The South Africa President, Cyril Ramaphosa, was in Abuja earlier, this month (July 2018), to participate in the 25th anniversary celebration and annual General meeting of the African Export Import Bank (Afreximbank). Ramaphosa, also used the opportunity to call on Nigeria, not to delay signing the agreement for the African Continental Free Trade Area (CFTA).
Notably, the CFTA seeks to create, unhindered access to markets in 54 African countries, with a combined population of about 1.2 billion people, and a gross domestic product, above $3.4 Trillion. Incidentally, 49 countries, including South Africa have now signed the AfCFTA; Nigeria with a population of almost 200 million, and 4 other countries are yet to do so.
Nonetheless, in response to Ramaphosa’s admonition, Nigeria’s Finance Minister, Kemi Adeosun, noted, that Nigeria was about concluding nationwide consultations with critical stakeholders, so that the final decision “must reflect views across the country”. Adeosun, however cautioned that “we must never be in a hurry to get things wrong, we must get things right”.
Similarly, days later, President Buhari also noted, in his speech, at the Afrexim event, that “there is a need to ensure our national interests, as well as our regional and international obligations are balanced”. According to PMB, “Nigeria is a federation of 36 states, plus FCT Abuja, 774 local governments and millions of interested stakeholders who must be consulted with and listened to, in order to ensure an optimum outcome” PMB consequently, reportedly, directed “relevant Agencies to conduct intensive and exhaustive consultations nationwide on the CFTA”; the President’s consultative Team has already met key stakeholders across the six geopolitical zones, and observed that the clear message that emerged, is that any trade agreement must be both “free and fair”.
Nonetheless, President Buhari has assured that “this fairness is achievable”, and affirmed that “we will work towards it”. Regrettably however, PMB is yet to disclose the critical concessions or amendments that would make the CFTA agreement free and fair.
Nonetheless, barely a week after Buhari’s observations, Vice President, Yemi Osinbajo, while speaking at the 8th Presidential Quarterly Business Forum, also noted that, the need to protect local manufacturers, made the federal government to favour further consultations, before Nigeria endorses the AfCFTA. Osinbajo explained that “with respect to the AfCFTA, there are clearly huge advantages for us”, as according to him “there is no question about it at all, the rest of Africa, see the enormous advantage of Nigeria’s participation; everybody is waiting for us naturally, because, they see a huge market; there are advantages of our being there”.
Osinbajo, therefore, advised that “we must ensure we get the best possible terms for Nigeria’s trade and commerce” and warned that “our experiences with ‘dumping’ and other injurious practices make it obvious to us, that our market could be a real target, our local manufacturing industries, could become unprofitable, and our agricultural advantage could be reversed.” Osinbajo, nevertheless, observed that although “the general resolve favours engagement, but concern remains around improving the domestic environment for greater competitiveness, while there are also concerns of power supply and (poor) investment in infrastructure”. However, Osinbajo assured Nigerians that “government would take account of all the issues that had been raised and would negotiate well”. Furthermore, the Vice President decried, with serious concern, that “this was the first time Nigeria was negotiating on a treaty”, because, according to him “the country was only signing treaties in the past, without knowing those who negotiated them”. Heaven help us!!!
Conversely, Okechukwu Enelamah, Minister for Industries, at the same Presidential Business Forum, noted that “the idea of not signing the agreement, actually disadvantages us, as it weakens our position”. The agreement, according to Enelamah, “is a ticket to play, and I mean, not buying the ticket to play is suicidal, in a market where the consequences will be there”. The minister therefore, suggested that “we accept to play and solve these problems and make sure the work goes on, and that we want to do so collectively in a partnership”. Nonetheless, Enelamah promised to “have another meeting with the Manufacturers Association and other stakeholders who are interested in continuing with us soon”.
Similarly, Minister for Power, Babatunde Fashola, reportedly, also supported the idea of signing the treaty. Fashola, apparently, wondered what Nigeria was still waiting for “when smaller countries with lesser potential had since signed the agreement”.
In sharp contrast, however, Nigeria’s Organized private sector, is obviously not on the same page with political office holders, whose stake in the Nigerian project is often transient. Thankfully, the Manufacturers Association and other industry players have, clearly, remained un-bowed by the serious pressure from government officials to support the immediate endorsement of the AfCFTA. According to M.A.N, such an agreement should only be considered “when the federal government has done more studies on its impact”. Indeed, earlier in July, M.A.N President, Dr Frank Jacobs, told reporters in Lagos, that “when they open our borders for all manner of products to come into this country, most of our industries will be out of business”; Jacobs therefore, affirmed that “we will continue to oppose it until the right thing is done”.
Similarly, Chief Nike Akande, Chairman NEPAD Business Group also noted that “Nigeria will not be ready for the agreement until the country’s goods and services were competitive enough”. Akande, also, warned against turning the country into a dumping ground for foreign goods and advised that “good infrastructure was key to promoting trade and investment”.
Similarly, Muda Yusuf, Director-General LCCI noted that “the manufacturing sector in Nigeria is focused more on domestic market and once you take away this market, the sector will practically collapse, because it cannot compete internationally”. This according to Yusuf, “is because of the operating environmental challenges in Nigeria”. Consequently, Yusuf warned, that although “there are attractions for a free trade zone, but for a country with a large market like Nigeria, we must be very careful in signing such agreements”.
Furthermore, according to Dr Chijioke Ekechukwu, former Director-General, Abuja Chamber of Commerce, it will be sensible to borrow a leaf, for example, from the Chinese, who strategically delayed their endorsement of the World Trade Agreement, until after year 2000, when their industries were ready to compete effectively with the rest of the world! Clearly, in retrospect, that decision has paid off very handsomely for the Chinese economy.
In our case, companies from Europe, Asia and America will take advantage of this agreement to bring their production lines to neighbouring African countries with steady power supply and dump their products in Nigeria.
The views of this columnist on the AfCFTA were earlier captured in the title “African Continental Free Trade Area: Matters Arising”, published on 26 March 2018 (see www.betternijianow.com).
Clearly, Nigeria’s ambition to successfully grow and sustain a diversified economic base will be challenged by the CFTA. However, the prosperous outcome, glibly canvassed by CFTA advocates, is probably best amplified by the embarrassing, stark reality of the overwhelming preponderance of imported consumables and other products, particularly from South Africa, on shelves in increasing ShopRite and other supermarket outlets nationwide. Invariably, Nigeria’s endorsement of CFTA would, clearly challenge the survival of local manufacturing industries, who will become even less competitive with the subsisting, oppressive interest rates they are compelled to pay to fund their operations. Regrettably, for example, while South Africa’s Monetary Policy Rate remains around 6 percent and promotes cheaper cost of funds, our own CBN and the MPC are clearly befuddled as to how to reduce MPR to single digit from the present counter-productive 14 percent!
Furthermore, issues relating to security challenges and high cost of energy to power our industries will continue to adversely influence investors from directly pitching their facilities within Nigeria, while Naira’s multiple exchange rates and distortions from fuel subsidy will further muddy the waters for prospective investors.
SAVE THE NAIRA, SAVE NIGERIANS!!!