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ACFTA: Big blunder or cautious step?

ACFTA: Big blunder or cautious step?

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Charles Nwaoguji

After decades of fruitless search to stamp its authority on the African continent as a dominant economic power house, Nigeria, last month, lost out big when it failed to sign the African Continental Free Trade Agreement (ACFTA) in Kigali, Rwanda.

Despite an earlier mandate given by the Federal Executive Council (FEC) for President Muhammadu Buhari to sign the protocol, the Nigerian leader surprisinglyopted out at the last minute to the consternation of many. Ostensibly, it was gathered that a hitherto enthusiastic Buhari capitulated after the Nigeria Labour Congress (NLC) and the Organised Private Sector (OPS) raised objections to the deal.

In the ensuring debate as to propriety of Nigeria signing the CFTA, the Director General of Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, for instance, admitted that the CFTA stands out as a part of the dream of the African Union (AU) to promote and drive integration, investment and trade on the continent. 

According to him, trade within the continent currently accounts for 11 per cent of total trade. It was therefore expected that CFTA will make the continent more integrated, united and prosperous economically.

Speaking to Daily Sun from his office in Lagos, Yusuf explained that the CFTA is a good dream, especially in the light of the numerous benefits of a larger market but contended that a liberal trade regime within the continent poses a major risk to the Nigerian manufacturing sector.

“The Nigerian industrial sector is highly vulnerable because of its weak competitiveness. Manufacturers in Nigeria are burdened by profound infrastructure challenges and high cost of fund, which put tremendous pressure on their production and operating cost,” he said.

He observed that Nigeria’s industrialisation strategy, which has been in place for several years was rooted in import substitution. For him, this is a model of industrialisation that is inward looking and focusing on domestic market for its sustenance.

“This strategy does not position the sector for competition in the regional, continental or global marketplace. The sector does not have an outward looking or export-oriented disposition. Therefore, exposing the Nigerian industrial sector to international competition may be the undoing of the sector,” Yusuf argued.

According to him, “this poses a major dilemma for our trade policy. While economic integration is desirable because of the attraction of larger market, we need to worry about its implications for our weak industrial sector.”

As a way forward, the LCCI boss said government needs to strengthen the competitiveness of the Nigerian industrial sector,  stressing it was only then that the country can get value from being part of a continental free trade agreement.

Yusuf also pointed out that besides, some African countries already have trade treaties with countries outside the continent. “This means that products from outside of the continent may penetrate the entire continent under a CFTA regime. These are some of the issues that may have informed the current equivocation on the signing of the Africa CFTA by Nigeria.”

He stated that trade can only be beneficial if the country is in a good competitive position to be part of such trade. “We need to review our industrialisation strategy from the disproportionate dependence or as protectionism to a policy choice of focusing on building the capacity of the manufacturing sector for competitiveness.  This is what can create an enduring industrial sector in Nigeria.  This is also in tandem with the Nigeria Industrial Revolution Plan (NIRP), which underlines the significance of resource-based industrialisation strategy. This is a model that stresses local value addition, robust linkages and competitiveness.”

Speaking in the same vein, the former Chairman of Apapa branch of Manufacturers Association of Nigeria (MAN), Mr. John Aluya, said the Rules of Origin in the AfCFTA cannot be adequately enforced against influx of European Union (EU) goods into the Nigerian market. He said the Rules of Origin are used to determine the country of origin of a product for purposes of international trade.

“Those same goods will surely find their way to Nigeria, which is the main target market for the EU,” Aluya said.

He said the gains of the manufacturing sector and other small scale sectors will be totally wiped out if Nigeria agrees to the Africa CFTA, saying it is the manufacturing sector that is against the idea not just the Federal Government. “Imagine companies with huge manufacturing plants here competing with their rivals from Europe. If we truly want to industrialise as a nation, Nigeria should never go near that CFTA deal. I have been in meetings where this has been analysed and discussed extensively. MAN will never support the idea especially in these days of trying to encourage made in Nigeria products. Going near the CFTA deal will be a contradiction; then you and I will come back here to lambast government for not protecting Nigeria’s businesses,” he explained.

But according to Mr. Patrick Iwuagwu, the Managing Director of Patchib Energy Resources Limited, an importer, said the AfCFTA has the potential to bring over 1.2bn people together into the same market. The bloc of 55 nations would be the largest in the world by number of states. 

He said signing an agreement establishing the CFTA is welcome development for importers because the flow of goods will be easier within Africa region.

“This would  reduce  barriers to trade and as such remove import duties and non-tariff barriers, as African countries are hoping to boost intra-continental business. The AfCFTA could improve trade between African countries,

He said, Manufacturers  should not be apprehensive about  the Rules of Origin in the AfCFTA as SON is there to check every goods that comes into the country.

“We should not be afraid that the Rules of Origin cannot be adequately enforced because goods from the EU can find their way into one of the African countries that have bilateral agreement with the EU. “When the goods get into the African country, they cannot repackage them, change the label from Made in Europe to that of the African country.

“Though same goods will not surely find its way to Nigeria which is the target market for the EU if rule of law as followed,” Iwuagwu said.

To make meaningful impact, he said the CFTA would improve the quality as well as the quantity of intra-African trade.

“The objective of the CFTA should primarily to engender more intra-African trade, which currently comprises just 15 per cent of the continent’s total merchandise trade. When compared with intra-regional trade in other continents – 67 per cent in Europe, 58 per cent in Asia and 48 per cent in North America – this is quite low,” he noted.

In 2012, the African Heads of State and Governments resolved to establish AfCFTA treaty to create a single continental market for goods and services in member nations of the AU, with free movement of business persons and investments using a single currency.

Consultations and negotiations for establishing the treaty commenced in June 2015 during the 26th Ordinary Session of the AU Assembly Heads of State and Government in Johannesburg, South Africa.

The year 2017 was adopted as the deadline the treaty would become operational. But, consensus was not reached among many member nations who requested for more time to continue consultations on the potential impacts on their economies.

The scope of the treaty covered agreements on trade in goods, services, investment, and rules and procedures on dispute settlement, including a range of provisions to facilitate trade, reduce transaction costs, provide exceptions, flexibilities and safeguards for vulnerable groups and countries in challenging circumstances.

But after several years, the draft agreement was finally signed on March 21, 2018 during the 18th Extraordinary Session of the Assembly of AU Heads of State and Governments in Kigali, Rwanda.

About 44 of the 55 African countries signed the treaty. The signatories included host Rwanda, Niger, Angola, Central African Republic., Chad, Comoros, Congo, Djibouti, The Gambia, Gabon, Ghana, Kenya, Mauritania, Mozambique, Cote D’Ivoire, Seychelles, Algeria and Equatorial Guinea.

Others include Morocco, Swaziland, Benin, Burkina Faso, Cameroon, Cape Verde, Democratic Republic of Congo, Guinea, Liberia, Libya, Madagascar, Malawi, Mali, Mauritius, South Sudan, Uganda, Egypt, Ethiopia, Sao Tome and Principle, Togo and Tunisia and others.

Nine others that did not sign the agreement included Nigeria, South Africa, Zambia, Tanzania, Burundi, Eritrea, Botswana, Lesotho and Namibia.

Nigeria said it was delaying its signature to the agreement to widen and deepen domestic consultations, to ensure all concerns were addressed, as it would not sign any agreement that would not fairly and equitably represent the interest of Nigeria and indeed, her African brothers and sisters.

The treaty aims at taking advantage of 1.2 billion population of the continent with a combined Gross Domestic Product (GDP) of more than $2 trillion to create a single continental market for goods and services. 

Some argue the treaty would impact on government revenue and social welfare, as elimination of all tariffs among African countries would erode the trading states’ treasury by up to $4.1 billion annually and deepen poverty, with millions of Africans potentially exposed to starvation and death.

Others, particularly among the poorer economies, are rather apprehensive the benefits in the free trade area may not be equitably distributed among economies.

The International Monetary Fund says Nigeria is the largest economy in Africa with GDP of $405 billion, followed by Egypt ($332 billion) and South Africa ($295 billion). Nigeria, with a population of about 180 million is also Africa’s largest market.

Nigeria decided not join the Africa free trade zone on March 21 because it needs to carry out more consultations at home first.

Other leaders agreed to form a zone encompassing 1.2 billion people, but 11 countries including the continent’s biggest economy, Nigeria, and its most-developed, South Africa, did not sign up.

The omissions were a blow to African Union plans to cut back red tape and other barriers that have strangled trade between African states – which amounts for just 15 percent of total commerce on the continent.

“Minister of Foreign Affairs, Mr. Geofrey Onyema, in a tweet said the decision for President @MBuhari to not attend the #AfCFTA signing ceremony was taken because we realised more inclusive (domestic) consultations needed to take place before Nigeria signs,” read a message on the presidency’s Twitter feed.

It did not go into any details on the nature of the consultations.


The post ACFTA: Big blunder or cautious step? appeared first on The Sun News.

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