AFCFTA: How Prepared is Nigeria’s Private Sector?
The African Continental Free Trade Area AfCFTA treaty, one of the flagship projects of the Africa Union Agenda 2063 is aimed at creating a single continental market for goods and services, with free movement of business, people and investment. The free-trade area, according to Forbes, is the largest in the world with potential customers of 1.2 billion and combined estimated GDP of $2.5 trillion.
Nigeria, Africa’s largest economy, on Sunday July 7, 2019 signed the treaty to become the 54th country to come on board. The AfCFTA deal is expected to improve intra-African trade, enhance economic growth and sustainable development, and promote cooperation on investment, intellectual property rights and competition among other value chains.
With a GDP of $405 billion, and a population of about 200 million, Nigeria is considered the largest economy in Africa. It is followed by Egypt ($332 billion) and South Africa ($295 billion). Nigeria from the face of it is expected to have a comparative economic advantage.
However there seems to be lack of consensus among economic experts on how the treaty will impact the Nigerian economy and how prepared the nation to take full advantage of the socio-economic potentials.
THE TARRIF CHALLENGE
A school of thought believe the treaty would impact negatively on government revenue and social welfare. According to them, elimination of all tariffs among African countries would erode the trading states’ treasury by up to $4.1billion annually and deepen poverty, with millions of Africans potentially exposed to starvation and death.
According to available data from the National Bureau of Statistics, in 2017, export to other African countries accounted for 12 percent of Nigeria’s total exports and only 4 percent of her imports came from other African countries. Nigeria mainly exports petroleum to other African countries. South Africa has been Nigeria’s largest trade partner in Africa, both in import and export.
The country mainly imports polymers, fertilizers, prepared binders, and frozen fish from other African countries that are not members of the Economic Community of West African States, of which Nigeria is the powerhouse. These products are subject to import duties which will no longer exist under the free trade agreement.
THE OPEN MARKET OPPORTUNITIES
On the other hand, with the elimination of trade barriers under AfCFTA treaty, Nigeria will now have the opportunity to harness and export most of her resources that might be needed in some other African countries at no excise duty cost.
The Small and Medium Scale Industries, cottage industries, agro allied industry, and the large-scale manufacturing firms now have new markets to export their products. The Nigerian fashion industry which is currently booming can now expand into export market within and outside Africa. There is going to be a kind of cultural exchange with the industry taking off. The Nigerian movie industry will also have that boost because we will be able to freely sell our movies across Africa without barrier. We are going to have more trade fairs among African countries. If well harnessed, it will be the beginning of our boom era.
As member nations are gearing up to leverage the open market boom that is expected to come with such free trade treaty, how prepared is Nigeria’s manufacturing and productive sectors? How ready are they to increase capacity and tap into the opportunities? How prepared is the financial sector to provide the equity capital and other instruments needed to support the market? How prepared is the government to provide the infrastructure demand, the enabling policy instruments, regulatory frameworks that will support the industries to rise?
More so, how prepared are government agencies at managing the economic hazards that will come with the treaty such as dumping and mass importation of sub-standard goods?
Our submission is that government must come up with internal mechanism to protect local markets from smuggling and dumping by reviewing and harmonizing Nigeria’s trade policies. The Federal Ministry of Industry, Trade and Investment must engage key stakeholders and reach consensus on non-tariff barriers. The Standard Organisation of Nigeria SON, and the National Agency for Food and Drug Administration and Control (NAFDAC) must rise to the occasion.
Considering the failure of the West African Free Trade Agreement which did not really deliver much values to the nation, key players in the private sector must come together and strategise on how best the AFCFTA treaty will promote the frontiers of the much-desired growth of their enterprise and the economy at large. They must identify areas of competitive advantage and build institutional capacity.
ENGAGE Nigeria, believe that AfCFTA should become a platform for Nigerian
manufacturers of goods and providers of services to explore the value chains,
and promote the Made in Nigeria goods and services. In this wise, Nigeria
should define standard specifications for goods that can come into the market.
The Proudly Nigeria campaign should be reinvigorated and promoted across Africa
such as will engender brand equity.