BY HENRY BOYO (Twitter.com/betternaijanow)

Benjamin Mkapa, Tanzania’s former President, has warned Nigeria to resist pressure to sign the Economic Partnership Agreement, (EPA), with the European Union, because, according to him, such contracts “are counterproductive.” Mkapa sounded this warning, as Guest speaker at the 45th Annual general Meeting of the Manufacturers Association of Nigeria (MAN) on September 14th, 2017 in Lagos.

The former President noted, in a post event interview, with the media, “that such agreements are not in line with the aspirations of African countries”. Consequently, Mkapa encouraged African Countries to “undertake some degree of industrialization, to add value to their, agricultural and primary products and natural resources to substantially increase government revenue.”

According to the former President, “when raw materials are exported and value is added outside the continent, and then, the finished products are re-imported without tax, you are invariably depriving (your own) government of revenue.”

Incidentally, Thambo Mbeki, South Africa’s former President earlier also had sounded the same warning, as guest speaker, at MAN’s Annual General Meeting, two years or so ago. 

Furthermore, while speaking at this year’s AGM, MAN President Dr Frank Udemba Jacobs, without mincing words, stridently opposed the admission of Morocco into ECOWAS, as this would be “equivalent to signing the E.P.A through the back door.”

The MAN President further explained that “we are aware that Morocco and the European Union have trade agreement, which means if they become part of ECOWAS, products that come into Morocco from EU will end up in Nigeria; afterall, Nigeria is the biggest market in ECOWAS, so we are vehemently opposed to Morocco being admitted into ECOWAS.” According to Dr Udemba, “It will really affect us badly, so we are telling our government not to allow them become part of ECOWAS, because it will badly affect the productive sector of the economy. (See Daily Independent 15th September, 2017) MAN warns against Admission of Morocco into ECOWAS.

The above title, ‘EPA AS ENSLAVEMENT PARTNERSHIP AGREEMENT’ was first published on October 13th, 2014; a summary of that article follows hereafter, please read on.

“Under the terms of the EPA, “the European Union will immediately offer the 15 member Economic Community of West African States, full access to it markets. In return, ECOWAS will gradually open up 75% of its markets, with its 300 million consumers, to the European Union over a 20-year period. Furthermore, in accord with the provisions, the EU would also offer a package valued at about EU6.5bn over the next five years, to help ECOWAS countries, cushion the effects and costs of integrating into the global economy (see “F.G. seeks review of economic partnership agreements” - Punch Newspaper of 1/9/14, Pg. 36).

Nonetheless, MAN sees the EU’s appetising carrot as a dagger directed at the heart of Nigeria’s industrial sector. The Association has therefore warned that signing the agreement in its present form, would impact negatively on local manufacturing and result in shutdown of industries with heavy job losses, because of the unfair competition that will evolve. The immediate past President of MAN, Chief Kola Jamodu, also noted that, “no country can develop without protecting its industries”, and therefore cautioned that “Nigeria stands the risk of having its market flooded by European goods with a resultant negative effect, on local industries and the economy, if the EPA is approved in its present form.”

The Minister of State for Finance, Ambassador Bashir Yuguda had, at an earlier interaction with MAN also echoed the above concerns, when he stated that “government is actively encouraging the African Union and ECOWAS to reconsider endorsing the EPA in its current state.” Yuguda declared that “the government is critically assessing options that will improve competitiveness and ensure that local manufacturers are adequately protected; consequently, the Federal government was “negotiating a strong Common External Tariff agreement with its ECOWAS partners to protect strategic industries”. 

Nonetheless, proponents of EPA argue that the objective of ECOWAS Common External Tariff  (CET) is to “build bridges of development, investment and trade cooperation, between members of the Community and also between ECOWAS as a trade block and other such regional or third party trade and economic Union; furthermore, the Pro-EPA lobby are optimistic that the operation of the Common External Tariff, would create a level playing field for imports into our sub-region and thereby significantly reduce the distortional spectre of smuggling and re-export of third party imports into Nigeria, because of more favourable duty differentials of our neighbours. It is also speculated “that the product of CET will be reflected in reduction of import duty leakages and contraction of opportunities for bribery and corruption at our ports.”

Nonetheless, despite the listed benefits, MAN remains, clearly uncomfortable with the adopted classifications of customs duties under the CET; for example, essential social commodities including pharmaceuticals, books, newspapers, etc attract zero percent duty; basic goods and raw materials attract 5%, while intermediate goods attract 10%; furthermore; finished consumer goods attract 20% duty, while an additional tariff band of 35% was created for those goods currently under Nigeria’s Absolute Import Prohibition List.

All the same, the Association of Manufacturers, recognize the difficulty in evaluating these categorizations, appropriately, because of the fairly loose class definitions adopted. For example, Nigeria has a growing pharmaceutical sub-sector which could become uncompetitive with zero percent tariff for drugs and medicaments imports, from countries with lower cost of borrowing and superior supportive infrastructure.
Furthermore, MAN is equally concerned that food and agricultural imports from such better endowed competitors may also reduce our chances of success in our attempts to be self-sufficient, in rice and maize production, for example.

Additionally, the manufacturing community noted that although the tariff rate for raw materials and production machinery has been set at 5%, it would probably be more appropriate for these sets of imports, for which there are no potential local substitutes, to also attract zero percent duty, as this would further reduce production cost and cushion the adverse impact of high cost of funds and power on made in Nigeria products.”

Similarly, manufacturers expect that it will be challenging to, finely compartmentalize imports under the 10% and 20% tariff classifications, as what may appear, for example, as an intermediate product, could well be a finished product; for example, an automobile tyre maybe considered as an intermediate good by a vehicle assembly plant, but for the car owner, it is clearly a finished product and vice versa. Presumably, the goods under Nigeria’s current import prohibition list may form the bulk of items under  the highest  duty category of 35%, since the 45 currently listed items under prohibition, comprise sectors in which Nigerian manufacturers already have, a foothold with potential for further growth that would positively impact employment and ultimately on government revenue.

Nigeria manufacturers are obviously unimpressed by the promised EU package of over EU6.5bn to the 15 members of ECOWAS, over a 5 year period, as MAN estimates that the Nigerian Treasury could lose over $1.3tn revenue from a significant reduction in import duties, if the EPA is also endorsed in its present state.

In addition, MAN’s opposition to EPA is also premised on the reality that our different levels of economic strength and industrialisation would put Nigeria and other ECOWAS members at a trade disadvantage, in a manner that is sadly reminiscent of the one sided terms of the slave trade era.

The above, notwithstanding, MAN is also aware that it is hard to find countries within the African continent that have achieved unusual industrial transformation just by virtue of its membership of a regional trade group such as ECOWAS. In reality, Economic and industrial growth according to the Association are the products of the leadership’s abiding vision and the application of appropriate monetary and fiscal frameworks that accommodate lower single digit interest rates, low inflationary rate, appropriately priced, stable and sustainable exchange rate regime with supportive social and industrial technology and infrastructure. Regrettably, these features have remained alien to the Nigerian economy and invariably negate the expected benefits of the ECOWAS Common External Tariff.

”Besides, we may be forgiven to ask why the EU is actively promoting free trade with industrially weaker nations in ECOWAS, while it actively denies free movement of labour within the same partnership.”