Ahead of the implementation of the African Continental Free Trade Agreement (AfCFTA) in July, the Nigeria’s industrial sector has identified the need for the country to address current market challenges to ensure its gets benefits of the agreement.
There are indeed genuine concerns about how manufacturers can overcome domestic gaps to compete under a liberalised African market, amidst the advantages that include improved ease of doing business across the continent, enhanced Africa’s investment profile (foreign investors see Africa as a single market), opportunities for knowledge and technology transfer, improved mobility of talents among others.
The AfCFTA Forum, which comprised representatives of the private sector, key government institutions, and experts highlighted among other things, the need for the country to conduct a gap analysis on the readiness for a successful implementation of the agreement. The forum focused on the domestic challenges the economy was faced with; and which needs to be overcome to ensure that the real sector competes in the African market.
Some of these challenges include high-interest rates, corruption, unreliable power supply, and inadequate infrastructure. Others include low disposable income, unmitigated competition from foreign goods, mostly sub-standard and lack of access to finance. The players pointed out that a study conducted in Nigeria indicated that the cost of doing business and physical infrastructure were key priority areas that needed to be addressed by the government as it moves towards AfCFTA implementation.
Consequently, they agreed that business enterprises in the country should be sensitised on AfCFTA , with emphasis placed on what can be done to integrate regional and global value chains. They are of the view that the sensitisation should also focus on addressing youth and women’s informal trade, showcasing the benefits of the AfCFTA.
Issues dealing with intra-Africa payment systems and information sharing on how to boost intra-African trade and investment were discussed.
It was also agreed that an institutional framework to address rules of origin, standards, technical barriers to trade (TBT), sanitary and phytosanitary measures (SPS) from national to RECs, linking to the African Union, technical regulations, and conformity assessment were needed. The institution is to set up a verification mechanism on conformity assessment certificates and rules of origin certificates, with participants agreeing on the need to address disputes that may arise from trade remedies.
Furthermore, researchers at the World Bank have identified other technical challenges that need consideration as governments negotiate the terms of trade agreement.
For instance one of the key issues remains the tension between national industrial policies and AfCFTA ambitions.
They noted that the AfCFTA will only succeed if member countries make the regional strategy part of their national policy and proactively address the tensions that arise between the two.
The World Bank recommended that countries should find the favourable point that reinforces national economic goals and ensure maximum gains from increased integration, looking beyond a static assessment of their priorities.
The researchers were also of the view that countries need to make their people understand why integration is useful – this is particularly important in the larger countries, which may have greater influence on regional decisions.
Likewise, the lack of capacity to monitor and safeguard against illicit practices like smuggling, dumping, and violation of the rules of origin were also identified as a part of the challenges to be addressed.
Given the African Union’s ambitious industrialisation agenda, the World Bank expects to see even more of these types of disputes on rules, particularly the rules of origin, once trade under AfCFTA becomes more widespread.
With this on the horizon, countries need to think through how to address origin fraud, setting clear and simple rules that are monitored and enforced at the national and regional levels.
The need for an effective dispute resolution mechanism with the authority and institutional capacity to mediate and enforce decisions within and across countries in Africa and with parties outside the continent, they said was critical to the implementation of the agreement.
The researchers noted that the border closure gives us an opportunity to re-evaluate the tools of engagement as Africa moves forward in its decision to create the world’s largest single market.
Meanwhile, the Manufacturers Association of Nigeria (MAN) has expressed concern over Nigeria’s preparedness.
Director General of MAN, Segun Ajayi-kadiri, said AFCFTA is not bad in its entirety, but many questions and salient issues were not resolved before Nigeria signed the agreement.
The MAN boss said Nigeria is lagging behind in terms of trade facilitations, access to finance, technology, trade information hub, production capacity among other factors, which would place it at disadvantage, hence, no country would have an edge over another without a robust manufacturing sector. He explained that if Nigeria has no functional research and information hub to guide investors, promoters, analysts, business men and women to make business decisions and proper planning as well as the required strategies to get results, one wonders how it intends to make any headway at AFCFTA.
He added that though the Federal Government is doing its best to boost ease of doing business, most of the business policies of this administration are strangulating the Organised Private Sector (OPS) because they do not achieve any significant reduction in the cost of doing business; which is what every business person expects from the government.
Similarly, former president of the Lagos Chamber of Commerce and Industry (LCCI), Babatunde Ruwase, welcomed the agreement but added that it may not work out if member nations fail to reform their business environment, diversify their export base, fix infrastructural problems, address regulatory challenges as well as institutional competitiveness. Ruwase believes that the agreement will further boost trade in a continent with a population of 1.2 billion, as it allows members to specialise in their areas of comparative advantage.
“Trade within the African continent is relatively low compared to other continents. The United Nations Conference on the Trade and Investment (UNCTAD), in its ‘Economic Development in Africa Report last year, stated that the share in Intra- African trade, which is the average of Intra-African exports and imports, was about2 per cent between 2015 and 2017, while comparative figures for America stood at 47 per cent, Asia 61, Europe 67 per cent and Oceania, 7per cent”