Despite Nigeria’s comparative advantage and self-sufficiency status in the production of certain products, cement, flour, rice, sugar and 180 other products would not be liberalised under the African Continental Free Trade Area (AfCFTA), even though doing otherwise would help the country tame its rising inflation
While negotiations have almost been concluded on sugar exclusion, semi-milled or wholly milled rice, whether or not polished or glazed, flour (meal and powder), cocoyam flour and cement are products being protected by the country under the trade deal.
A complete list of the tariff lines is expected to be released before the end of the month after consideration from the Tariff Technical Committee.
Though the commencement of the AfCFTA portends advantages to Nigeria’s trade balance as it opens a wider market space for the country’s exports and opportunity to get cheaper imports of goods and services, its protectionist stance on some commodities that the nation’s local capacity cannot be met, raises concerns.
Presently, only seven per cent of sensitive products (427 tariff lines) and three per cent (184 tariff lines) of exclusive products were negotiated rather than the other way. This puts over 4,300 tariff lines under the liberalised list.
With concerns about the country’s readiness for the trade deal, stakeholders are already trading blames on how to remove the obstacles, especially as it relates to implementation, rules of origin, tariff lines and future negotiations.
Local manufacturers are already worried, noting that Nigeria was not in position to benefit from the various opportunities due to poor trade infrastructure; hostile trade environment, especially among Nigeria’s neighbouring countries; high level of trade malpractices; and limited trade capacity fuelled by supply constraints, among other things.
Already, there are concerns about Nigeria’s readiness to implement the AfCFTA, considering the `disconnect between implementation and negotiations, as well as intense lobbying by different groups for the position of the office of the DG/Chief Trade Negotiator after the passing of Ambassador Chiedu Osakwe.
Local producers had raised concerns about the use of frequency of the choice of member-state as major criteria to select tariff lines that will go into Exclusion, Sensitive and Liberalized baskets, not minding the economic size, the magnitude of market and industrialisation capacity of member-states, is a concern that Nigeria has to live with.
According to them, liberalisation should be in phases to support the local industry that is already undermined by lingering challenges.
A stakeholder familiar with the negotiations expressed worry about abuse of rules of origin, especially by Nigeria’s neighbours.
The primary goal of rules of origin is to prevent trans-shipment – that is, goods from a non-preferential country being imported at preferential rates of duty.
But Nigeria’s Acting Chief Trade Negotiator, Victor Liman, told The Guardian that the country had negotiated up to 81 per cent on Rules of Origin.
“What we have agreed under the RoO is to encourage industrialisation and ensure that we boost intra-African trade as well as prevent third countries from interfering and manipulating the rules. Goods that are not produced in the country of origin would not qualify under preferential tariff treatment. The issue of value addition also has to be substantially improved. I think we should be more patient and some of the issues would be clarified soon,” he said.
The Federal Government had set up the National Action Committee (NAC) in December 2019 to guide Ministries, Departments and Agencies (MDAs) and the organised private sector on AfCFTA implementation. However, stakeholders, including the Customs Service, continue to await guidelines for trade deal implementation.
Indeed, separating the implementation of the AfCFTA among entities and from the NOTN may have stalled the trade deal locally, considering that after the agreement is concluded and negotiated, there is a lot of adjustment before implementation is done.
“One of the issues to look at is the laws to domesticate the trade treaty. Technical verification of the RoO needs to be done to decide the criteria and simplify in a manner that stakeholders would be able to deal with it. The schedule also needs to be verified,” Liman added.
Indeed, Nigeria’s inflation rate increased by 15.75% YoY in December 2020, hitting its highest figure in three years.
According to the latest Consumer Price Index report, released by the National Bureau of Statistics (NBS), the food inflation index rose sharply by 19.56% in December, caused by increases in prices of bread and cereals, potatoes, yam and other tubers, meat, fruits, vegetable, fish and oils and fats.
Rice is number one on the list of prohibited products in which CBN placed forex restriction and equally accounts for one of the most smuggled items in the country due to inadequate local production capacity. A 50kg bag of local rice presently sells at between N22,000 to N25,000 in the country.
Flour and sugar are major components for the bakery and pastry industry, as well as in the production of pasta, spaghetti and noodles. Bread accounts for one of the foods driving inflation. A strategic liberalisation of such commodities, experts say, would likely increase competition and drive down prices of food.
In its released COVID-19 impact report for the month of August 2020, the NBS revealed that 51.3 per cent of Nigerian households obtained loans during the lockdown from mid-March to purchase foodstuffs.
Already, due to shortfalls in local production of rice and sugar for instance, smuggling of the commodities has increased, creating the need for review of government’s stance on liberalisation, especially as closed borders for over one year failed to achieve the desired result of self-sufficiency.
But the Director-General of the Lagos Chamber of Commerce and Industry (LCCI) observed that the idea of having products on sensitive and exclusive lists is to allay the fears of local manufacturers, who had at the outset, raised concerns about the impact of the trade deal on investment in the sector.
According to Yusuf, our industries produce at a very high cost when compared to other countries, adding that even the so-called mature industries incur huge costs that make them lose competitiveness in other countries.
“Many of these industries deal with multiple challenges. Many of the industries still import raw materials. Many of them have invested heavily in the country, and exposing them without strategic caution could kill these industries.
“Government should seek a balance between protectionism and liberalisation, by considering the effects on competition and people’s welfare. The criteria for identifying the products under certain lists need to be explained,” he added.
Nigeria’s cement production, at present, is about half of its almost 60 million MT installed capacity, with operators already looking to the export market for value expansion.