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Correcting Nigeria’s trade imbalance through non-oil exports

Correcting Nigeria’s trade imbalance through non-oil exports

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Despite the fact that Nigeria has the largest market in Africa, the country’s trade volume as a percentage of total trade within the African continent still hovers around 5.5 per cent. In this piece, IFEANYI ONUBA examines the reasons for this trend

Based on an analysis by the African Export-Import Bank, one of the main reasons why intra-African trade is low at about 15 per cent compared to Europe (59 per cent), Asia (51 per cent) and North America (37 per cent) is because of lack of access to trade and market information.

This is because there is no coordinated platform to bring together continental and global players to showcase and exhibit their goods and services and to explore business and investment opportunities in Africa.

Also, the limited access to information about trade finance and trade facilitation interventions that will support intra-African trade has been identified as a major reason for the low level of trade within the continent.

In order to boost the level of trade within the region, stakeholders are of the view that there is need to have an intra-African market place where buyers and sellers of goods and services will meet and explore business opportunities.

This, according to them, would provide a platform for entry into a single market of over one billion people joined under the African Continental Free Trade Area.

As part of a comprehensive intervention to support trade in the region, AFREXIM Bank has decided to disburse $25bn in support of intra-African trade by the end of 2021.

The bank is also putting measures in place to facilitate trade by finalising the African payment settlement system.

This would provide a clearing platform for payment system in the region.

Currently, all the 55 African countries have signed a treaty for the bank to implement this payment system.

Speaking in Abuja during an Intra-African Trade Fair engagement session organised by the African Export-Import Bank in collaboration with the Nigerian Export Promotion Council, Vice President, Yemi Osinbajo, said Nigeria could not afford to be left out of the trade and investment opportunities that abound in Africa.

Osinbajo lamented the low level of trade between Nigeria and other countries within the African region, adding that the Federal Government would in the short term correct the level of trade imbalance.

The Vice President said while South Africa’s trade as a percentage of total trade within the African continent was about $32bn or 25 per cent, Nigeria’s portion of intra-African trade was just $7.1bn, about 5.5 per cent.

He said the administration of President Muhammadu Buhari understood the importance of trade in creating jobs and attracting investments, adding that the government was determined to increase the level of Nigeria’s trade within the sub-region.

In order to achieve this objective, Osinbajo said Nigeria would participate effectively at the IATF scheduled to hold in December.

The fair to be hosted by Egypt is expected to have 1,000 exhibitors and over 70,000 participants.

The VP said, “South Africa’s share of intra-African trade as a percentage of total African trade is 25 per cent or $32bn, while Nigeria’s share of intra-African trade as a percentage of the total is only 5.5 per cent or $7.1bn.

“Despite the volume of informal trade which may not have been captured, we realise the need to seize this opportunity of this trade fair to promote Nigeria-African trade.

“I will like to assure you that Nigeria will participate effectively at that trade fair and use it effectively as an opportunity to showcase its trade and investment opportunities which are indeed very vast.

“We believe that the trade fair will provide an opportunity to engage with other African countries and investors who are interested in partnering Nigeria to support the zero oil policy and to reposition the Nigerian economy.

“We believe that trade is very critical in creating jobs especially for the young African population and it’s too good an opportunity to be missed.”

In his comments at the event, the Executive Director, NEPC, Mr Olusegun Awolowo, said the agency recognised that the volume of intra-Africa trade was abysmally low.

He put Nigeria’s export potential with West Africa at $200m, out of which $102.1m remained untapped, while for North Africa, it was $31m, with $16.1m untapped.

Awolowo said while the potential exists especially where the country has comparative advantage, the government would continue to ensure that products from Nigeria remain competitive.

He said the IATF would serve as a platform for advancing Nigeria’s trade with countries within the African region.

He said, “We should aim to make Nigerian products the first products of choice for African markets and the first step is to engage.

“When we looked at the 2017 statistics from the International Trade Centre, we saw that Nigeria only accounted for about one per cent in value of African imports from the world in 2017 of which 80 per cent was petroleum.

“While this is disappointing, it demonstrates opportunities and also validates the case for improved intra-African trade engagements.

“Looking at Nigeria’s export potential; while regions in Europe, Asia and North America present the greatest potential markets, African sub-regions feature among the top 10 markets.

“A thorough look at Africa’s products demand from around the world shows Nigeria is suitably positioned to replace supplies from other regions of the world on some key products.

“We found that four of Africa’s high demand products are among Nigeria’s 11 priority products identified to diversify our export base under our Zero Oil Plan.”

He said while the potential exists for Nigeria to take advantage of products where it has comparative advantage, there was need for stakeholders to get competitive and increase their productive capabilities.

He said, “We should aim to make Nigerian products the first products of choice for African markets and the first step is to engage, and over the next few months, we will be engaging broadly with relevant government partners and the organised private sector to ensure that Nigeria showcases its best and maximises the intra-African trade fair platform for enhanced trade relations.”

The President, AFREXIM Bank, Dr Benedict Oramah, said that the bank was taking steps to ensure that continental trade becomes a reality.

He said, “Trade is the gateway to development and statistics in Africa are not too expensive, especially when it comes to one of the biggest opportunities for growth: trade among African countries.

“Infrastructure development is a top developmental priority in Africa in two critical areas: electricity and transport.”

Oranmah said access to electricity forms the basis of an industrialised economy, adding that critical infrastructure challenges needed to be addressed to facilitate trade within the region.

“Unless we can do something to tackle this issue, we have no hope of increasing intra-regional trade in Africa,” he said.

He said the bank had realised that sustainable economic growth in the continent could not be achieved quickly without participation from both the private and public sectors.

He said, “The private sectors has a crucial role to play in making regional integration work for Africa because though trade agreements are signed by governments, it is the private sector that understands the constraints facing enterprises and is in a position to take advantage of the opportunities created by such agreements and regional trade initiatives.”

The Managing Director, Intra-African Trade Initiative, Kanayo Awani, said the agency would transform the way African countries trade with each other and transform Africa generally.

Awani called on the Federal Government and various stakeholders to mobilise businesses, both corporate and small and micro enterprises to get involved in trade and investments across Africa.

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