AfCFTA: WHY IS NIGERIA HESISTANT ?

Nigeria is the most populous Country in Africa with current population estimated at about 194 million growing at about 2.6% per annum. It is said that every one of Four black People in the World is a Nigerian.With an estimated GDP of $405 billion Nigeria is still the largest economy in Africa in spite of its recently ended descent to economic recession. So with the largest population and largest economy, it is natural that Africa expects leadership from Nigeria.

The discussions for the conversion of the African Union (AU) into a common economic zone like the European Union (EU)  had been going on since 2012 and actually intensified since 2015. Nigeria's current Minister of Industry, Trade and investment, Dr Okechukwu Enalamah was the Chairman of the African Ministers of Trade (AMOT) that signed off the legal instruments establishing the African Continental Free Trade Area (AfCFTA), thereby paving the way for the Heads of States and Governments to gather in Kigali Rwanda last Wednesday 21st April to ratify the agreements and protocols for the common customs union that will become effective in 18 months time. 

But Nigeria was conspicuously absent and you could say embarrassingly missing when 44 African Countries signed the agreement.

The question is why would Nigeria 'dodge' at the last minute, even when the meeting was almost on the way? Does it show that President Muhammadu Buhari (PMB)  and the government he leads do not understand the benefits of having free trade within the continent? Removal of trade tariff barriers on 90% of goods and liberalizing services have many advantages. 

1. It will create a market of 1.2 Billion people with a GDP size of 2.2 Trillion dollars with a potential to quickly reach 3.4 trillion dollars . 
2. It will allow people, goods and services flow seamlessly from one African Country to another and in the process create more opportunities for entrepreneurship.  
3. Because tariffs will be removed on most of the goods imported within the Free Trade Zone, costs of imports will fall and prices of imported goods will come cheaper to African consumers including the suffering people of Nigeria. 
4. It should lead to creation of more jobs which will help us solve a major economic challenge confronting Nigeria. 
5. Because African Countries can now trade with each other with minimum inhibition, African capital will circulate more in Africa creating great benefits. It is so embarrassing that when African Countries need anything, their first instinct is to look up to Europe (especially UK), North America (especially USA) or Asia (particularly India & China). They hardly  looked next door,despite nearness and similar market and cultural characteristics.

Today intra-African trade is only about 15% of total trade within the continent, indicating that 85% of African trade is done with 'outsiders'. In contrast, Europe has 67% of its trade done in the European Union; Asia has 58% as intra-regional trade; and North America has 48%. 

Therefore it should be clear to all those who want Africa to come of age and begin to compete fairly with the rest of the World,and to stop being over dependent on Charity or aid from the rest of the World, Africa must grow its intra-regional trading muscles. And given the size of Nigeria and its several factor endowments, Nigeria should be a major beneficiary of the AfCFTA deal. So why would Nigeria dither? and give the impression of  a confused country? 

  

Certainly, I disagree with the inelegant way Nigeria carried itself in this embarrassing last minute refusal to take its proper position as Africa was making history in Kigali, forming the largest Trade block since WTO . Nigeria had all the opportunity to discuss this matter with all stakeholders before this day to reach a consensus. To allow the Federal Executive Council (FEC) to approve the terms of the agreement, authorizing PMB to go to Kigali only to abort the trip at the last moment demeans Nigeria's standing in Africa or indeed in the rest of the World. This kind of Behaviour which has the trade mark of American Trump's call of "America First"and weired behavior in the international arena does not fit Nigeria.  

But when all is considered, I will still think that PMB made the right decision not to attend. Firstly, it was an acknowledgment that though he had failed to consult with the organized private sector prior to getting the FEC's approval, he regarded the red flag raised by the Manufacturers' Association of Nigeria( MAN) especially and the Nigeria Labour Congress( NLC) serious enough. Despite the embarrassment and the apparent slur on Nigeria's image and standing by being absent in Kigali as Africa made true history, I salute his courage in deciding to err on the side of caution. It is my thinking that he was showing that Nigeria had learnt lessons from the WTO debacle in 1994. The Nigerian government at the time was criticized severely  for rushing to sign the WTO agreements without fully  understanding the ramifications of globalization. Buhari seemed not to want a repeat, where we would sign this African Trade deal as  good as it sounds without a full understanding of its ramifications on local manufacturing and domestic security. 

Secondly, critical issues raised by MAN truly require full answers. The area of major concern is how are we going to enforce the rules of Origin? The inconvenient truth is that except for a few countries - Egypt, Morocco, Kenya, Nigeria and South Africa, there is little real, manufacturing going on in much of Africa. Primary commodities yes, but not manufacturing. Today Nigeria perhaps has the largest manufacturing base outside South Africa.In normal circumstances that should give Nigeria an advantage as it could easily seize the new open market opportunities to dominate the African market in manufactured goods. But experience from the ECOWAS Common External Tariff (CET) for example, seem to dampen the enthusiasm of Nigerian manufacturers. It has been alleged that foreign companies set up 'shell' manufacturing companies in neighboring African Countries and simply import finished or almost-finished products into such countries and subsequently off load them on the Nigerian market, often at lower prices than local manufacture. Matter is worsened for Nigerian manufacturers because much of their products are globally uncompetitive due to infrastructural deficits, especially power and the overall high cost of doing business. Thus Nigerian manufacturers suffer double jeopardy . They can not easily export to other African Countries because those countries have easy access to cheaper imports from Asia and Latin America especially. And then in the domestic market, the free import of what one may call pseudo- manufactured goods or what really are trans-shipped finished goods using African Countries as 'transit camps' compromise the viability of the locally manufactured goods. That is the fear of the local manufacturers.

It is this reality that has made the growth of the export of Nigeria's manufactured goods to remain dismal and indeed has forced many Nigerian manufacturers to focus almost exclusively on the domestic market. This is the reason crude petroleum has remained the major export and foreign exchange earning item on the Nigeria's economic menu. But having said all these, I still believe that in the long run it is imperative that Nigeria signs the treaty and joins the Continental Free Trade area (CFTA). The issues raised by the Manufacturers and the labour are not insurmountable. The Primary need is to work out a water-tight mechanism to ensure no African country allows its territory to be used as a transit route to dump products on the Nigerian Market. Nigeria must insist on getting legally enforceable assurances on this. Secondarily the government must continue to devote maximum effort and investment on bridging the power deficit in Nigeria. This is a major issue for Nigeria's global competitiveness. The current effort at improving the Ease of doing business must be sustained with increased urgency. Also the Federal government  should continue to offer incentives like the Export Expansion Grant( EEG) and tax deductibles for 'own'  energy to manufacturers to help overcome existing uncompetiveness as interim measures. So we must quickly undertake the consultations with all stakeholders and take on board all concerns and design how to contain them and then go to Kigali or Nairobi or Addis Ababa and sign the agreement and begin the process of rapidly expanding intra-African trade. The benefits are enormous and certainly exceed the concerns of any particular trade group. And lastly, let us as Nation learn to get our act together and avoid dancing naked in the market place. Let the right things be done at the right time!

Mazi Sam I. Ohuabunwa OFR 

sam@ starteamconsult.com