The Managing Director, Value Fronteira Limited, Dr. Martin Oluba, discusses the ECOWAS Trade Liberalisation Scheme and the importance of commerce to the nation’s emergence from the current economic recession. He spoke to Crusoe Osagie. Excerpts:
What impact will enhanced importation have on the nation’s economy?
Generally, focus on export is not particularly superior. I think part of the problem Nigeria has had over the years is having a leadership that can combine these things in such a way that we’ll leverage the resources that we have, to both export those things that we can produce and also to import those things that we need. And when we talk about importation here, it covers the entire gamut; science and technology, human capacity to develop, etc. So, broadly speaking, none is superior to the other. Imports can play a very crucial role at this stage because we need the right manpower. We need the right technology and the right quality of innovation to come out of the present situation. Economics is all about exchange, you want to give out what you have to be able to get what you need. The cumulative problem, as I said earlier, has been the inability of the leaders to harness what we have, leveraging, for instance, oil that we have had for a long time and other factors or resources such as land, minerals like columbite, tin, and forests, timber, livestock, cash crops and all of that, to leverage all of this is some way to get what we need. And when we say getting what we need in terms of importation, we’re talking about the right quality of technology, and even human resources, because when you talk about imports it appears it’s only commodities. We need the right quality of human resources to help us to identify even the things that we need, and how we can combine them in such a way that we can improve on the prosperity of the people that live in Nigeria.
What is responsible for the low intra-Africa trade?
As at the end of 2015, the National Bureau of Statistics (NBS) said that capital importation into Nigeria was approximately 9billion dollars. However, 65% of this amount came from only the United States of America and the United Kingdom. There are so many reasons why African countries trade more with foreign countries than among themselves, but I can talk about a few. If you look at a typical case of Nigeria, the demand pattern shifted when we had the oil boom, so elitist consumption patterns came in and you wouldn’t easily get things produced in Africa. The natural tendency was, therefore, with this money in our hands, far in excess of what we normally have, where do we get the kind of lifestyle that we have chosen for ourselves? It’s outside of the continent! So, that’s typically why you have more of that. But that has to change, not necessarily because they are bad but because there are alternatives here. We need to leverage the natural resources we have.
But some economists also cite the existence of trade barriers within ECOWAS. Could that be why ECOWAS came up with the ECOWAS Trade Liberalisation Scheme as a way of smoothing trade relationships among countries in the sub-region?
It’s normal and typical to have barriers. But then again, it is also the norm within blocs to find ways of taking out these barriers. The global tendency is to liberalise trade as much as possible so that nations could trade with each other with fewer restrictions. Just last year, the total value of imported products from all the other 53 African countries into Nigeria was one hundred, and in ECOWAS, for instance, a lot of that has been done under the ECOWAS Trade Liberalisation Scheme (ETLS) which was intended to remove non-tariff and tariff barriers to trade among member-states. But then again, you find them in different blocs. Even the ETLS is copied because it’s the norm globally. And it presents a whole lot of benefits for Nigeria as a country and for the whole of Africa as a continent.
Would the ETLS place one country at an advantage over the others in terms of benefits derivable from the scheme?
No, it doesn’t. All countries in Africa as far as I know are endowed with varieties of natural resources. So it is left for them to go back and see what it is that they have, see how they can develop it and take advantage of the ETLS. For instance, for those within the ECOWAS sub-region, Nigeria, for instance has arable land. It can grow cash crops such as vegetables and tobacco. Of course, tobacco is one of the world’s top foreign exchange earners. In the first quarter of this year Zimbabwe earned $246 million in tobacco. You can imagine if we take such advantage. Zimbabwe is a small country, if we do twice what Zimbabwe is doing we’ll probably be having more than $1 billion in a year in tobacco. We can also earn revenue from forestry and solid minerals mining. We can do all sorts of other mineral resources. So countries need to go back and prepare themselves to enjoy the incentives that ETLS offers.
Some argue that trade among African countries can never be equitable what’s your take?
Talking about equitable trade among African countries, the fact is, we are all endowed with virtually the same kind of mineral resources; every African country has its own resources that it can take advantage of. Trade becomes unfair when maybe you are more advantaged, say, technologically, such that I depend on you to exist. But it doesn’t apply that way for most African countries. Yes, there could be some disparities in terms of trade but if you net everything across the board you discover there is no inequity. But again, policymakers in different countries have a role to look at what they have. Take manufacturing, for instance; let me again refer to the tobacco value chain. In the tobacco value chain, you see that there is an opportunity for massive agricultural production; that’s at the production level. You grow tobacco leaves and they can be sold to anybody; all they need to do is make some additional input and then turn them into their own brands. These are opportunities for improving on the leaves domestically in Nigeria to produce the cigarette brands. So, each country looks at what it has and decides, and I think there is a company, Phillip Morris, that is trying to do something in that direction. I think part of what they are planning to do is to expand the agricultural production. Of course, there are inherent advantages in that, because when you build capacity to grow tobacco on a large scale, there are other things that come with it, like mixed cropping. So people who have the advantage to grow tobacco should also naturally have a capacity to grow, say, vegetables, yam and other things
Do you think trade liberalisation, such as we have in ETLS, can reduce poverty and boost the Nigerian economy?
“Like it’s often said, ‘we need trade, not aid.’ This tells the entire story. Trade prospers both the seller as well as the buyer. So, for a country exporting, it offers prosperity, while the country importing, it also brings prosperity.” Also, you need to have good policies that enable you to harness what side of the trade that you are in. Of course, when we say side, you should be on both sides anyway; it depends on what you’re offering and what you are getting. So, it should ordinarily lead to prosperity for all and reduce poverty. First, ETLS will stimulate economic activities, promote trade among member-states, and once you promote trade, it should ordinarily lead to the creation of more jobs. What the ETLS ordinarily will do is expanding the market that is available. Nigeria has some advantages. The advantage Nigeria has is, one, the sheer size of its human resource. Two, the sheer size of its natural resources. It has natural resources in virtually every aspect of factor categorisation – in minerals, it has columbite, tin, iron, steel, uranium, so many, including the ones that are being discovered every day. If you go to forestry, the same thing. If you go to livestock, the same thing. If you go to agronomy, the same thing. Nigeria has all of that, and if you put all these on the table, it has a whole lot to offer and the country can actually leverage the ETLS to push these to the ECOWAS market. Of course, that doesn’t mean it is going to be shutting out other countries. As I said, each country goes back to prepare itself to play equitably in the market.
Are Nigerian companies well-placed to tap into the opportunities inherent in the ETLS?
I think Nigeria still has a lot to do to increase awareness, to sensitise industries and in fact to sensitise even the stakeholders within the entire ETLS implementation chain, including those who work in the ports, to let them know about the advantages that these offers, and communicate same to Nigerians. For instance, let me go back to the issue of tobacco. If for instance, you farm 10 hectares of vegetables, you will not get as much foreign exchange as you would get if you farm 10 hectares of tobacco. Now if you have that in mind, what you do is to have a policy that tells you, hey, go there, plant more of this, if you export it you are going to do more for your economy.
What role do you think the ETLS can play in checking illegal cross-border flow of goods?
There are a lot more that can be done beyond just ETLS because ETLS itself, for instance, is not like a magic wand. Countries also need to do a lot more in terms of checking their borders and retraining those who work at their borders. There is need for re-sensitisation. In fact, countries can even partner in capacity building in these areas. All of that, I think, will help check smuggling.
If you are to outline the benefits of trade liberalisation, what would they be?
If you, for instance, use the ETLS as a case study, let us single them out. For instance, government is a stakeholder in the process and that is basically why they decided on it. What is government interested in? Government wants to ensure that it can kill smuggling; government wants to protect the private sector in these countries. Part of what it wants to do is to reduce the price un-competitiveness of products within the intra-ECOWAS region. That way, the first is that the ETLS, which is like the flagship for liberalisation within the sub-region, helps to protect the revenue that government typically loses through smuggling and through dumping. Number two, it gives the private sector producers the advantage of price competitiveness. Number three, there is enormous capacity building in all of that. Number four, there is enormous prosperity that goes with it. For instance, the ETLS expands market; it gives market access. Once you have market access, one of the things that go with it is the demand pressure on manufacturers. That pressure on manufacturers forces you to employ more, to buy more equipment, to expand on your processes.
Again, one of the things trade liberalisation does is, it enhances capacity and improves on standards across the board. It helps to improve on products standards. You know, one of the things often mentioned as partly responsible for unfair terms of trade is that they say the standards of products from Africa are not too good. Liberalisation helps you to work on your standards and that’s one of the things you bring to the market – enhanced standard. In fact, all that are embedded in that value chain, there are expansions within that value chain across the board. All of these are multi-advantages for various stakeholders including government, the private people, and the community itself, the community of people, because everybody benefits.
In other words, if Nigeria taps properly into the opportunities presented by ETLS will it be able to get out of recession quicker?
I have mentioned tobacco here, and I have to mention it again. Let’s do a simple calculation. If Zimbabwe within the first quarter of this year could make $246 million, Nigeria can double that capacity very easily in tobacco production. It’s very simple. And then, not only in tobacco, there are many more products that you can identify. And this is not rocket science, all you need to do is to engage with local farmers/producers and they will roll out this. I don’t know whether other investors that are interested in that area are also doing the same, but I understand that Phillip Morris has a programme to provide free extension services and interest-free support to local farmers.
How long must Nigeria import before it can be at least 90-percent self-sufficient?
Every country keeps importing. If you look at America, it keeps importing. America imports a lot from us and from different countries. All countries import, it depends on what you are importing. The thing we are saying is let Nigeria import more of the things that it cannot produce because that’s actually the way it should be. We must import. It’s all about exchange. Nigeria has things at the backyard, and that’s the very painful story. Over the years, our leadership has continuously failed to use finance from the oil resources that we’ve had to activate other sectors.