Nigeria failing to maximise free trade benefits
by ODINAKA ANUDU
September 19, 2017 | 1:38 am| | | Start Conversation
People walks in a market of the south Abidjian popular district of Koumassi on April 12, 2011. Thunder of heavy weapons rocked Abidjan once more today as President Alassane Ouattara struggled to take control of Ivory Coast's commercial capital after capturing his rival Laurent Gbagbo the day before. AFP PHOTO / SIA KAMBOU (Photo credit should read SIA KAMBOU/AFP/Getty Images)
As Nigeria turns down the Economic Partnership Agreement (EPA) proposed by Europe, checks show that the country is not making maximum use of various international trading agreements with many countries.
After 16 years of A the African Growth And Opportunity Act (AGOA) which allows 6,000 products to be exported to the US, duty-free, till 2025, Nigeria is yet to raise its export substantially to the world’s biggest economy.
In 2014, Nigeria exported products worth only $2.6 million to the US, while South Africa exported in excess of $1.2 billion. Nigeria’s non-oil export to the United States, under AGOA, fell to $1.141 million in 2016, representing a 23.5 per cent slump from $1.491m in 2015.
Ethiopia exported products to the US worth $35 million in 2013 and up to $40 million by 2015. Foreign companies such as Chinese big shoe maker, Huajian Group, produce in Ethiopia and specifically export to the US market, earning $20 million annually.
“What we have found is that we are not really taking advantage of opportunities in AGOA. We have failed to take advantage of the first 15 years of AGOA existence, but some others have,” said Olabintan Famutimi, president, Nigerian-American Chamber of Commerce, in Lagos.
Rather than benefit from the Common External Tariff (CET) which is a free trade agreement among the 15 countries of ECOWAS, Nigerian pharmaceutical companies were almost brought to their knees, due to an aspect of the agreement that imposed five to 20 percent tariff on imported raw and packaging materials, while requiring that drug importers pay no duty.
“The CET will simply destroy over N300 billion investment made by pharmaceutical industry and result in one million Nigerian employees in direct and indirect employment losing their jobs,” Okey Akpa, president, Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN), told BusinessDay in 2015.
However, the Federal Government had to intervene this year, by imposing Import Adjustment Tax (IAT) on imported medicines, to save the industry from collapse.
Hamma Kwajaffa, director-general, Nigeria Textile, Garment and Tailoring Employers Association (NTGTEA) told BusinessDay recently, that the CET has further encouraged the influx of cheap textiles into the country, thus frustrating local players.
The complaint was attributed to the fact that goods from Asia and other parts of the world, now pass off as ECOWAS products, thereby denying Nigeria of the tax revenues. The CET encourages uniform tariff among 15 countries of West Africa, some of whom are zero duties.
“We have discovered that some third party goods come into the country in the name of CET. We are grappling with the problem, but if you are a manufacturer and import raw materials from Spain, you will pay tariff,” said Hameed Ibrahim Ali, comptroller-general of the Nigeria Customs Service (NCS) at a dialogue with the Manufacturers Association of Nigeria (MAN) last week.
The ECOWAS Trade Liberalisation Scheme, allows Nigeria and 14 other countries to export freely to the West African region, but Nigeria’s total exports to the region were worth $154.47 million in 2015, falling from $350.86 million the previous year.
Nigeria’s non-oil export in 2016 was estimated by the International Trade Centre at $3.04 billion.
John Isemede, former director-general of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and international trade expert with UNIDO, said Nigeria’s failure to maximise free trade benefits is based on its poor non-oil export capacity.
Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry (LCCI) said the major challenges are lack of competitiveness and information.
“Trade is about competition. If you have all the agreements and you are not competitive, you will make no headway,” said Yusuf.
“Many of the industries that are surviving in the country are doing so on the basis of protection. You have to be price and quality competitive and sometimes, there is insufficient information and awareness,” he said.
Nigeria, last week, rejected the Economic Partnership Agreement (EPA) because it will destroy its domestic industries.
“Nigeria has clearly indicated that it is not happy with the EPA. Unless we have the EPA that is favourable to us, unless we have an EPA that will not endanger our businesses, we will not be signing it,” Zainab Ahmed, minister of state for budget and planning, who represented Nigeria’s president Muhammadu Buhari, said at the MAN AGM.
The EPA is a free trade agreement between the 15 countries of the Economic Community of West African States (ECOWAS) and the Europe, seeking to enable West African countries access the European market and vice versa, without paying tariffs. Europe is committing 6.5 billion euros every five years beginning from 2015 to 2019, including during the 20-year transition period that will end in 2035.
The EU will open its market completely from day one, while West Africa will remove import tariffs partially over a 20-year transition period once the deal is ratified.
Nigeria recently ratified the Trade Facilitation Agreement (TFA) as the 107th member of the World Trade Organisation (WTO) while the Common Free Trade Area (CFTA) could begin in 2018.
“EPAs will put your regional trade and integration at risk. You will find that most of the products that you are producing locally are in fact traded regionally in ECOWAS. If you acquiesce to the EPA and its corollary liberalisation, EU competitiveness will certainly jeopardise you regional trade. EU products are likely to flood your market and displace domestic and regional production,” Benjamin William Mkapa, former president of the United Republic of Tanzania, advised Nigeria.
Big Read |