Monday, October 21, 2019

A SWOT Analysis of AFCFTA For The Nigerian Economy

The President of Nigeria finally signed the African Continental Free Trade Agreement (AfCFTA) at the last summit of the African Union in Niger. This was an historic event for Nigeria because of the much-awaited desire for Nigeria to sign the AfCFTA. President Buhari initially planned to sign this free trade agreement during the launching at Kigali, Rwanda in March 21, 2018 but he later changed his mind because of some concerns raised by Manufacturers Association of Nigeria (MAN) and other organised private sector on the likely negative impact of this agreement on Nigeria.

For a long time, the countries in Africa has not been able to leverage on its population to get generate wealth for its people. This has largely been enjoyed by the other countries in Asia, Europe and America. Also, the European Union (EU) with a population of about 500million people is controlling about 33% of world trade with about 70% of this being traded among the EU countries. Africa on the other hand with a population of about 1.2 billion people is only contributing just 2.5% to the world trade with just about 18% of this being traded among the African countries. The African Continental Free Trade Agreement (AfCFTA) affords the African countries the opportunity to increase the trading activities among themselves and thereby increasing the African contribution to world trade and consequently creating more jobs and wealth as a result of the demand on the companies to grow their capacity to meet the new market demands.

AfCFTA and the Strength of Nigerian Economy
The strength of Nigeria under AfCFTA is not in doubt. The performance of manufactured products export as a percentage of non-oil in Nigeria has been growing. The data from the National Bureau of Statistics (NBS) showed a continuous upward trend in the volume manufactured goods exported out of Nigeria from 2016 to 2018. According to the NBS, the trade report of the first quarter of 2019 revealed that the manufacturing sector contributed 10.19% to the total export done during this period and this 76.6% of the total non-oil export done during the same period. From 2018 till date, there has been a continuous upward trend in the exportation of Nigerian goods to both the ECOWAS countries and also other African countries. The NBS data also showed that the non-export items of Nigeria to African countries is mainly manufactured goods while Agricultural products are mainly shipped to Europe and Asia. If there has been an upward trend in the non-export of Nigeria to ECOWAS and other African countries and the major export of Nigerians to Africa is manufactured goods, then we can safely conclude that there has been consistent growth in the export of manufactured goods from Nigeria to ECOWAS and other African countries 

AfCFTA and the Weakness of Nigerian Economy
According to the global competitiveness report of world economic forum for the year 2018 which ranked 140 countries in the world, Nigeria scored 47.5% and ranked 115. The ranking has 12 pillars which include: Institutions, ICT, Skills, Infrastructure, Macroeconomic stability, Health, Product market, Labour market, Financial ecosystem, Market size, Business dynamism and Innovation capability. Nigeria ranked the least out of the top five economies (Nigeria, Algeria, South Africa, Morocco and Egypt). Some other African Nations that scored above Nigeria besides the top economies include- Tunisia, Botswana, Kenya, Senegal, Cote D’Ivoire, Namibia, Ghana, Rwanda and Cape Verde.

AfCFTA and the Opportunities for the Nigerian Economy
There is a huge potential for Nigerian manufactured products on the African continents. This is because quite several the items being procured by other African countries from around the world are either already being manufactured in Nigeria or can be produced in Nigeria. A recent research showed that about 90 different products most of which are manufactured, processed Agro and commodities (Agro & Minerals) are in this category. The challenge that Nigerian companies might have had in the past (which might have prevented entry into these markets) is likely going to include pricing and this will most likely be reduced by the implementation of AfCFTA. The fact that African countries currently import these products is a sign that they will most likely leave them on the 90% non-sensitive list when submitting their tariff schedule to the AU secretariat. These products are strategically positioned low hanging fruits that MAN should consider first in its implementation of the AfCFTA.

AfCFTA and the Threat to the Nigerian Economy 
The fact that Nigeria is not very competitive when compared to other top economies in Africa is a cause for concern. The implication of this low competitiveness of Nigerian businesses is that most top economies in Africa will most likely be manufacturing their products at a cheaper rate than Nigeria. That means that they might be flooding the Nigerian markets and thereby killing the local competitors. However, the major item of export of these top economies in Africa are not the items that can kill the local manufacturers at least in the short run because the major items of export of these countries in the last few years are Crude oil, solid minerals and machineries.

The Committee
Now that Nigeria has signed, the question we need to ask is how does Nigeria enjoy the benefit of this agreement? What does the country need to do to ensure that it is well implemented for the benefit of Nigerian populace? How do we ensure that it does not become one of those agreements that Nigeria has signed in the past which are of no value to the citizen?

In other to ensure that the Nigerian businesses enjoy in full the benefits of the AfCFTA and also that the prediction of those that are against the signing AfCFTA does  not come to pass, there is a need to begin to actively and intentionally put in place programs and policies that will ensure proper implementation of the agreement.

I will like to recommend that the proposed implementation committee should include people from both public and private sector. Public sector should include but not limited to the likes of Nigeria Export promotion Council (NEPC), Nigeria Custom Service (NCS), Standards Organization of Nigeria (SON), National Agency for Food and Drug Administration and Control (NAFDAC), Ministry of Foreign Affairs, Ministry of Trade and Investment, Presidential Enabling Business Environment Council (PEBEC), Small and Medium Scale Enterprise Development Agency of Nigeria (SMEDAN) and the Nigeria Office of Trade Negotiation (NOTN). On the other hand, the private sector should include but not limited to the representatives from National Association of Chamber of Commerce Industry Mines and Agriculture (NACCIMA), Bankers Committee, National Association of Small and Medium Scale Enterprise (NASME), Nigerian Association of Small Scale Industrialist (NASSI) and Manufacturer Association of Nigeria (MAN). 

We will like to recommend that this committee should execute either directly or indirectly the task of communicating the details of the AfCFTA to the business community, Capacity building to empower businesses with skill to benefit from the agreement, getting the Commitment of the government to support the manufacturers with necessary incentive that will reduce their cost of production and make them more competitive, cooperation with various government agencies to enable them support all the initiatives of the committee to drive the AfCFTA implementation and finally Collaboration with the private sector in order to understand what they need from the government especially with respect to monitoring shipments into the country to prevent free entrance of goods from third countries and marketing their goods at exhibitions in various African countries.

In conclusion, I am very optimistic that the AfCFTA is well implemented in Nigeria, it has a very high tendency to create the necessary jobs that will lift out of penury, the tens of millions of Nigeria that are currently living below the poverty line.

Bamidele Ayemibo