· Cite infrastructure deficit, production capacity as constraints
· Challenge FG to improve policy environment, competitiveness
Nigeria is not yet ready to take full advantage of the $3.4 trillion intra-continental trade deal heralded by the coming into force of the African Continental Free Trade Area (AfCFTA), Lagos Chambers of Commerce & Industry (LCCI) and Manufacturers Association of Nigeria (MAN) have said.
The two bodies enumerated infrastructure deficit, quality and high cost of production as well as poor policy environment, among others, as fundamental challenges attesting to Nigeria’s unpreparedness for the intra-continental trade bloc.
In separate interviews with THISDAY, LCCI’s Director-General, Dr. Muda Yusuf and MAN’s President, Mr. Mansur Ahmed explained diverse challenges that would undermine Africa’s biggest economy from benefitting optimally from the trade deal.
AfCFTA, a trade agreement the African Union (AU) brokered among its 54 member-states with the goal of creating a single market and a single currency union.
At its inauguration on March 21, 2018, no fewer than 44 African countries including Algeria, Angola, Ghana, Kenya, Morocco, South Africa and Sudan signed the trade agreement in Kigali, Rwanda.
But Nigeria withheld its assent from the agreement, citing lack of wide consultations with relevant stakeholders.
Amid protracted criticism, President Muhammadu Buhari eventually signed the trade declaration at the African Union summit in Niamey, Niger on July 7, 2019, about one year and six months before AfCFTA eventually became effective on January 1, 2021.
Now that AfCFTA has come into force, Yusuf, LCCI’s director-general, told THISDAY that Nigeria “is not fully prepared yet for the $3.4 trillion intra-continental trade bloc, which according to analysts, could become the world’s biggest trade block.
Citing diverse challenges associated with the African biggest economy, Yusuf argued that it would take some time for the AfCFTA to take shape due to what he ascribed to the issue of readiness first on the part of economic players.
He explained the readiness on the part of economic players “to mean the capacity to produce and the capacity to produce competitively.”
According to him, trade is, essentially, about competitiveness.
He said: “If you are not competitive, you cannot get any serious value from trade. So, we have a major weakness in our real sector because of the enabling business environment challenges.”
He noted that most manufacturing industries in the country “are able to survive largely on the back of our protectionist policies.
“In other words, it is either we have very high tariffs or we have outright import bans to protect them. That is what is sustaining most of them, especially those that fall within the SME category.
“For multinationals and conglomerates, perhaps because of their sizes and economies of scale, the average costs will be much lower and they may be more competitive. For SMEs, there is a very high risk. That is the readiness on the part of the economic players.”
LCCI’s director-general, also, explained diverse constraints, which according to him, were connected to institutional readiness.
He noted that the institutional readiness “has to do with the readiness of the customs and all regulatory institutions. It is not clear how ready they are. We know the lag we have in terms of policy pronouncement and implementation.
“Let us look at the case of land border reopening, for instance. As at today, vehicles can still not come in. At least, we had this pronouncement almost two weeks ago,” Yusuf observed.
He buttressed his position with the concern of the AfCFTA secretariat, which he revealed, had at different times expressed concern about institutional readiness, especially on the part of customs of many African countries.
In all these situations, LCCI’s director-general urged the economic players in the country “to moderate our expectations. AfCFTA implementation is likely to be gradually. There is still a lot of fine-tuning to do. There is a lot of reforming and restructuring of institutions to do.”
He, however, expressed concern about the institutional capacity of African countries “to enforce the rules of origin. Among others, the rule of origin challenge is one of the biggest.
“What the rule of origin says is that the goods that will be traded under AfCFTA are goods that are produced within the countries that sign the agreement or goods that have substantial local content. We have a continent with weak institutions.
“A lot of these institutions compromise, not only in Nigeria, but in other parts. They would bring goods from China and all sorts of places, repackage and present it as if it is from Africa. So, enforcing the rules of origin is a major challenge, which requires that institutions are ready.”
Ahmed, MAN’s president, largely shared the concern of LCCI’s director-general about the capacity of Nigeria to compete effectively under the new intra-continental trade regime.
He admitted that there “are many areas in which the country is not ready at the moment,” though observed that there “are other areas in which we are ready for the African trade agreement.”
He emphasised the need to build capacity to compete in the new market adding, “There are a lot of things being put in place by governments and of course by the private sector as well. We are just starting.”
Ahmed, specifically, mentioned the need to improve the country’s capacity and scale up its competitiveness against other actors/players on the market.
He said: “In order to compete with other actors, we must be able to scale up our productivity, our production as regards physical growth as well as service. We are already the largest economy in Africa.
“We must strengthen this position to be able to capture the market. Many of our larger manufacturers are already playing in other African countries very successfully. Our banks are all over Africa. Other private actors like professional services, cement sector.”
Like LCCI’s director-general pointed out, Ahmed observed that Nigeria’s small and medium enterprises (SMEs) completely lacked skills to be able to compete effectively.
He said: “Part of the reasons our SMEs can not compete is because our infrastructure is very weak, particularly transport infrastructure. Energy and power, also, affect the competitiveness of SMEs.
“We must improve our power supply in particular and make sure the cost of our products is lower and our production costs are reduced to enable us to compete like South Africa, Egypt, Algeria, Morocco.
“We must focus on these areas that we are not competitive and the areas where we have raw materials. We must build capacity to get raw materials. We must also improve the quality of our products. If we must compete effectively in the new market, the quality of our products is very important.”
MAN’s president, equally, emphasised the need for the federal government “to improve regulatory functions that will enable our companies to scale up their competitiveness.
“Policy environment is still very harsh for businesses. If today you look at the competitiveness of our economy under the World Bank Ease of Doing Business, we are ranked 131. This ranking is not good enough.”