A couple of weeks ago, 44 African countries at a summit of the African Union in Kigali signed the much talked about agreement to create the African Continental Free Trade Area (AfCFTA). It is important to note that Nigeria, Africas largest economy and 10 other African countries did not sign the agreement.
It is also instructive to note that alongside Nigeria, South Africa also did not sign the agreement although for different reasons other than those given by Nigeria to wit: Nigeria believes it will undermine local manufacturing or lead to Nigeria becoming a dumping ground for finished goods. This was backed by the organized private sector demands led by the Nigeria labour Congress (NLC).
According to the Nigerian authorities, it is a renewed, extremely dangerous and radioactive neoliberal initiative being driven by the Ministry of Trade and Investment that seeks to open our seaports, airports and other businesses to unbridled foreign interference never before witnessed in the history of the country’. This position is at best a myopic representation of the true intent of the agreement and other similar agreements which countries have been entering into to facilitate trade and boost their economies.
The CFTA which aims to reduce barriers to trade such as removing import duties and non-tariff barriers, hopes to boost intra-continental business. The African Union Commission (AUC) estimates that if coupled with complementary trade facilitation measures to boost the speed and reduce the cost of customs procedures and port handling, the CFTA could more than double share of intra-African trade to 22 percent of total trade by 2022.
For perspective most Free Trade Agreements (FTAs) owe their success, at least in part, to prior reductions in trade barriers between the parties to the agreement. This then enables the countries to assess if entering into a trade agreement is the right step to take to boost trade between the countries. For example, the case in point will be the ECOWAS ETLS which has been in play in ECOWAS countries, a good place to start will be to examine the project since inception to understand if this has worked well and this will then lead to greater confidence to get in to the broader TFA or in this case a CFTA agreement. Nigeria could borrow a leaf from these types of examples to then decide if we can begin to enter into agreements or otherwise.
Some of the arguments the Nigerian authorities have put up are as follows; customs revenue will drop once duty-free regime commences, opening the borders to goods from other developed countries will naturally serve to kill local industries which primarily churn out low standard ‘un-competable’ products; Nigeria will need some time to build capacity and infrastructure before thinking of going that way; Nigeria is already solely import dependent. Etc.
The fact is that we will never get to a state where we are comfortable enough to open our markets to trade. In a situation where we are looking to diversify the economy from a single source of foreign exchange earner we should work towards lifting all barriers to trade and indeed emphasis should be less about protectionism but on putting the right enablers in place for us compete favorably.
Nigeria today is focusing on the wrong objectives going into these trade negotiations. While it is important to protect the local manufacturing sector, it is important to also ensure that we build it to a level that can compete with manufactured goods from the region. It is important to note that at this point, we have not even begun to talk about competing with Europe. We have been in a position where we have been susceptible to headwinds in the oil sector, as a disruption in the oil prices globally leaves our economy in shambles. We need to take a stance on what must be done to ensure we don’t go down that spiral of devaluation, inflation and currency crashes again. Indeed, this should serve as a compass in steering the country’s economy in the right direction by truly diversifying.
In the last quarter of 2016, we were at a stage where we began as a country to put in restrictions on certain categories of imports simply because the foreign exchange wasn’t there to meet out import obligations. 60% of the import bill catered for the importation of petroleum and related subsidies. The rest was spread between scarce but necessary imports. Fiscal and monetary policies began flying all over the place with each competing for messiah status to save us from total recession. Indeed, for the first time in a long while, Nigeria recorded two consecutive quarters of negative growth.
At this point of relative stability, and as we continue to build our reserves in this fragile state of relative peace in the Niger Delta, we need to truly take stock of the situation and ask ourselves tough questions on where we are headed as a nation.
Having the ‘gut’ to take tough decisions and see it through in the face of opposition from all angles is the true mark of a leader.
As with my previous essays on the topic, this is what I propose;
I still maintain that something must be the catalyst to force government to either build the required infrastructure or to encourage the private sector to develop these infrastructure for us to move ahead as a nation. What Alh. Aliko Dangote is doing in this regard is instructive and should serve as a guide to be replicated across all sectors.
- He has realized that the government is not going to fix infrastructure any time soon.
- He has gone ahead to fix the roads leading to the ports.
- He will in return get tax breaks for a period.
- It’s a win-win situation.
No wonder he has gotten to where he is in life. That’s smart right.
The truth is that at this point in the country’s growth, we know for certain that relying on the government to fix critical infrastructure which will make us compete favorable will probably never happen. However, we also know for a fact that we need to compete favorably with other nations. Now, let us imagine if what Aliko is doing is replicated by other companies across all sectors. In no time, we will ourselves rush to other countries to beg them to open our borders.
The point to this write up is that already entering into these trade agreements upfront will be the catalyst to force company/government to enter into these types of agreements. Otherwise, we will remain complacent and never grow as a nation.
The answer is not to make us a pariah nation, shy from engaging and with the outside world.
Also, this is to also note that for Nigeria as a low hanging fruit, in going into these negotiations, our negotiators can insist on certain clauses like regulations within the agreements which will protect against the identified disadvantages. i.e we can insist that developed economies should reduce their business subsidies for their companies as this will keeping emerging market companies in business and to compete effectively. Furthermore, we can also insist that foreign companies build local factories as part of the agreement, including the requirement of these companies to share technology and train local workers.
Countries are moving towards industrializing their economies and expanding trade with other countries in other to boost their balance of payments. They are being forward thinking and not being introverted about this at all. We should think of moving the goods produced in Nigeria to other nations, expanding new markets and territories and truly diversifying our economy from oil.
Nigeria can be likened to a lady who doesn’t not want to have anything to do with the men specie but also wants to get married to a man at the same time. The marriage concept in this case is a farce unlikely to materialize unless we make tough choices, hard decisions which may not look appetizing in the short run, but will serve to build our economy in the long run.
I totally agree with the CFTA representing a significant opportunity to redress the vulnerabilities of Africa’s economies within the global economic order and Nigeria serves to gain and truly rise within the world order if we leverage this agreement.
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