Jonathan Eze writes that Nigeriaâ€™s decision to rethink signing the African Continental Free Trade Agreement might not be unconnected with the public outcry over its negative impact on private businesses and the Nigerian economy
Last week, 44 African countries, at a summit of the African Union (AU) in Kigali, Rwanda, signed an agreement to create the African Continental Free Trade Area (AfCFTA).
Nigeria, Africaâ€™s largest economy and 10 other African countries did not sign the agreement.
The summit was supposed to be a step forward for the AU’s 2063 project for closer African integration, with 27 member states also signing a commitment for the free movement of persons.
It is predicted that the AfCFTA will boost intra-African trade. If successful, it will be the biggest trade agreement since the formation of the World Trade Organisation in 1995.
By reducing barriers to trade, such as removing import duties and non-tariff barriers, African countries hope to boost intra-continental business.
The AfCFTA could improve trade between African countries, which in 2016 estimates accounted for only 10%.
However, in a set-back for the African Union, Nigeria, Africa’s largest economy and the most populous country, declined to sign the agreement.
President Muhammadu Buhari explained that Nigeria will not agree to anything that will undermine local manufacturers and entrepreneurs, or lead to Nigeria becoming a dumping ground for finished goods.
South Africa, also one of Africa’s largest economies, did not sign the agreement, but President Cyril Ramaphosa stated his commitment to the agreement once the necessary legal processes were undertaken.
The organised labour, through the Nigeria Labour Congress (NLC), had pleaded with Buhari not to sign the CFTA, warning that it would destroy Nigeria’s economy.
The NLC had described the proposed signing of the CFTA as “a renewed, extremely dangerous and radioactive neoliberal policy initiative being driven by the Ministry of Trade and Investment that seeks to open our seaports, airports and other businesses to unbridled foreign interference never before witnessed in the history of the country.
“This policy initiative, for instance, will make it possible for a foreign airline to directly do local scheduled flights without employing Nigerians. Owing to the sensitivity of this policy or its possible fall-outs on our economy, those driving it were directed to consult the Nigerian local business community and organised labour.
The NLC had stated: â€œWe at the organised labour were not consulted. Information reaching us suggests that the relevant business community has not been consulted. The drivers of this policy initiative, without consulting the relevant stake holders for possible impact assessment, have perfected a document which President Muhammadu Buhari was to sign at Kigali on March 21, 2018. We, at the NEC, are shocked by the sheer impunity or blatant lack of consultation in the process that has led to this.â€
In the same vein, the Manufacturers Association of Nigeria (MAN) had applauded the federal governmentâ€™s refusal to sign the agreement establishing the AfCFTA.
The manufacturers frowned on the contents of the agreement, noting that it will lead to gross unemployment in the country as most manufacturing companies in the country will be made to die a quicker death.
The Associationâ€™s President, Frank Jacobs vowed that the body would not support federal governmentâ€™s adoption and ratification of the agreement establishing the African Continental Free Trade Area (AfCFTA) until issues of market access and enforcement of rules of origin were addressed.
According to MAN, the agitation from the private sector was a result of lack of consultation and inclusion of inputs of key stakeholders before Nigeriaâ€™s position was presented at the meetings of the African Union-Technical Working Group on CFTA in the build-up to AfCFTA negotiation by Nigeria.
Jacobs explained that the issues of market access that allows only 10 per cent of products to be protected as well as governmentâ€™s enforcement mechanism in the area of enforcement of rules of origin needed to be clearly defined before local producers can support the agreement.
He added that MAN is not unaware of the benefits inherent in installing a continental trade agreement like AfCFTA that could improve intra-African trade and enhance economic growth and sustainable development. Jacobs declared that Nigeriaâ€™s national interest should be the primary consideration in the decision to sign-on to such an arrangement.
He urged the government to set in motion a process that will enable all stakeholders on the international trade value chain in Nigeria to quickly review the text of the draft AfCFTA agreement and come up with comments on areas that are not in the best interest of the Nigerian economy and sectors.
â€œGovernment should, as matter of urgency, convene a special meeting of the relevant stakeholders, including experts on trade policy to consider tariff lines rates along the line of efficiency, sectoral and sub-sectoral preferences that would be most beneficial to Nigerian businesses under the AfCFTA dispensation as well as reconsider the national position on EPA vis-a-vis the AfCFTA especially on tariff lines of products on the sensitive/exclusion list, with a view to ensuring that the EU-EPA is not reintroduced through the AfCFTAâ€™s back door.
â€œReview presentations and prepare a detailed submission for the Government on ways and means of participating in the AfCFTA in a manner that our national interest and that of the budding manufacturing sector are effectively protectedâ€, he added.
The 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union, held in Addis Ababa, Ethiopia in January 2012, had adopted a decision to establish a Continental Free Trade Area (CFTA) by an indicative date of 2017.
The summit also endorsed the Action Plan on Boosting Intra-Africa Trade (BIAT), which identifies seven clusters: trade policy, trade facilitation, productive capacity, trade related infrastructure, trade finance, trade information, and factor market integration. The CFTA will bring together fifty-four African countries with a combined population of more than one billion people and a combined gross domestic product of more than US $3.4 trillion.
The main objectives of the CFTA are to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union. It will also expand intra-African trade through better harmonisation and coordination of trade liberalisation and facilitation and instruments across Africa in general.
The CFTA is also expected to enhance competitiveness at the industry and enterprise level through exploitation of opportunities for scale production, continental market access and better reallocation of resources. The establishment of the CFTA and the implementation of the Action Plan on Boosting Intra-African Trade (BIAT) provide a comprehensive framework to pursue a developmental regionalism strategy. The former is conceived as a time bound project, whereas BIAT is continuous with concrete targets to double intra-African trade flows from January 2012 and January 2022.
An international trade expert and former Director General of Nigeria Association of Chambers of Commerce Industries Mines and Agriculture (NACCIMMA) John Isemede, noted that Nigeria will not really gain from the free Trade Area if the agreement is signed.
Isemede said many of Nigeriaâ€™s trade agreements had even worked to its disadvantage due to poor export capacity in non-oil and low industrial capacity.
â€œThere is a need to review trade agreements and policies at this time because most of the developed countries we see today grew by closing down their borders for a while.
â€œTake a look at AGOA for instance, for 10 years, only very few exporters have been able to export under the platform due to poor information and lack of proper documentation.
â€œWe have rice mills and farms that are barely functioning, except for the new intervention of the UNIDO and Bank of Industry to empower farmers and this apparently is not enough.â€
He advised the federal government to look at the critical details involved in the agreement adding that there must be a balance between import and export for a country like Nigeria to benefit from any trade agreements.
Also, an investment expert and CEO of Allied Trust Systems Limited, Emeka Nwasike, reasoned that opening the borders of Nigeria will only expose local manufacturing industries in Nigeria which are struggling to survive to undue competition. He added that at a time when other countries are developing policies of protectionism for the growth and survival of its local industry, Nigeria cannot afford to jeopardise the growth of its local industries by allowing a free trade policy.
â€œThere is therefore a very high possibility that the region would become a conduit for imports against local manufacturing if the free trade zone is allowed operation in Africa and especially in a country like Nigeria. No wonder developed countries and neo-liberal institutions such as WTO, DFID, EU USAID, World Bank etc are very enthusiastic to finance the CFTA process because they know that it would open up the African markets to their exports and at the detriment of the growth of local industries.
â€œAccording to history, all developed countries today reached their competitive position through a high import protection on agriculture and other infant industries and as a result benefited from huge subsidies and exploitation of their Southern colonial countries, particularly in Africa for centuries. They created the condition to do it through import protection and it is only afterwards that they opened their markets to other countries. I wonder why Africa would want to do otherwiseâ€ he said.
Furthermore, he said: â€œCFTA has the tendency to reduce real income in Nigeria because, with the policy, the federal government will be forced to renounce to a non-negotiable source of income. Also, as African countries open up, competition will be increasing on the continental market. This will result to trade flows such as African imports being reoriented because, partners located either on the continent or outside of the continent are being replaced by imports from African partners benefiting from better market access, thanks to tariff cuts, and potentially leading to terms of trade reduction. Thirdly as world prices of food products slightly increase with the liberalisation reforms, net-food importing countries such as Nigeria will be hurt and their real income reduced.
Essentially, the general perception is that free trade can cause turbulence in sectors of a domestic economy, such as long-established manufacturing segments already vulnerable to global competition.