AfCFTA: Experts deliberate on impact on SMEs as CIPE unveils 2020 survey

In a bid to guide and torchlight opportunities that medium, small and Micro-scale Enterprises (MSMEs) can benefit from within the African Continental Free Trade Area (AfCFTA) agreement, the Center for International Private Enterprise (CIPE) has unveiled a survey and policy brief that would serve as a road map to show how MSMEs can play within the act and form sustainable policy reforms.

Speaking at the launch in Lagos, CIPE who funded the survey, said the report aims to unlock economic opportunities, develop critical reforms for policy engagement with the government and other stakeholders as well as articulate policy positions so that local traders and businesses can benefit maximally. Formally launched by the Secretary of the national action committee, AfCFTA, Francis Anatogu,the launch had in attendance NECA, ANWBN, NASSI, MAN, NASME, FACAN, NANTS, NACCIMA, NASME and other industry stakeholders.

According to the survey, MSMEs remain critical constituents of the Nigerian economy as they represent about 96 percent of Nigerian businesses and contribute 75 percent to national employment. It went on to add that MSMEs can benefit from greater access to new markets and the possible economic transformation that competition could promote. Focusing on four key sectors, wholesale/retail trade, the agricultural and food processing sector, manufacturing and service sectors, CIPE said these sectors were selected given their high business potential and contributions to GDP, employment and exports. Decrying the low level of awareness regarding the existence of the agreement among MSMEs, it said there is a general optimism surrounding the prospective effects of its implementation among the minority aware of the agreement.

Director of education, Governance research, Center for the Study of Economics of Africa (CSEA), Dr Adedeji Adeniran, said modest positive welfare gains to Nigeria with machinery, other transport, textile and metal products as well as textile industries account for most of the positive effects on real wage with the agreement. Listing the potential impacts of economic integration, he said it would lead to an improvement in intra-African trade, net welfare improvement and better access to a larger market and skilled labour. Listing perceived threats of AfCFTA to MSMEs, he said businesses surveyed said they are afraid that cheaper goods from other African countries will compete against local goods, an increase in foreign competition, neglect of important factors affecting MSMEs, reduction in demand for local goods and dumping of sub-standard products.

Exploring the impact of COVID-19 on the MSMEs and identifying ways of mitigation that could facilitate an expedited and efficient implementation of AfCFTA in Nigeria, 25 percent of surveyed businesses reported that the pandemic significantly impacted their preparations for AfCFTA; 46 percent experienced significant effect of the pandemic on their future expansion plans to export abroad and 63 percent experienced significant effects of the pandemic on plans to import from abroad.

Adeniran said while different sectors required different things to succeed within AfCFTA, Nigeria’s imports from several African countries including Botswana, Burundi, Ghana, and Namibia declined by more than 10 percent as well as imports from China and Canada by 29.5 and 11.3 percent respectively. Nigeria’s imports from Ethiopia tripled while imports from Italy (108.8 percent) Japan (100.96 percent) and Zimbabwe doubled. Imports from OECD and North America increased and imports from Italy, Japan, Netherlands and rest of Europe rose by 108.83 percent, 100.96 percent, 92.73 and 70.83 respectively. On export, Nigeria records growth in exports of agricultural products, food, electrical, and machinery products while exports declined significantly in the wood and paper industry.

He added that despite the country’s large population, it wasn’t translating to regional nor global economic competitiveness and urged the government to consider easier business loans for legitimate businesses and tax cuts to encourage SMEs. He also urged that the government develop a context-specific awareness dissemination strategy and training programme. For Business Membership Organisations (BMOs), he urged active participation and partnership with the government, support for members, partnership to mitigate threats and partnership with bodies such as SON and NAFDAC to ensure strict adherence and compliance to standards.