Of 55 African countries, 49 have signed the African Continental Free Trade Area (AfCFTA) agreement; 20 others have ratified the deal, which seeks to create a continental trade bloc of 1.2 billion people, with a combined Gross Domestic Product (GDP) of about $3.3 trillion. But, Nigeria has yet to muster the political will to sign the treaty. However, experts and stakeholders have mounted pressure on President Muhammadu Buhari to sign. They note that the agreement holds the key to maximising Nigeria’s economic potential, Assistant Editor CHIKODI OKEREOCHA reports.
He spoke with the verve and bluntness of an expert schooled in the dynamics of the African economy, particularly Nigeria’s. And by the time the President of African Export-Import Bank (Afreximbank), Professor Benedict Oramah was done reeling out some of the obvious benefits of the African Continental Free Trade Area (AfCFTA) agreement, it was clear that Nigeria may have been shooting herself in the foot by her continued delay in signing and implementing the agreement.
The AfCFTA was 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, and was expected to create a continental trade bloc of 1.2 billion people, with a combined Gross Domestic Product (GDP) of about $3 trillion. The agreement is seen as an important milestone in promoting Africa’s regional integration and helping to increase intra-African trade.
AfCFTA commits countries to liberalising services and trade and removing tariffs on 90 per cent of goods. Apart from its inherent capacity to promote economic growth and development, reduce poverty in the partnering countries, it was also expected to help expand and diversify trade and increase domestic and foreign investment. The AfCFTA was signed in Kigali, Rwanda on March 21, 2018 by 44 of 55 African countries.
But President Muhammadu Buhari cancelled his earlier scheduled visit to Rwanda to sign the AfCFTA, citing the need to allow for more consultations with stakeholders in Nigeria over the trade agreement, and the need for his administration to be circumspect in entering into any agreement that would make the country a dumping ground and jeopardise its security.
In boycotting the trade liberalisation deal, the president buckled under intense pressure by members of the Organised Private Sector (OPS), which included Manufacturers Association of Nigeria (MAN), Nigeria Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMMA), and the labour movement who vehemently kicked against the proposed agreement.
For instance, MAN hinged its opposition on issues of market access and the enforcement of Rules of Origin (RoO), among other concerns. It said, for instance, the 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, MAN expressed fears that the RoO cannot be adequately enforced because goods from the European Union (EU) can find their way into one of the African countries that have bilateral agreement with the EU.
MAN also said 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,” MAN said.
On its part, the NLC expressed fears that the deal will lead to the collapse of the manufacturing sector and loss of jobs. It also raised the alarm that if signed, the CFTA will turn Nigeria into a dumping ground for repackaged and re-bagged foreign goods from Europe and other developed countries.
The alleged lack of inputs of critical stakeholders in the proposed agreement also did not go down well with the NLC. Its President, Comrade Ayuba Wabba, argued that ordinarily, proponents of the trade document ought to have consulted all relevant stakeholders because of its likely implications on the economy.
Consequently, the president set up a committee to review the CFTA framework agreement. And the committee said it has since moved to strengthen its consultations with critical stakeholders and determine how various sectors of the economy will benefit from the proposed agreement.
Despite setting up the committee, the Federal Government has continued to foot-drag on the signing of AfCFTA more than one year after its inauguration in Rwanda. Obviously, this has not gone down well with Oramah and indeed, other experts and critical stakeholders in the economy. They have, therefore, intensified pressure on Nigeria to sign the treaty.
Oramah, for instance, rode on the platform of this year’s Bullion Lecture organised by the Centre for Financial Journalism (CFJ Nigeria) to speak of his disappointment that Nigeria, which hosted the forum that gave birth to the AfCFTA initiative was yet to decide on what to do with it.
At the lecture, which held in Lagos, Oramah, who spoke on the topic: Leveraging the African Continental Free Trade Agreement to boost Nigeria’s economic development, said given Nigeria’s vantage position as Africa’s largest and most populous economy, AfCFTA actually handed her a window of opportunity to maximise her economic potential almost on a platter.
He regretted Nigeria’s inability to sign the agreement more than a year after 49 out of 55 African countries signed it, even as 20 other African countries have ratified it. He urged the Federal Government to take urgent steps to sign and implement AfCAFTA in order to take advantage of its numerous benefits.
According to the Afreximbank chief, one of the benefits of the deal waiting for Nigeria to grab, if it summons the political will to sign it, was the possibility of taking over from China as the world’s manufacturing hub.
He said while China exports $45 billion of light manufactures into Africa, Nigeria and other African countries can expect to fill that void if they take advantage of the tariff and non-tariff reductions in the AfCFTA.
Tracing the historical and economic imperatives that necessitated the birth of the AfCFTA, Oramah noted that Africa benefited a little from many years it was ruled by colonial powers whose main focus was to draw the raw materials it needed for its home industries while it dumped its own manufactured goods in return.
He said the AfCFTA was meant to change the narrative, as a continent that was called the “Basket Case”, is on the path to becoming the “Bread Basket” of the world. He said AfCFTA will create the environment for the continent to chart a new development path.
It will also eliminate the causes of weakness while upholding the areas of strength among the 55 countries of the continent. This, according to him, will be by creating the required economic integration that would promote sub-regional and continental supply chains such as the automotive industry.
Experts say that the deal presents an attractive domestic market base for foreign investors interested in manufacturing for exports to the rest of Africa. “Today, Foreign Direct Investment (FDI) inflows to Nigeria amount to about $3 billion, 90 per cent of which goes to the oil sector. This can change positively with the AfCFTA”, Oramah stated.
He further stated that a survey conducted by Afreximbank showed that 69 per cent of Nigerian businesses believed that AfCFTA would be advantageous to the country in three main areas, namely creating a better business environment, promotion of local businesses and business growth and expansion.
The Director General/Chief Negotiator, Nigerian Office for Trade Negotiations (NOTN), Ambassador Chiedu Osakwe, could not agree less. He projects that with the trade liberalisation deal, an economy like Nigeria would be larger than that of Australia in 32 years.
The acclaimed international trade policy expert added that intra-African trade, which was at 16 to 17 per cent, would be increased to 52 per cent with a corresponding GDP growth and increase in employment and job creation on the continent.
OPS, others push for Nigeria to sign
Some members of the Organised Private Sector (OPS) particularly Lagos Chamber of Commerce and Industry (LCCI) have also thrown their weight behind the push to get the Buhari-led government to do the needful and sign the free trade treaty. For instance, LCCI President Mr. Babatunde Ruwase described the AfCFTA as an economic game-changer.
Speaking at the 2019 Founders Day Lecture of the Nigerian Institute of Advanced Legal Studies (NIALS) with the theme, “Inclusivity and the Transformational Potentials of the AfCFTA for African Countries,” Ruwase said Nigeria stands to benefit from the continental economic integration. “The reality is that there is a great deal of value in economic integration, but as a country, we need to position ourselves well to take advantage of the opportunities it offers.
“The AfCFTA is an age-long dream of the continent with regards to the promotion of trade and investment among African countries. As a country, our decision on the AfCFTA could be a game-changer for the Nigerian economy if we do the right thing at the right time,” the LCCI president said.
The guest lecturer, Adjunct Professor at the Centre of Comparative Law in Africa, University of Cape Town, South Africa, Prof Faizel Ismail, also said AfCFTA has the prospect of catalysing the process of transformative industrial development, cross-border investment, democracy and governance in Africa.
Similarly, the President and Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN), Uche Olowu, noted that Nigeria being the biggest economy in Africa ought not to lag behind in ratifying the trade agreement, but should be at the fore front.
He lamented that Nigeria is one of the very few countries yet to sign the treaty, despite her large number of manufacturing companies and other small and medium enterprises.
Olowu’s worry was that if Nigeria does not sign the continental agreement, it will not only be a dumping ground for substandard products, but a final destination for totally rejected goods and services from other African countries.
The challenges
Despite experts’ superior argument in favour of signing AfCFTA, signing and implementing the treaty will not be a walk in the park. The belief is that there are still a number of hurdles to cross if Nigeria and other African countries must reap the benefits the AfCFTA offers.
Some of the major challenges ahead in terms of implementation and pushing the AfCFTA agenda forward to meet the goal of increasing intra-African trade to 25 per cent by 2023, from between 15 and 18 per cent currently, include weak productive capacity, high production costs, and large infrastructure deficits.
Oramah said, for instance, that the challenge of creating conducive macroeconomic policies that support increased regional trade remain. He said strategic steps should be taken to introduce policies that encourage FDI flows to sectors that have the highest potential for foreign trade, namely light manufacturing and agriculture.
He also said lack of appropriate financing should be addressed through specific monetary and trade policies that target the potentials of each country towards maximising the competitive advantage inherent in each economy.
Oramah, however, said Afreximbank had supported African businesses to overcome their growth challenges, noting that Nigeria was among the key beneficiaries of these measures, one of which was the elimination of the poor product quality of many African businesses by instituting appropriate quality assurance centres.
The other, according to him, was offering guarantees for facilities given by local banks to Small and Medium Enterprises (SMEs).