THE AfCFTA, NIGERIA’S BORDER CLOSURE AND THE COVID19 PANDEMIC – OPEYEMI ORINIOWO
In the last few months leading to the New World Order of the COVID19 pandemic, Nigeria’s public policy space was shaken by an outburst of tantrums from Nigerian opinion leaders, think-tanks, government officials, civil society groups and other concerned interest resulting from the initial hold-back by President Muhammadu Buhari from signing the African Continental Free Trade Agreement (AfCFTA), and the aftermaths of the event owing to concerns of its potential detriment to local businesses in Nigeria.
In the administration’s usual approach, a consultation/review committee was commissioned by the President to critically look at the AfCFTA document and advise the government appropriately on the best line of action. It is believed that the outcome of this process resulted in the eventual signing of the AfCFTA treaty by the President in July 2019, at the 12th Extraordinary Summit of the African Union in Niamey, Niger State, making Nigeria the 53rd country to sign the agreement.
While this delay might have seemed necessary in light of the reasons adduced, it becomes unfounded and an unnecessary drag-back when viewed through the prism of Nigeria’s involvement in the negotiations at the level of the African Union and our participation in the crafting of the AfCTA protocol in the first place. This reveals an inherent communication gap between Nigeria’s Policy actors and the stakeholders, and citizens they represent. Short off an international embarrassment, the delay has cost Nigeria the leadership role on the African continent, coupled with an oscillatory positioning on the economic policy pendulum if one considers the Land border closure enforced by the administration in August of the same year, 2019.
Nigeria seems to have mastered the art of 2 steps forward and 5 steps backward. Nothing impedes foreign investment like policy inconsistency. Asides, from that, Nigeria’s Land Border closure stands in contrast to the ECOWAS protocol on Free Movement of Goods and Services adopted in May 1979 in which Nigeria is signatory too and we have breached. It is important to note that Nigeria played a leading role in the founding of ECOWAS in 1975, contributing 32% of the budget and still hosts the headquarters in Abuja.
At a stakeholder meeting organized before the lockdown by the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the organized private sector (OPS) with the attendance of organizations such as Nigerian Association of Small Scale Industrialists (NASSI), Manufacturers Association of Nigeria (MAN), Nigeria Employers’ Consultative Association (NECA), National Association of Nigerian Traders (NANTS) and Federation of Agricultural Commodities Association of Nigeria (FACAN), unanimously agreed that Micro, Small and Medium Enterprises (MSMEs) need to embrace global best practices and influence government policy reforms to strengthen and position MSMEs in Nigeria to benefit from the African Continental Free Trade Agreement when it comes into effect.
Representatives of Organized Private Sector (Manufacturers Association of Nigeria (MAN), Nigeria’s Employers’ Consultative Association (NECA), Nigeria Association of Small and Medium Enterprises (NASME), Nigeria Association of Small Scale Industrialist (NASSI), National Association of Nigerian Traders (NANTI), Federation of Agricultural Commodities Association of Nigeria (FACAN) at a consultative meeting on AfCFTA organized by NACCIMA and CIPE In a broader consultation and stakeholders Forum on the 18th February 2019 in Lagos, organized by the Lagos Chambers of Commerce and Industry (LCCI) in partnership with the Center for International Private Enterprise (CIPE) on the ‘Economic Implications of the Border Closure’, the Comptroller General of Nigerian Customs Col. Hammed Ibrahim Ali (Rtd.) stated that the Border closure was in response to the lack of co-operation and compliance to the guidelines of the ECOWAS Protocol in the handling of transit-goods in the area of Rule-Of-Origin (ROO) resulting in Trade diversion and revenue loss, Unabated smuggling, increasing insecurity especially in the North-Eastern part of Nigeria occasioned by the proliferation of light arms and small weapons, and other economic protectionist benefits for certain local manufacturers and farmers in Nigeria.
Without a doubt, these are serious concerns, however, in the remarks by the representative of the high commission of the Benin Republic to Nigeria at the forum, he agreed that compliance and Monitoring of the ECOWAS Protocol on Free Movement of people and goods were indeed serious challenges to the protocol but was categorical in stating that all signatory countries including Nigeria were complicit and needed to work collaboratively to stem the tide. It was also established that the ECOWAS protocol on the free movement of people and goods had an arbitration clause with a clearly defined consultation process with other member states on issues of non-compliance which Nigeria did not follow before the abrupt closing of the borders. In the response by the Acting Director-General of Manufacturers Association of Nigeria (MAN), Mr. Ambrose Oruche, he opined that the border closure policy was tantamount to Nigeria ‘throwing the baby away with the bath water’.
In the summation of MAN, the land border closure was detrimental to a significant proportion of Nigerian manufacturers whose production relied on certain raw materials from ECOWAS Countries and whose products had a comparative advantage in these foreign markets. ‘The land border closure is also resulting in the loss of revenue and jobs in the manufacturing sector’ he said. In addition to this, Nigerian-made products are also rendered uncompetitive in foreign markets due to the high cost of exporting to otherwise neighboring countries via the sea or air.
In the remark by the President of Poultry Farmers Association of Nigeria, represented by the Secretary, Mr. Mustapha Bashir-Mogaji, he opined that while the border closure might be a welcome development as it offers poultry farmers the opportunity to increase their output and Nigeria market share, it was also counterproductive when viewed against the fact that most of the poultry farmers in the northern part of Nigeria had off-takers in the bordering countries of Mali, Chad and Niger republic where trade has been brought to a halt due to the border closure.
Most significantly, the Association established a lack of transparency in policy communication especially relating to the process of export and import into the country as a major challenge. He cited a lack of access to financial facilities for local farmers to scale up their production to meet the demand occasioned by the border closure. To the credit of the Nigerian Government, Mr. Shakin Agbayemi, Deputy Chairperson of All Farmers Association of Nigeria, and Chairperson of Rice Farming Project, Lagos supported the government border closure policy owing to the significant increase in demand for locally grown rice and increasing revenue of local farmers.
However, despite the merits and challenges that have accompanied the ban in the importation of rice into Nigeria, it is important to differentiate it from the scenario of the total land border closure. It might also be worth mentioning that there has been an increase in the activities of the Boko-Haram terrorist group, banditry, and other criminal activities in recent times around the country despite the closure of Nigeria’s land borders. This brings to question the security merit of the border closure, as well as should spark a more holistic conversation on border control measures, taking into cognizance the endless informal border entry points across the country where smuggling still thrives.
We can perhaps come to a reasonable conclusion that the land border closure policy is not a sustainable measure for economic growth, neither does it solve the adduced problems in the medium and long term. Before we get ahead of ourselves, this is not to equate all bilateral and regional free trade agreements to fair trade, but it must be emphasized that it is the trade that will move our people out of poverty not the foreign aid we have grown accustomed to and dependent upon. No country better exemplifies this than China which reduced the headcount ratio of poverty by their official poverty line, which is about 21% higher than the line set at USD 1.9 per day (2011 PPP) by 94% between 1980 and 2015 in rural china.
So, it might be important for us to understand the basis for the regional and continental trade agreement and examine where Nigeria and Africa stand in this regard. Nigeria’s trade with other countries within the ECOWAS region remains poor-as do aggregate trade flows among all the ECOWAS Member States. This is despite the ratification of the ECOWAS protocol on the free movement of people and goods by Members State. According to research by the Nigerian Institute of Social and Economic Research, Nigeria’s export to the ECOWAS region, which averaged about 7% of its total export between 2001 and 2006, plummeted to 2.3 % in 2010. It should also be noted that mineral fuel and oils constitute 97% and 94% of Nigeria’s export to ECOWAS countries in 2009 and 2010 respectively.
Comparatively, the share of manufacturing in Nigeria’s total exports to the ECOWAS region climbed from 1% in 2001 to 5.4% in 2010, while the share of Nigeria’s agricultural exports- which was 3% in 2001 plunged to nearly nothing in 2009 and 2010. Likewise, the share of other ECOWAS countries in Nigeria’s imports dropped from 4.4% in 2001 to less than 0.5 % in 2010. This highlights a general production deficit across ECOWAS states and a penchant for imports from Western and Asian countries thereby encouraging the existent of parallel or non- complementary production structures across member countries.
For instance, the share of the agricultural product as a percentage of GDP was approximately 37% in Liberia in 2018, and approximately 47% in Guinea Bissau in 2018. Similarly, services accounted for nearly 58.8% of Senegalese GDP and 58.3% in the Gambia in 2018. In contrast, the share of manufacturing in GDP was around 10% and below in Guinea, Sierra Leone, Burkina Faso, Gambia, and Nigeria in 2018. To provide a broader context for the imperative of the AFCTA, Africa presently accounts for just 2.4% of the global GDP with Intra- African trade accounting for about 12%, compared with the North America Free Trade Agreement (NAFTA) of 40%, and 63% between economies of Western Europe and 30% for ASEAN.
This is despite the Doha Development Agenda (DDA) of the WTO, AGOA of USA, and the EPAs of EU; all of which have not been negotiated to date to enable Africa’s successful integration into the Global Economy, despite their promises. A continent economically divided against itself cannot lift its people out of poverty. The adoption and ratification of the AfTCA will result in a concept called ‘Trade diversion’ and ‘Trade Creation’. The former refers to scenarios where low-cost products from China will be substituted for less efficient products from other African countries.
This will be due to the elimination of tariffs on African products while maintaining tariffs on goods from China and other non-African countries. While Trade creation on the other hand is considered to be the replacement of producers from Nigeria with imports from other African countries that are more relatively efficient. While we await the outcome of detailed studies on the impact of the AfCTA on various sectors of the economy such as the research presently underway by the Center for International Private Enterprise looking at the potential impact of the AfCFTA on Micro, Small and Medium Enterprises (MSMEs), we can at least infer that the ratification of the AfCFTA on the African continent will turn out in one of two outcomes; a win-win outcome for all African countries, or a zero-sum game in which case the gain of one country becomes the loss of another, or the loss of one country becomes the gain of another.
Although an unanticipated variable of COVID19 has been thrown into the dynamics with impacts that are already catastrophic for the economy as we presently know it, all on-going research and consultation on AfCTA in Nigeria must factor in this variable as the world must grapple with the pandemic. On the optimist side, the postponement of the implementation of the AfCTA owing to the pandemic has perhaps reinforced the rationality of the Africa trade integration and the need to draw on economies of scale offered by the trade agreement to boost Industrial production and Manufacturing.
The development of regional value chains and local manufacturing capacities, especially in pharmaceuticals and medical equipment will reduce the risk of excessive reliance on imports and the negative spill-over effects of disruptions of global supply chains owing to the COVID19 pandemic. Notwithstanding, Nigeria’s benefit from the AfCFTA will be dependent not just on a deep understanding of the document by our policymakers but also on their ability to cascade information to the public and position the Nigerian economy post-COVID19 to leverage on the free trade agreement particularly in the area of production.
Opeyemi Oriniowo, is an International Development Practitioner and Analyst. He the Principal Partner, at Rindev Consulting Limited. He writes from Lagos, Nigeria