

    Governments world-over encourage investments; you don’t decree, you don’t frustrate, you don’t criminalize. A toothpick importer of today may be a Bill Gate or another Dangote of tomorrow.

    Being a paper presented by Ochiagha Ufomba at the Focus Group Discussion on Impact of CBN Foreign Exchange Policy organized by the Lagos Chamber of Commerce at Oriental Hotel Lagos.