AfCTA: Facilitating free trade in Africa – Punch

When 44 African heads of state and governments gathered in Kigali, Rwanda, to ink a free trade pact for the continent, their triumph was tempered by the conspicuous absence of Nigeria and South Africa, the continent’s biggest economies. President Muhammadu Buhari’s decision to pull back at the last minute “to consult with stakeholders” resonated around the world and focussed attention at home on Nigeria’s place in continental commerce. The consensus today is that, though free trade is desirable, Nigeria should, however, position itself for maximum benefit before logging on to any new free trade pact.

Buhari has been praised by stakeholders, notably the organised private sector, for cancelling his trip to Kigali a day before the scheduled signing to give more room for consultations. This is a marked departure from past experience when critical sections of the polity were ignored, leaving uninformed civil servants to tie the economy through binding multilateral agreements.

The African Continental Free Trade Area agreement was signed by 44 of the 55 member nations of the African Union, with Nigeria and South Africa, the continent’s two largest economies, demurring, along with eight others. It is the culmination of years of talks and negotiations to achieve the dream of African unity and a common market. It aims to bring together 1.2 billion persons with combined Gross Domestic Product estimated at $2 trillion: designed to facilitate free movement of goods and services and remove tariffs on 90 per cent of goods, leaving 10 per cent of “sensitive items” to be negotiated at a later date. Also on the cards are eventual free movement of people, liberalisation of services, dismantling of non-tariff barriers such as red tape and ultimately give birth to a single currency.

Ordinarily, any free trade arrangement should favour and be enthusiastically supported by Nigeria, given her unique advantages. Boasting the highest population estimated at 193 million and largest economy with GDP of $405.1 billion, 77 million identified as the current working population and the largest informal sector, youth population of over 90 million, a borderless African market should be a tantalisingly welcome prospect.

But our experience with the Economic Community of West African States trade pact and the World Trade Organisation, despite their potential, has not been pleasant, which compels caution as we contemplate AfCFTA.

Trade blocs, inter-governmental agreements that are components of regional inter-governmental organisations (in this case, the AU), seek to break down or reduce barriers to trade and commerce among member-states. Its benefits, say experts, include improved access to foreign direct investment, creation of jobs, improvement in competition, improved productivity and economies of scale. It drives down the cost of imports and enhances market efficiency.

Nigeria should, however, focus on ameliorating the identified disadvantages before taking another plunge. For instance, while trading blocs favour its participants, they tend to disfavour multilateralism through erection of tariff and quota barriers against non-members, promoting, according to the Atlas of Global Inequality, regionalism instead of global integration. Loss of sovereignty is also an issue. Experts recall how the EU started as a trading bloc in 1957 but has grown to a political confederacy with binding legislation on human rights, environment and immigration. Concessions could also allow market dominance by stronger nations within the region and make some countries more dependent on others.

Even UNCTAD, a promoter of free trade, has published studies showing how unprepared nations often suffer from free trade arrangements. Nigeria, with its weak industrial base, is not benefitting from its hasty entry into the WTO and has been victimised by the ECOWAS Common External Tariff that confers preferential tariff on goods originating from member countries. Reports by the Manufacturers Association of Nigeria indicate that goods from Asia, Europe and the Americas are imported, first, into West African countries, re-labelled as made in the ECOWAS states, and then brought into Nigeria, thereby depriving the country of customs revenue, crippling local industries and taking away jobs from our youths. Because Nigeria has failed to build a vibrant manufacturing economy mass producing goods for the region, Asian countries, especially, have turned Nigeria into a dumping ground. The debacle is of our own making, the result of incompetence by successive governments.

Nigeria should get serious; AfCFTA is an ideal it should eventually sign on to, but only after putting her house in order and, like more deliberate and serious governments, plan and faithfully execute development projects. China spent time reforming and positioning its economy for global competiveness for over three decades and did not join the WTO until it was ready in 2000. India, despite its membership of WTO since 1995 and its predecessor, General Agreement on Trade and Tariffs since 1948, fiercely protected its textiles, steel and automobile industries, having wisely negotiated exemptions. Today, it is leveraging its position as the world’s third largest exporter of textiles after China and the European Union and major exporter of steel, automobiles and IT software. Nigeria needs to open up agriculture, mining, railways, ports, airports and downstream oil and gas to FDI and liberalise the operating business environment to become the major beneficiary of ECOWAS trade liberation and AfCFTA. The power sector needs urgent reform and massive infusion of private investment to reuse available electricity power. The economy cannot fly, nor can Nigerian products ever compete in any transnational market when less than 5,000 megawatts is available for distribution and businesses incur over 40 per cent additional costs providing alternative power sources.

When the 36 states begin to operate as productive economic units instead of indolent cost centres and the full force of human and natural resources are unleashed, Nigeria will be the major beneficiary of regional and continental free trade agreements. Those like former president, Olusegun Obasanjo, who canvass the immediate signing of AfCFTA forget that it was the unprofessional negotiating skills at play when the country ratified WTO pacts on his watch that triggered the final collapse of our local textile industry. Such missteps should not be repeated.

Radical economic reforms should be launched without further delay to enable us to benefit from the ECOWAS CET. This should prepare us for eventual membership of AfCFTA.

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