Economy
As the African Continental Free Trade Area enters its first six months of inauguration on Tuesday, 1st June, the need for Nigeria to enter the fray of her infrastructure development was the topic that dominated discourse at various fora last week. While the webinar sponsored by Nigeria Export Import Bank revolved around preparing Nigeria in the area of infrastructure development for international trade, the webinar organised by the Bureau of Public Enterprises, similarly dwelt on infrastructure issues and how government will engage it using the public private partnership model. To complement the PPP platform, the apex bank tasked the state governments to tap into the opportunities available to develop the economies of their respective states. Chris Paul reports
Barely recovering from the damaging impact of the COVID-19 pandemic in 2020, the urgency to seek multiple alternative revenue streams to boost Nigeria’s economy cannot be overemphasised.
The economy, which is just crawling out of recession, recorded a 0.51 per cent growth in the first quarter of 2021 after a 0.11 per cent growth in the fourth quarter of 2020.
To place Nigeria on a firm footing for effective performance on the AfCFTA stage, her economy must post a double-digit growth or prepare the ground for it.
But to get to that point, the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, said Nigeria will require about N35 trillion investments in infrastructure.
In a goodwill message he delivered last week Thursday, at a webinar on “Financing Public-Private Partnership to Boost Infrastructure Delivery in Nigeria,” organised by the Bureau of Public Enterprises (BPE) in Abuja, he said it will be difficult to support such investments using government funds alone given the paucity of government revenues.
At another forum, Emefiele also called on governors to make their states economically viable in order to reduce their dependence on allocations from the Federation Account.
Delivered, on his behalf, by the Deputy Governor of the bank on Economic Policy, Kingsley Obiora, the CBN Governor said the COVID-19 pandemic had exerted unprecedented impact on the economy, adding that interventions by the monetary and fiscal authorities had led to Nigeria exiting recession with poor growth.
Though, the news may be positive, he said growth is still far below the country’s population growth of 2.7 per cent.
“It is therefore imperative that we all work together to harness the growth potential of the Nigerian economy.
“If we take into account Nigeria’s Infrastructure Masterplan, we require close to N35 trillion worth of investment in order to attain double-digit growth. But given the paucity of government revenue, which the BPE director-general mentioned earlier, it will be difficult to support these investments using government funds alone.
“So, finding ways to harness public-private partnerships have become very important and we are happy to acknowledge that these partnerships have started in earnest and the Central Bank of Nigeria looks forward to continuing collaboration with the BPE to harness these partnerships to ensure that we significantly scale up investment in our infrastructure,” he said.
To ascertain Public-Private Partnership (PPP) suitability and compliance with the National Integrated Infrastructure Master plan by her ministry and the BPE before inclusion in national budgets and subsequent procurement, the Minister of Finance, Budget and National Planning, Zainab Ahmed, in her keynote address, said from the 2021/2022 budget cycle, all infrastructure projects in Nigeria must be screened.
She said these efforts, by government, are to ensure that PPP takes a centre-stage in the procurement of infrastructure in Nigeria.
According to her, the federal government is willing to discuss and incorporate suggestions from stakeholders with a view to strengthening Nigeria’s PPP framework.
The minister, who is also the Vice-Chairman of the National Council on Privatisation (NCP), solicited the support and cooperation of the public and private sectors partners, local and foreign partners, financial institutions and other important key stakeholders towards the successful implementation of the new PPP policy directive.
The current administration, according to her, is committed to the development of infrastructure through PPP arrangements.
In line with its new role in the administration of concession programmes of the federal government, BPE, in collaboration with the Ministry of Finance, Budget and National Planning had developed a PPP project information tool, which has been forwarded to all ministries, departments and agencies (MDAs), to capture all current and proposed infrastructure projects in the country.
“The BPE Director-General, Alex Okoh, said this will help document a pipeline of PPP projects across various sectors of the economy.
Adding that some MDAs have submitted their PPP Project Information Data ahead of the final submission date of May 31, Okoh said the bureau will partner the United Kingdom Nigeria Infrastructure Advisory Facility (UKNIAF) to screen projects to ensure that only those that are financially as well as economically viable are included in the ‘National Pipeline of PPP Projects.
According to him, the BPE will also establish a revolving Project Development Fund (PDF) for PPP transactions, while funds realised from the pool will be used to facilitate the proper structuring of PPP transactions.
Okoh is hopeful that financial institutions will support the initiative to increase the number of viable projects that could be successfully brought to commercial and financial close in the infrastructure space through PPPs.
The CBN governor also, within the week, called on governors to make their states economically viable in order to reduce their dependence on allocations from the Federation Account.
In a similar development, to address Nigeria’s infrastructural constraints for advancement in intra-African trade and export diversification, Experts advocated for the Public-Private partnership (PPP) funding model.
The call was made at a Nigeria Export Import Bank-sponsored webinar, which was organised by Arbiterz Media Ltd with the theme: “AfCFTA: Revamping Nigeria’s Infrastructure for Global Trade.” According to the panel of Experts, boosting Nigeria’s competitiveness in AfCFTA and globally, demands deliberate tackling of the country’s infrastructural gaps through the PPP.
To upscale the manufacturing sector, Managing Director, ARM-Tarith Infrastructure Fund, Tariye Gbadegesin, said spreading national infrastructure development across ports, inland hubs, rail, roads among others, were necessary.
Cost of transportation, power, logistics which are factors fundamental to production and competitiveness were high and relentlessly deepening cost of production.
Developing transport corridors and designing rail network that supports trade more than passenger commuting, are the way to go; according to Gbadegesin.
She further stressed that opportunities abound to support the emergence of a manufacturing or commercial class in Nigeria, which she said calls for partnership between private and public sector to fund infrastructure.
“You need infrastructure to upscale across board and as an equity fund, we are happy to invest in the PPP.
“The transport corridors need to be developed and we are looking at large scale ports infrastructure.
“Inland port would be viable when you have a viable rail transportation system that connects from ports to land,’’ she said.
Pledging the bank’s support to providing export credit, facilities, guarantee and insurance to promote trade, Managing Director, Nigerian Export-Import Bank, (NEXIM), Abba Bello, represented by Hope Yongo, Technical Adviser, said redefining and restrategising export and investments guarantee instrument would address the challenges impacting intra-African trade on primary agriculture produce.
He said creating a national quality infrastructure framework to reduce the rejection of Nigerian commodities in intra-African trade, will go a long way in achieving the objective; adding: “NEXIM is committed to promoting introduction of factory services in Nigeria for the promotion of trade.
Currently, we have the Bill before the National Assembly.”
Expressing concerns about the debt relationship between China and African countries, the Chief Economist, Pricewaterhouse Coopers Nigeria, Andrew Nevin, advised that it is very important to try to de-emphasise commercial relationship with just one bloc or trading partner and have economic and social relationships with other blocs.
Executive Secretary, Nigerian Investment Promotion Commission, Yewande Sadiku, said the funding models should be reflective of an inclusive job creation perspective.
Noting that given the current precarious realities of government’s expenses, Sadiku said a derisking model position in the PPP model will be a better option for the government.
The private sector, according to her, needed to be taken from the fringes to the centre in an approach that is more inclusive.
“Government is better positioned at derisking but they cannot fund infrastructure alone given the current realities of its expenses while the private sector needs to be taken from the fringes in an approach that is inclusive,’’ she said.
According to the acting Chief Executive Officer, Fund for Development in Africa, Emmanuel Assiak, Africa ranked lowest in export diversification and manufactured value addition.
He noted that Africa’s Gross Domestic Product (GDP) was closely tied to commodity cycle.
Outlining gaps in the African trade ecosystem to include structural, funding, financing and sectoral, Assiak stressed the need to address the soft and hard infrastructural constraints to engender the advancement of intra-African trade and export diversification.
He emphasised that Debt funding is not enough to address these critical gaps; saying: “We need to develop a diverse pool of funding sources to finance Africa’s growth and increase the share of equity instruments in the African funding mix.”
Affirming the resilience of Nigeria’s survival spirit, the Chief Executive Officer, Nigerian Export Promotion Council (NEPC), Segun Awolowo, said the country must and could survive in a world without oil.
Tasking players in the private sector particularly the Micro, Small and Medium Enterprises (MSME) to key into the NEPC Export Expansion Facility Programme to drive exports and reduce dependence on oil, Awolowo said: “This facility programme provides export development fund, market development initiatives, capacity building, export aggregation and trade facilitation.
“It serves to penetrate 22 identified export markets, facilitate production certifications, and assist in funding businesses amongst others,’’ he said.
More than five years after, negotiations for AFCFTA led to the signing of the trade agreement on 21 March 2018; it entered into force on 30 May 2019; free trading began on 1 January 2021 after a six-month delay following the COVID-19 outbreak.
Although, the AFCFTA frenzy is yet to be felt in Nigeria, trade activities on the AFCFTA platform have actually kicked off in other countries of the continent.
Over five months ago, free trading officially commenced under the trade pact; a move that gave life to the decisive step toward the continent’s long-held regional integration aspiration; the post-pandemic stimulus Africa needed desperately.
The flagging off of free trading had thus reinvigorated the dream for Africa’s post-pandemic recovery.
Two Ghanaian companies became pioneer exporters of products using the AfCFTA preferences, four days later; signifying a major milestone in the history of the trade agreement.
Kasapreko, alcoholic product manufacturers, airfreighted a container-load of goods to South Africa, while, by sea Ghandour Cosmetics shipped items to Guinea.
It was an operation the Ghanaian Government celebrated with pomp and pageantry.
The Accra-based AfCFTA Secretariat, is headed by a South African, Wamkele Mene, as the Secretary General.
Mene was born in Kariega, a South African town in the Eastern Cape Province.
Established as a single market for made in Africa goods and services, the AfCFTA eliminates tariffs by 90 per cent and tackles non-tariff barriers such as customs delays.
With a combined GDP of $3 trillion, this unified market of 1.2 billion people is potentially a formidable foundation for industrialization.
Intra-African exports, currently stand at about 17% of total continental exports. If this volume is ramped up, value addition will increase just as income will be boosted as well as a leap in the rate of job creation.
While only Ghana, South Africa and Egypt had established the necessary customs infrastructure for trading at the start of free trading last January, over 36 AU member states have deposited their ratification instruments; so far.
This means that countries that have ratified the agreement can trade with each other based on their tariff concessions and proposed rules of origin.
About 90% of the rules of origin are currently in the can, while the remainder are expected before the end of July 2021.
So as not to allow countries that are yet to meet the customs requirements hinder the smooth flow of trade transactions and operations, the Council of Ministers, one of AfCFTA’s decision-making bodies, approved for the affected countries to set up escrow accounts to reimburse traders operating under AfCFTA preferences.
Talks on protocols are ongoing. The first Phase of negotiations, which relate to the protocols on trade in goods and services and dispute settlement, is expected to be concluded before the end of June 2021.
Phases II of negotiations on protocols on investment, intellectual property rights, competition and e-commerce, will be concluded by the end of 2021.
On the financial sector of the trade agreement, The AfCFTA Secretariat has been busy coordinating with the African Export and Import Bank (Afreximbank), a pan-African multilateral financial institution, to implement the Pan-African Payment and Settlement System (PAPSS) project, which should tackle difficulties of multi-currency convertibility; while Afreximbank is providing $500 million to PAPSS for clearing and settlement in the West African Monetary Zone (WAMZ).
Afreximbank is looking to inject up to $3 billion to support an Africa-wide PAPSS project.
With 42 currencies in the continent, the AfCFTA goal is to ensure that a trader in Ghana can transfer Ghanaian cedi to a counterpart in Nigeria who will receive naira.
While the AfCFTA pace may seem slow, its speed is relatively impressive compared to other regional blocs.
The EU common market, for instance, was conceptualized in 1950; but countries such as Bulgaria and Romania joined 57 years later, in 2007.
Meanwhile, 54 AU member states, excluding Eritrea, are parties to the trade agreement, and ratifications continue at an impressive pace.
Evidently, the AfCFTA has demonstrated that the platform is primed to play in the big league, big time.
However, for that resolve to gain greater traction that will shake the Western powers-dominated global economy to its boots, the hand of Nigeria must be felt in actual trade operations.
Unfortunately, the African ‘giant’ is currently bugged down with the numbing issues of insecurity.
Worse still, is the inferiority complex she is nursing because she lacks the fundamentals to hold her own on the field of play, for now, on the AfCFTA platform.
One of the major pillars she requires urgently to join the race, is infrastructure which will set her back over N35 trillion.
Thankfully, finance minister working with the CBN Governor will engineer a PPP arrangement that works and which can push the country to the level where she hold her ground on the AfCFTA turf.
