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Making AfCFTA work for Nigeria

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[FILES] Buhari signs, on behalf of Nigeria, the Agreement Establishing the African Continental Free Trade Area (#AfCFTA), at the opening of the 12th Extraordinary Session of the Assembly of African Union Heads of State and Govt, in Niamey, Niger Republic, July 7, 2019. Photo/Twitter/Asorock

After a curious initial hesitation, Nigeria recently became the 53rd country on the African continent that signed the protocol establishing the Africa Continental Free Trade Area (AfCFTA).

President Muhammadu Buhari who signed the protocol in Niamey, Niger Republic stated that Nigeria believed not only in free trade but also fair trade. Prior to that, concerns had been raised in certain quarters within the country, among stakeholders such as the Manufacturers Association of Nigeria (MAN), the Nigeria Labour Congress (NLC).

The concerns raised include the sufficient lack of tradable goods due to the paucity of infrastructure for competitive manufacturing and industrial development such as electricity generation and transportation infrastructure among others, which may turn Nigeria into a dumping ground.

The ACFTA, which is estimated to be the world’s largest free trade area with a large market of 1.2 billion people and a cumulative gross domestic product, GDP, of about $2.65 trillion covers 55 African countries. Recent data shows that total intra-African agricultural trade was valued at US$24.4 billion (US$13.2 billion exports and US$11.1 billion imports) representing some 19% of total intra-African exports and 18% of intra-African imports. Intra-African agricultural exports are mainly palm oil, sugar, maize, rice, and cigarettes.

Conceptually, the agreement establishing the AfCFTA was signed at the 10th Extraordinary Summit of the African Union (AU) Assembly on March 21, 2018, in Kigali, Rwanda. The AfCFTA which covers six protocols is the continent’s most ambitious integration initiative with the main objectives of creating a single continental market for goods and services, promoting the free movement of business persons and investments, expanding intra-Africa trade across the regional economic communities and the continent in general as well as the enhancement of competitiveness in support of the continent’s economic transformation.
 
The agreement, which came into force on May 30, 2019, is a component of Agenda 2063, the continent’s framework for structural transformation containing other continental initiatives, as well as the seventeen United Nations Agenda 2030’s sustainable development goals (SDGs). By the structuring of the ACFTA, the six protocols on trade in goods, trade in services, investment, intellectual property rights, and competition policy, as well as dispute settlement, form an integral part of the agreement.
 
With the agreement put in two phases, the trade in goods and services are being negotiated in phase one while phase two of the negotiations cover investment, competition policy, and intellectual property rights and expected to be completed by January 2021.

By this structuring of the AfCFTA, Nigeria and the other signatories to the agreement are expected to prepare their economies to maximally benefit from the arrangement. Though there have been fears by various governments on whether they would lose out under AfCFTA, the general perception and belief is that it should turn out to be a win-win situation with the opportunity for trade creation for even the small countries in whatever goods or service offerings for which they have a comparative advantage in the continent.
 
For Nigeria, it is hoped that the presidential committee set up to assess the impact and readiness of the country to join the free trade area did a thorough appraisal of the Nigerian situation before giving Nigeria’s leader the go-ahead to append his signature to the agreement. Whatever the case, some relevant issues need to be pointed out here.

First is the recurrent issue of lack of basic infrastructure to enhance the production of goods for the African market at competitive prices. This is important because the costs of production of basic manufactures in Africa are largely higher than those of other major world producers of manufactured goods especially in Asia with particular reference to China. Appropriate external tariff measures are necessary to enhance trade diversion from these countries from Africa such that African markets will not be diluted by the entry of goods from these major competitors. So, the government must critically address the infrastructure issue since particularly the first phase of the implementation of the AfCFTA covers primarily trade in goods and services.
 
Under this phase, the basic question is, what does Nigeria have to offer the enlarged African market? Aside from crude oil and financial services for which international market already exists, one wonders what really Nigeria has to offer under the ACFTA arrangement.

 
Now that the agreement has been signed by the President, Nigeria should make the best of it. First, it needs to address the various internal inconsistencies so as to enhance productivity in the economy. Appropriate policies need to be put in place to encourage production. The crises of uncertainty and insecurity need to be addressed lest Nigeria will just turn out to be a dumping ground for goods from within the African continent. Second, the government should use this opportunity to revamp its medium-term Economic Recovery and Growth Plan (ERGP), which has already fallen short of expectations in the attainment of the projections set for many of the economic indicators.
 
Ideally, given the size of the Nigerian market and the huge impact, it would have on the free trade arrangement, Nigeria should have provided the headquarters for the ACFTA secretariat. Unfortunately, this has been lost to Ghana, a neighbouring country.

The United States, for example, does not compromise its national interest regarding the siting of key strategic institutions within its shores, particularly where it makes an overwhelming contribution towards the establishment and support of the institution. Nigeria should take advantage of its size and contribution to the African economy to enhance its own economic growth and development. While the negotiation on phase two of the ACFTA is expected to be concluded by January 2021, the country should use the available time before then to prepare its capabilities in investments, intellectual property rights and pursuit of appropriate competition policy that would advance its interest.
 
Overall, the ACFTA is considered to be a good idea but it must learn from the challenges already experienced in the Eurozone and thus be very cautious in further advancing to arrangement into a customs union or a monetary zone. The bottom-line now should be the enhancement of intra-regional trade.

The adage to “make haste slowly” should be a driving force in the pursuit of this much-touted economic integration in Africa since particularly most African economies are still largely at a rudimentary stage and would need some more time to acquire the needed sophistication to fare well in these arrangements.

 


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