Editorial

Nigeria’s economy and AfCFTA’s operation

With the take-off of the much talked about African Continental Free Trade Area (AfCFTA) agreement, all eyes have been on Nigeria to prove its status as the Giant of Africa.

 

Now engrossed in a trade pact expected to create a $3.4 trillion economic bloc with 1.3 billion people across Africa and constituting the largest new trading bloc in the world, Nigeria has another great opportunity to further increase its contributions to the continent’s Gross Domestic Product (GDP) by creating an atmosphere for investments to thrive. Already, Nigeria accounts for about 17 per cent of the continent’s GDP.

 

The trade agreement is set to create the largest trading bloc since the World Trade Organisation (WTO) and promises to improve trade and promote intra-regional investment in Africa by removing 90 per cent tariffs on goods and services. When fully operational by 2030, AfCFTA is expected hit a combined GDP of $2.5 trillion. Even with the opportunities presented by the trade agreement, the apprehension in the atmosphere remains thick as members of the organised private sector, economic analysts as well as observers and potential investors fear the influence of the ‘Nigerian factor’ in the process. The question remains, how prepared is the Federal Government of Nigeria for AfCFTA? For the years it has been discussed in diplomatic circles, it is not clear yet if Nigeria has made a significant improvement in the area of infrastructure.

 

The period of delay in joining the other 53 countries to endorse the agreement has turned out to be a mere hiatus to flex its muscles as usual without adding value to the system to take advantage of.

Members of the OPS being the major drivers of the economy and whose lot it falls to also drive the trade pact have consistently bemoaned the dearth of infrastructure in the country and what it portends for them as soon as the continental pact takes off.

 

The issue of power has remained intractable with manufacturers relying more on private power generating sets and fuelling them at exorbitant cost for production than putting hope in public electricity supply.

 

For a free trade system with no holds bar, smaller countries within the continent are already mapping out strategies to take advantage of bigger countries, especially Nigeria, which has consistently played the big brother even to its own disadvantage.

 

Even while the Ghanaian Government is yet to fully resolve the trade dispute with Nigerians in that country, traders of Ghanaian origin have already set out to invade Nigeria giving the opportunities made available through AfCFTA.

 

Whereas the pace has been set for other countries that have always seen Nigeria as the big market to leech on, Nigerian manufacturers are, no doubt, under siege for so many reasons.

 

 

We recognise the fact that even while the land borders were closed for one year, there was still increasing incidence of smuggling, espe- cially of counterfeit versions of established local brands; illegal importation of unregistered products, under-invoicing and considerable evasion of duty payments.

 

Although the prospects under the trade agreement are high, critical challenges such as forex scarcity, inconsistent foreign exchange policies, inefficient transport infrastructure, high production cost, weak consumer demand and the new competitiveness pressure foisted by the AfCFTA may end up altering the balance of trade to the advantage of other smaller countries.

 

One of the highlights in the implementation of the trade pact is that as usual with such development, competitive industry would in turn address market fragility, expand market opportunities, enable private initiatives, and cultivate a dynamic economy, which also implies an increased exposure to global markets and increased possibilities of unfair and injurious trading practices.

 

Today, officers and men of the Nigeria Customs Service are known to regularly raid markets for goods that are assumed to have been smuggled into the country, but how prepared are they to ensure Nigeria’s position on illegal products is not breached in the process of the trade pact’s implementation.

 

How will the rule play out under the ECOWAS Trade Liberalisation Scheme? This is where the Standards Organisation of Nigeria (SON), which appears to have been quiet since the change of guard in management, is expected to play a significant role.

 

Manpower is typically essential as the commencement of AfCFTA further underscores the need for SON’s presence at the entry points to prevent Nigeria from being turned into a dumping ground of substandard, fake and counterfeited products from other African countries.

 

There should be a need for product authentication as an additional tool to fight faking, adulteration and unfair competition with substandard products in the market.

 

To ensure a fair and successful implementation, there should be trade remedies and dispute settlement safeguards to create a system for protecting the Nigerian economy from injurious and unfair trading practices from foreign companies and countries.

 

However brilliant the trade pact potential appears, we believe that the failure of government to address infrastructure deficits and security challenges pose significant threats to the long-term effectiveness of the treaty.

 

Without mincing words, except there is a hurried reversal in some policies and urgent approach to infrastructure development, we believe Nigeria may have to struggle hard to meet up with the competition during trade facilitation under the pact.

 

To guarantee a fair deal for the local manufacturers, who already appear disadvantaged, we advise that the agencies manning the borders and other entry points do their jobs diligently to ensure the country is not turned into a dumping ground and an illicit trade arena

 

 

 

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