Market News

By Oluwakemi Abimbola

Despite the immense benefits of the African Continental Free Trade Agreement, the Nigerian private sector has lamented that many trade restrictions and logistics challenges have been hampering the country from harnessing the potential of the trade agreement, Oluwakemi Abimbola reports

As the countdown to the third Intra-African Trade Fair organised by the African Export-Import Bank in collaboration with the African Union and AfCFTA Secretariat gets underway, the private sector has lamented that the barriers had been preventing it from harnessing the benefits of the African Continental Free Trade Agreement.

The AfCFTA, which was adopted in 2018 but came into force on May 30, 2019, was one of the best things that had happened to Africa. AfCFTA advocates the dropping of 90 per cent of tariffs and includes policies aimed at eliminating nontariff barriers, such as customs delays and others.

Nigeria, Africa’s largest economy, signed the AfCFTA on July 7, 2019, becoming the 34th member of the trading bloc. According to a 2021 Brookings commentary, under the AfCFTA, Nigeria stands to gain from increased access to cheaper goods and services from other African countries, as its intra-African trade is currently low.

“Indeed, as of 2018, Nigeria’s imports from the African region relative to total imports were at 3.2 per cent while the share of Nigeria’s exports to the African region relative to total exports was 13.2 per cent. Moreover, in 2020, Nigeria’s main trading partner was actually China,” said the Brookings report.

According to the National Bureau of Statistics, Nigeria’s trade with the rest of Africa increased by 40.8 per cent year-on-year in the first half of 2023 to N1.84tn from N1.31tn recorded in the corresponding period of 2022.

The World Bank’s New 2022 AfCFTA report stated that the AfCFTA could help participating countries bring 30 million people out of extreme poverty and raise the incomes of 68 million others who live on less than $5.50 per day.

Also, the World Bank said that the implementation of AfCFTA would boost Africa’s income by $450bn by 2035 (a gain of seven per cent) while adding $76bn to the income of the rest of the world. It noted that the trade agreement had the potential to increase Africa’s exports by $560bn, mostly in manufacturing.

It is expected that the agreement would also spur larger wage gains for women (10.5 per cent) than for men (9.9 per cent) and boost wages for both skilled and unskilled workers; 10.3 per cent for unskilled workers, and 9.8 per cent for skilled workers.

However, despite the touted benefits of the trade agreement, Nigeria has not harnessed its potential.

During former President Muhammadu Buhari’s administration, Nigeria closed its borders to neighbouring countries, leading to substantial business losses. The move, which commenced on August 22, 2019, at the busy Seme and Idiroko borders, was to check the smuggling of imported rice.

Also, the country was absent from the first batch of participating countries under the Guided Trade Initiative of the AfCFTA due to failure to meet the minimum requirements for trade under the agreement. It failed to submit a Schedule of Tariff Concessions to the AfCFTA secretariat, which is one of the prerequisites for participation in the trade agreement.  The AfCFTA secretariat is also required to approve and gazette the STCs.

GTI was launched in September 2022 to match-make businesses and products for export and import between interested state parties that have met the minimum requirements for trade under AfCFTA. The countries that participated include Rwanda, Cameroon, Egypt, Ghana, Kenya, Mauritius, Tanzania and Tunisia.

However, this year, the secretariat of the National Action Committee on African Continental Free Trade Area, NAC-AfCFTA, disclosed that the Federal Government had kicked off preparation for the second phase of AfCFTA to onboard 10, 000 Nigerian businesses and exporters onto the GTI, for the actual commencement of trade across borders under the agreement before the end of this year.

While commendable, private sector operators say the government needs to do more to remove trade barriers and boost implementation through the provision of infrastructure.

Speaking during a panel session entitled ‘What must Nigeria do to take advantage of the AfCFTA?’ at the High-Level Business Roadshow in Lagos, ahead of the 2023 IATF, Senior Adviser, AfCFTA Secretariat, Emeka Uzomba, stated that the government had done its part and there was now a need for the private sector to harness the potential of the trade agreement.

“Nigeria has done quite a bit to ensure it is well-positioned to benefit from the AfCFTA. Someone said it earlier that governments do not trade, they can only create an enabling environment and that environment has been created by creating the agreement and ratifying it.  The private sector now has to take the baton and run with it. The problem is that we sometimes in Nigeria look at the challenges ahead of us and do not take the opportunities. Challenges present opportunities,” he said.

Uzomba highlighted that despite Nigeria’s poor manufacturing sector, a lot of what African countries purchase is produced in Nigeria.

He said, “If you go to all the countries around Africa, as poor as our manufacturing base is, a lot of what they purchase except for those imported from France and elsewhere, are actually made in Nigeria. But if we improve the standards and quality of products, we will even more take over the market. Someone spoke about how importing from Hong Kong costs the same as moving goods to Agbara (Ogun State).  You may ask yourself why. There is no infrastructure to move those products to Agbara. It is not the secretariat or anyone who needs to tell us to improve our efficiency at the ports and our trade-carrying infrastructure. If we do not take that advantage, others will take it.

“The private sector needs to organise itself and take advantage of the opportunities in AfCFTA and there are many.  I do not think there is any country today in Africa that can compete as aggressively as Nigeria when you talk about trade and services.

Uzomba declared that the country needed to improve its goods and services.

“Look at what we have done with our movies, music, fashion and financial services, those are trade. There are sectors where we have done well and where we can consolidate and take over the continent while improving on those other sectors where we have challenges.

“If we do not take (on challenges), we will not take advantage of the opportunities and you cannot wait until everything is right before you start. It is for the private sector to take the initiative and run with it. Not so much about the government because the policy phase is more or less there. But it is now to do the business and it is the private sector that does that,” he explained.

Countering the assertion of Uzomba on the private sector not harnessing the benefits of AfCFTA, the Director General of the Lagos Chamber of Commerce and Industry, Dr Chinyere Almona, argued that what the participating countries needed was beyond signing and ratifying the trade agreement.

Almona pointed out that the private sector was rearing to go but was badly hamstrung by the myriad of challenges along its path to sustainable operations.

“I was surprised that Emeka said the policy phase was done and the private sector needed to pick up. Actually, the private sector is ready to pick up and run with AfCFTA, but we are shackled by a lot of policy guidelines, bureaucracy, and changing policies that would not let us do business.  You have taxes, both formal and informal taxes burdening businesses. You have the fact that there is no infrastructure. They are so busy trying to stay afloat and they are not able to take advantage of the benefits around them.

“It is important to see how we can help businesses build capacity, understand the rules, and take advantage of the AfCFTA,” she noted.

According to the LCCI DG, the African market is a huge market, but Nigeria needs to break the barriers.

“I will give an instance. We are working with the National Action Committee on a project to onboard SMEs on a platform to have them trade electronically. We thought everything was done. You just need to put them on the platform and they will see their goods everywhere. Alas, that is not the case; you cannot sell certain goods in Ghana and other countries if you do not meet certain requirements. There are differences in standards which need to be harmonised across the regions.

“If I produce my goods to meet SON or NAFDAC standards, if I take it to Ghana and elsewhere, it should be the same. Secondly, how do I move my goods? It’s good to be able to see my goods in Egypt, but how do I get my goods there if ordered? Logistics is also a problem,” Almona stated.

Addressing concerns about trade barriers, the Director-General of the Manufacturers Association of Nigeria, Segun Ajayi-Kadir, reiterated that completing the paperwork for the trade agreement was good but not enough.

Speaking to The PUNCH on the sidelines of the IATF roadshow, Ajayi-Kadir said, “It is certainly true that there are still binding constraints, which are limiting intra-African trade. The fact that you have completed all the paperwork, and the fact that all the policies are there does not mean it is effective.

“For instance, there are many initiatives that are to support infrastructural development and they are guaranteed under the AfCFTA but do we have developed infrastructure? Do we have an efficient transportation system? Are we able to convert our currencies easily? Are we able to travel across Africa? Are those tariffs removed? There are provisions in AfCFTA that support the removal of non-tariff barriers, but they are not removed.”

He called on governments in the continent to remove barriers impeding intra-African trade.

“How can you have free movement of goods without the free movement of people? It is not possible. So, you cannot say that it is left in our court. No, it is not.

“How do I raise capital? How do I move my goods in a competitive manner? How about the market information that they are supposed to get? All those challenges are still there.  Somebody spoke about standardisation such that you are able to accept whatever product comes from one country. You cannot handle this in isolation. It has to be a continental standard. It has to be integrated in such a way that it does not constitute another barrier to trade,” the MAN DG elucidated.

On plans to participate at the 2023 IAFT, the MAN DG lamented that the recent floating of the naira had made things difficult for his members.

 “What we are currently battling is the cost of participating. With the floating of the rates, purchasing dollars to engender participation is really a challenge. We are working around strategies to minimise the cost of participation and get as many of our members on board,” he said.

For a director at the Small and Medium Enterprise Development Agency of Nigeria, Anthony Igba, it is important to enhance the capacity of SMEs to produce what is needed in the countries participating in AfCFTA.

According to Igba, one way to overcome the challenges of funding for the technology required to drive the implementation and penetration of MSMEs in relation to the AfCFTA is for operators to “take advantage of the common facility provision where MSMEs share resources and machinery”.

A board member of the Nigerian Automotive Manufacturers Association, Dr Harpreet Singh, noted that though Nigeria was on the brink of exponential growth, the high cost of purchasing raw materials locally had been an impediment.

“The biggest issue that I personally face is purchasing raw materials locally for our products. They are two times the cost of the imported raw materials. As a businessman, you will not be inclined to do that. We need to look at how we can reduce that,” he said.

He also stressed the need for the Federal Government to strive to reduce interest rates to a single digit.

Meanwhile, Afreximbank had projected that Nigeria has much to gain from IATF2023, having played a huge role in the successful outcome of IATF2021 in Durban, South Africa, where it accounted for 39 per cent ($16.5bn) of the total $42.1bn trade and investment deals signed.

The expectation is that Nigeria will surpass this at IATF 2023 where it is forecast to conclude $17.2bn (40 per cent) of the total trade and investment deals, accounting for 10,500 (30 per cent) and 400 (25 per cent) of the visitors and exhibitors respectively.

The forecast for IATF 2023 is $43bn of trade and investment deals being agreed and to attract over 1,600 exhibitors and more than 35,000 conference delegates and trade visitors.