In 2020, Nigeria ratified its bid to join the African Continental Free Trade Area with hopes of deriving benefits. However, macroeconomic headwinds along the way may scuttle the country’s chances of leveraging AfCFTA, writes EDIDIONG IKPOTO
On October 7, 2022, the Guided Trade Initiative of the African Continental Free Trade Area was launched in Accra, Ghana. The initiative seeks to allow commercially meaningful trading and test the operational, institutional, legal and trade policy environment under the AfCFTA.
At least 96 products will be traded under the GTI and the initiative will be reviewed annually to expand the list of countries.
The products earmarked to trade under this initiative include ceramic tiles, batteries, tea, coffee, processed meat products, corn starch, sugar, pasta, glucose syrup, dried fruits, and sisal fibre, among others, in line with the AfCFTA focus on value chain development.
The eight countries participating in the GTI are Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia, with Nigeria conspicuously absent.
When the plan for a continental free trade area was first conceived in 2012, there were a lot of expectations that Nigeria, Africa’s largest economy, with huge industrialisation potential, would inevitably be among the major players that would leverage the platform to boost intra-Africa trade and bolster the local economy of the largest black nation in the world.
But, despite the paltry connotation, which accompanied Nigeria’s inability to join in on AfCFTA’s dry run, there are widespread concerns that, given the myriad of challenges currently bedevilling the country’s economy, it may be a mile away from positioning itself to benefit from the massive platform that is AfCFTA.
The African Continental Free Trade Area could deliver far greater benefits in terms of jobs, growth, and poverty reduction than previously estimated, making it a potential game changer for Africa’s economic development if its ambitious goals are fully realised.
When fully implemented, the AfCFTA will require member countries to remove tariffs from 90 per cent of goods, allowing free access to commodities, goods, and services across the African continent.
The deal creates a continent-wide market embracing 54 countries with 1.3 billion people and a combined GDP of $3.4tn. Its first phase, which took effect in January 2021, would gradually eliminate tariffs on 90 per cent of goods and reduce barriers to trade in services.
That could raise income by seven per cent, or $450bn, by 2035, reducing the number of people living in extreme poverty by 40 million, to 277 million, according to a World Bank report published in 2020.
A new World Bank study, released in collaboration with the AfCFTA Secretariat, enumerated some additional benefits that would accrue from an increase in foreign direct investment – both from within and outside of Africa – that the deal is expected to generate.
Nigeria signed the African Continental Free Trade Area Agreement in July 2019 and ratified the agreement in December 2020.
In the wake of Nigeria’s ratification of the agreement, the African Union Commission’s Trade and Industry Commissioner, Ambassador Albert Muchanga, said there had been much interest in Nigeria’s decision regarding its AfCFTA status because of its position as Africa’s largest economy and the continent’s most populous country with more than 200 million people.
“With the Nigerian move, we can confidently say that Africa is on track to deliver a commercially viable continental market,” Muchanga said in a tweet.
In light of recent developments in Nigeria’s macroeconomic environment, it wouldn’t be sheer pessimism to say that all the excitement and anticipation that trailed Nigeria’s decision to hop on the game-changing continental free trade agreement has almost fizzled out.
Between 2020 (when the agreement was ratified) and 2023, Nigeria’s economy has been faced with a hydra-headed monster, which has comprised hyperinflation, rising interest rates, foreign exchange scarcity and a persistent energy crisis.
The consequence of this economic crisis has seen manufacturers employ last-inch tactics to stay afloat while several companies have shut down operations. Within the last 10 months, multinationals have been leaving the country in droves. At least five multinational companies have stopped production during this period.
While speaking at a two-day capacity-building training for exporters in Lagos, the Chairman of the Manufacturers Association of Nigeria’s Export Group, Odiri Erewa-Meggison, emphasised the need for Nigeria to sort out the kinks that had prevented the country from capitalising on the AfCFTA platform.
The MANEG chairman’s comments hinged on the fact that it was high time Nigeria started living up to its potential in the area of non-oil exports to fully leverage the platform of AfCFTA.
In an exclusive chat with The PUNCH, Erewa-Meggison pointed out that the road to AfCFTA remained long and tortuous as several challenges militating against exporters had hampered Nigeria’s chances of taking advantage of the free trade agreement.
According to her, Nigeria is being hamstrung by weak competitive ability, which is currently a major impediment to trading under AfCFTA.
She cited the increasing high cost of production occasioned by infrastructural deficiency,
exorbitant energy cost prices, high cost of borrowing, inadequate allocation of funds for credit for private sector investment and insecurity as some of the factors exporting manufacturers.
Other impediments identified by exporters as impediments to trade under AfCFTA include an absence of deliberate and timely incentive offers, regulatory bottlenecks from within the domestic economy, trade facilitation problems, high cost of logistics between Nigeria and other state parties and technical barriers to trade such as weight, size, packaging, ingredients, mandatory labelling, shelf-life conditions, testing and certification procedures.
In January, the Nigeria Export Promotion Council, in a report stated that the country’s non-oil exports grew by 39.91 per cent in 2022 to $4.820bn.
According to the report, semi-processed/manufactured products made up 36.61 per cent of the exports beating agriculture’s 30.12 per cent volume of non-oil exports, while precious stones made up 17.06 per cent, and others 13.21 per cent.
The Executive Director of the NEPC, Ezra Yukusak, who reeled out the figures, said the data was retrieved from various pre-shipment inspection agents appointed by the Federal Government under the Pre-shipment Inspection Act of 2004.
Yakusak noted that the country’s non-oil export record for 2022 reached its highest since the establishment of the NEPC 47 years ago, acknowledging export intervention programmes by the NEPC over the years.
He said, “About 214 different products ranging from manufactured, semi-processed, solid minerals to raw agricultural products were exported in 2022.
“Of these products exported, urea/fertiliser topped the list with 32.87 per cent. The emergence of urea/fertiliser as the highest exported product in 2022 can be attributed to the Russia-Ukraine war, which created an avenue for Nigeria’s urea/fertiliser to thrive.”
But, despite the significant growth picture the NEPC data painted, Nigeria is still a country mile away from joining the fray of African countries making impressive strides via non-oil exports.
According to the latest African Growth and Opportunity Act, South Africa, Kenya, Madagascar, Lesotho, and Ghana dominated the 2022 non-oil AGOA exports, accounting for 90 per cent of the total non-oil AGOA exports in 2022. Nigeria was nowhere to be found on the list.
AGOA, a US trade initiative established in 2000, allows African nations to export various products, especially non-oil goods, to the United States on favourable terms, thereby, promoting economic development and trade on the continent.
The platform has served as a crucial lifeline for many African economies, offering opportunities to access the vast American market.
According to the latest report, South Africa has led the line in non-oil AGOA exports, increasing its exports by 46 per cent in 2022 from 2021.
“South Africa is the top supplier of AGOA non-energy imports, with eligible imports increasing 46 per cent in 2022 from 2021, partly driven by higher motor vehicle imports,” said Liana Wong and Brock Williams, analyst and specialist in international trade and finance.
The country’s exports have ranged from automobiles and machinery to agricultural products, with a substantial increase in demand for its wines, citrus fruits, and processed foods.
Kenya has also been a major player. The East African country’s floriculture, textile, and apparel exports have posted impressive numbers under AGOA, servicing the U.S. market’s high demand for high-quality products.
Madagascar, another star on the AGOA stage, increased its exports by 45 per cent, making the country the third-largest AGOA beneficiary of non-energy imports. The island nation has managed to tap into niche markets in the United States, especially in the food and fashion industries.
Speaking with The PUNCH, the Deputy-President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, said efforts had not been hastened towards getting Nigeria ready to leverage the opportunities provided by the African Continental Free Trade Area.
He further stated that Nigeria’s dominance in Africa in the services industry had led to a lethargic attitude towards replicating this dominance in the area of trade
“The fact is that we are not moving fast enough. Manufacturing has to work hard; but, unfortunately, they have their hands tied behind their backs,” he asserted.
