by Winifred Egbeama.

Policy & Governance Area: Economic Growth and Human Development

The Nigerian government recently revealed its intentions to sign the African Continental Free Trade Agreement (AfCFTA), at the coming Extraordinary Summit of the African Union in the Nigerien capital city, Niamey. Up until now, the FG refrained from signing the agreement as it constituted a committee to weigh the effects of the pros and cons it will have on the economy. The Panel’s chair, Desmond Guobadia revealed that the committee’s report showed that amidst major risks which includes smuggling and deliberate labelling of products made outside the continent as made in Africa, the agreement should be signed by Nigeria.

Comments

On March 17th, 2018 African leaders from 44 African nations gathered at the African Union Summit in Kigali, Rwanda, and signed the Continental Free Trade Area (AfCFTA) treaty to bring to life the world’s largest sole market[ii]. Presently, 52 out of 55 countries have signed the agreement, 18 of which have already ratified.[iii]  One of the aims of AfCFTA is to establish a single unified market, which is projected to boost Intra-African trade from 17% to 52% by 2022, and to increase the Gross Domestic Product (GDP) of the African continent from USD2.5trillion to USD25trillion by 2050[iv]. The agreement is expected to foster economic integration within Africa along the lines of what is evident in the European Union, EU, the North American Free Trade Agreement, NAFTA, and the Association of Southeast Asian Nations, ASEAN[v]. The agreement will be the largest trade agreement in history since the creation of the World Trade Organization.

Previously, Nigeria was hesitant in signing the agreement as there was need to undergo due diligence – analyze and weigh the implications on the economy. Although, recently the Federal Government revealed its intentions to sign the AfCFTA at the upcoming Extraordinary Summit of the African Union in the Nigerian capital city, Niamey[vi].

Whilst some may welcome the decision as it has the potentials of promoting economic development in Nigeria and the continent at large, others may beg to disagree. At this point, the questions that come to mind are: What implication(s) does the signing of AfCFTA have on Nigeria’s economy? Are there policies in place to protect the country against smuggling and dumping of goods? Or should such policies be put in place? Are the borders secure enough to handle the implications of free trade? Are there institutions or agencies in place to screen and check the quality of goods imported into the country? What effect would it have on the private sector or manufacturers? Do they need protection? And what step(s) is/are the government expected to take going forward.

The essence of the agreement is to promote free trade within Africa as a whole; the implication is that there would be free entrance of goods, services and people within the continent. One perspective from which it can be viewed is that, Nigeria being the most populated country in Africa would have countries ready to invest in her, considering the large market it has. Also, it affords Nigeria the opportunity to create or enter new markets across Africa.

The instant challenge however, is the effect it poses on the manufacturing sector in Nigeria. One of the challenges it could be faced with, is the high cost of production in Nigeria. If cost of production is cheaper in other African countries, the goods and services of Nigerian products could be more expensive than non- Nigerian product and where consumers are faced with the same quality of products and varying prices, they are more likely to purchase the cheaper product. As regards protection of manufacturers in Nigeria, they have been protected for quite some time now, hence the ban of the importation of certain goods into the country. Perhaps, now is the time to allow them compete with foreign producers and manufacturers, it is probably one of the means in which they can grow and look for more efficient or innovative methods of production in the country. It is thus a call to the producers and federal government to work out a modality that will reduce the cost of production and manufacturing in Nigeria. For this to happen, affordable and constant electricity has to be in place, amongst other things.

For AfCFTA to be successful and advantageous to Nigeria, it is pertinent for certain regulatory policies and bodies to be established in order to monitor the quality, entry and exit of goods, services and people within and outside Nigeria. This will help in preventing the fear that may be nursed by some people – that the country might be a dumping ground for most countries.  It appears that the Standard Organization of Nigeria (SON) is not doing as well as it  should be doing in terms of monitoring quality of goods that are brought into Nigeria[vii].

It is however a two-fold expectation, which are both positive and perhaps negative, as in international relations there are always tradeoffs.

“.. international trade are not simply the outcome of market forces, of relative supply and demand. Rather, they are the result of a complex and interlocking network of bargains that are partly economic and partly political. These bargains involve the trade-off for states of their security interests and their commercial interests –  

 ‘Strange 2004[viii].

It behooves on the federal government to prioritize its values which should be to the advantage of the citizenry. Going forward, the federal government should:

  1. Improve electricity supply in the country.
  2. Tighten the security borders.
  3. Formulate policies that would accommodate free trade.
  4. Extend the remit of NAFDAC and SON.

 

[i] This article was taken from The Guardian Newspaper (online). Available at: https://guardian.ng/news/nigeria-to-sign-afcfta/ . Date accessed: 04/07/19.

[ii] The Africa Continental Free Trade Area:  Benefits, Costs and Implications, Jesus Cazares. Infomineo (online). Available at:  https://infomineo.com/africa-continental-free-trade-area/ . Date accessed: 04/07/19.

[iii]It’s time for Nigeria to sign the African Continental Free Trade Area Agreement, Aloysius Uche Ordu, 22/02/19. Brookings (online). Available at:  https://www.brookings.edu/blog/africa-in-focus/2019/02/22/its-time-for-nigeria-to-sign-the-african-continental-free-trade-area-agreement/ . Date accessed: 04/07/19.

[iv] The Africa Continental Free Trade Area:  Benefits, Costs and Implications, Jesus Cazares. Infomineo (online). Available at:  https://infomineo.com/africa-continental-free-trade-area/ . Date accessed: 04/07/19.

[v] Ibid.

[vi] Nigeria to sign AfCFTA, Timileyin Omilana, 03/07/19. The Guardian Newspaper (online). Available at: https://guardian.ng/news/nigeria-to-sign-afcfta/ . Date accessed: 04/07/19.

[vii] Standard Organization of Nigeria; The Agony of Nigerian Consumers, Emmanuel Ajibulu, 20/04/2010. The Nigerian Voice (online). Available at: https://www.thenigerianvoice.com/news/19898/standard-organization-of-nigeria-the-agony-of-nigerian-cons.html . Date accessed: 04/07/19.

[viii] Susan Strange (2004). States and Market. Pg. 175