AfCFTA: A Guide for Export Oriented Nigerian Manufacturers, SMEs
The National Action Committee on AfCFTA provided needful guide on how Nigerian enterprises could participate effectively in the African Continental Free Trade Area (AfCFTA), writes Dike Onwuamaeze
The Managing Director of Macjames Global Resources Limited, Mr. Chinenye Justin Nwaogwugwu, came all the way from Port Harcourt to to attend the Lagos Chamber of Commerce and Industry (LCCI) seminar on “AfCFTA: The Roadmap for Exporters Successful Participation,” which was held on Thurday, August 26, with two nagging questions.
Nwaogwugwu kept silent throughout the proceedings of the seminar until the microphone was handed to him during the question and answer session and he ceased the opportunity to voice his concerns.
He said: “Good day all. I have two basic questions for Mr. Francis. Sir, I want to know whether the products regulatory authorities will harmonise certifications for manufactured products under the AfCFTA project so that we do not need to certify products country by country in Africa. Two, how is your committee working with the regulatory authorities in Nigeria to make it faster for SMEs products to be certified if they meet basic requirements?”
Nwaogwugwu, who is a manufacturer with eyes on the African continental market, also narrated a recent experience that informed his questions. He exported a sample of its water treatment innovative product, SaferEx, to Stubhub (Pty) Limited, Botswana. The Botswana Water Utilities Corporation (BWUC) did laboratory runs with it on their two rivers water which lasted for six months or so and found the product satisfactory to be used as a disinfectant and coagulant.
But the BWUC demanded that the product should be certified by the NSF International, which is in Belgium. “We wrote to this certification body, which after giving us the cost, told us that it cannot come to Nigeria to take a sample of our product for the certification process because of the prevailing security challenges in our country.
“It also cannot allow us to send the product to Belgium for certification because Nigeria is rated below 50 percent by the Transparency International. So, Sir, what is the National Action Committee (NAC) on AfCFTA doing to ensure that African manufactured products that have been certified in Africa would be acceptable in any AfCFTA member countries without repeating the certification outside Africa?”
Nwaogwugwu was not alone. Another participant at the seminar, the Proprietor of Dasun Integrated Farms Limited, Ms. Bosun Solarin, who is also the chairperson of the LCCI’s Export Group, said: “I am still a little bit confused today about what AfCFTA holds. I want to know how I can be able to export my products under the free trade regime to Egypt and other African countries. I am still confused on how to export my goods. That is why I am here today. We want you to tell us how we can get into those countries and sell our products. The bankers should tell us how we can quickly get paid when we sell our goods abroad.”
On hand to answer their questions and remove any perceived confusion about how trade under the AfCFTA is the Secretary, NAC on AfCFTA, Mr. Francis Anatogu, who is also a Senior Special Assistant to the President on Public Sector Matters.
AfCFTA and Trading
Anatogu started by showing the participants the steps they should take trade in AfCFTA, which took effect on January 1, 2021. However, trading has not commenced under the agreement because member states are still negotiating trade rules and protocols.
He said: “What is important is to know the steps and how to take them. It is important to know what is in place and what are still being discussed to enable businesses to get up and do what that are needed to be done.
“The AfCFTA is about rules and making them clear; about reducing tariffs and harmonising policies, standards and operationalising corporation among African countries so that we can increase trade among ourselves. It is also about exporting and earning FX,” adding that the agreement offered those who are able to produce, the market to sell at discretional terms.
Anatogu disclosed that the negotiation around protocols on trade in goods, services as well as the mechanism for dispute settlement have been concluded under Phase One of the AfCFTA while negotiations have just commenced under the Phase Two for protocols on intellectual property rights, competition policy, etc.
He further disclosed that there are 6000 tariffs lines under the free trade agreement but emphasised that the agreement offered elimination of tariffs on 90 per cent tradable items.
However, it would take a period of 10 years, starting from the day the clock started ticking, to wipe out 90 per cent of the tariffs. But the clock has not started ticking yet.
Besides, there is another seven per cent that is classified as sensitive list, which would require a longer period for their duties to be removed. Again, Anatogu stated that every member country has the right to designate some products as sensitive products that will be subject to liberalisation over a longer term period.
He added that the remaining three per cent would be used to protect infant industries of member states that could not compete under a liberalised market. Therefore, the import tariffs on these three per cent would never be removed.
“The ECOWAS Trade Liberalisation Scheme (ELTS) has identified those 90 per cent that will be subjected to liberalisation, which has been submitted to the African Union but they have not been published. These products (schedule) need to be adopted by the Heads of State and then published.
The first step is adoption. When it is adopted, the customs union in Africa will update their tariff book. That is when you can go to the custom portal and say I want to export under AfCFTA.
“However, these products must also be liberalised in the country of export destination for trading under the AfCFTA.”
Removal of Tariff
If the eventual removal of tariff on 97 tradable items could be described as the unique selling proposition of the AfCFTA, then the Rule of Origin (RoO), would be viewed as its central issue.
The RoO simply means the percentage local content of a product that is derived from Africa. It would be the key determinant of trading under AfCFTA with the implication that any product that did not satisfy the RoO would not be acceptable for duty waiver under the AfCFTA.
He explained that, “unlike the ELTS, the AfCFTA has what we call product specific rule of origin, meaning that the rules are different for different products. It could be 100 per cent local content for some and substantial transformation for others, which is adding substantial value on materials sourced from outside the continent.”
The criterion for substantial transformation is broken into four. It includes the level of transformation that would warrant a change in the entire classification. For some, it might be a change in sub-classification. The third is value of non-originating materials for measuring what was imported outside Africa. The fourth one is manufacture or processing operation, which is about the kind of operation the product has undergone.
For instance, wood from the forest is exported under HS Code 4403. Sawing it moves the code to 4407, which is a change in subheading. If you make it into furniture it will move to 94.03.
Anatogu added: “For you to be able to export, you will follow the normal exporting process that we have today, but you need to obtain your AfCFTA certificate of origin as well as meeting all the export requirements of the destination country.”
Moreover, there will also be enterprise registration for companies to have their AfCFTA numbers that will identify them in any African country along with their products approval or registration.
He explained that companies would obtain their certification from a designated competent authority (DCA) for Nigeria, which has been nominated but not yet approved.
The duty of the DCA of the exporting state party is to authorise any exporter, who frequently exports products to the satisfaction of the customs authorities, all the guarantees for verifying the originating status of products as well as compliance with all other requirements to make out origin declarations regardless of the value of the products concerned. He shall issue to the approved exporter an authorisation number, which must appear on the origin declaration.
In addition, the NAC has identified 25 companies from different stakeholders’ organisation in Nigeria to do the trial runs in terms of going through the process of assessing the compliance of their products to the AfCFTA’s RoO. The process has just started and might run for the next two months. These are to ensure that Nigerian businesses would take off on a very strong and robust footing.
He advised businesses in Nigeria to locate their export market by finding out goods that Nigeria is exporting beyond $10 million that Africa is importing in billions of dollars, which Nigerian businesses are not playing in? These includes automobiles and spare parts, electrical, machineries, and pharmaceuticals amongst others. “We must develop capacity to play in these segments,” Anatogu said.
He identified ECOWAS as Nigeria’s core market along with Egypt, Kenya, Morocco and South Africa. “These will give us 50 per cent of the continental market,” he said
It would be unwieldy, according to him, for Nigeria to target all the AfCFTA member states because of the logistics and the strenuous nature of contracting customs cooperation and mutual recognition agreements.
He added that effective custom cooperation would be able to solve AfCFTA’s biggest issue: the infiltration of goods made outside Africa through one African country into the Nigerian market.
The Managing Director of Ecobank Nigeria, Mr.Patrick Akinwuntan, who was represented by the Executive Director of Ecobank Nigeria, Mr. Kola Adeleke, stated that the AfCFTA provided Nigerian businesses with a market to earn FX that would facilitate smooth running of their business without depending on the central bank.
He said: “Export is very important because it adds on the GDP. It also adds on the employment rate of any country. It provides businesses the opportunity to earn their own foreign exchange since the CBN cannot meet all the FX demand.
“What some Nigerian businesses are doing now is to export part of their products to be able to earn FX. I know of a firm that generated $2million within one month by exporting to Ghana. This reduced its FX pressure and gave it the opportunity to grow more capacity. We are financing its business expansion to enable it to produce more.”