Last week, Nigeria, Africa’s largest economy backtracked from signing an agreement to create the African Continental Free Trade Area (AfCFTA) at a summit of the African Union (AU) in Kigali, Rwanda. The agreement was signed by 44 African countries. Though 10 other African countries including South Africa also did not sign the agreement, Nigeria abstaining came to most as a surprise.
It is projected that the AfCFTA will boost intra-African trade and probably be the biggest trade agreement since the formation of the World Trade Organisation. The AfCFTA is also expected to remove business and import restrictions within the continent. Also, 27 member states signed a commitment for the free movement of persons.
President Muhammadu Buhari said the federal government wants to consult widely before signing the agreement. He also disclosed that he will not agree to anything that could undermine the local manufacturers and entrepreneurs, or lead to the country becoming a dumping ground for finished goods. To the local manufacturers, who have been urging the federal government not to sign the agreement, nothing could gladden their hearts than such a news of Nigeria not signing the AfCTFA.
The Manufacturers Association of Nigeria (MAN) had frowned on the contents of the agreement, noting that it will lead to gross unemployment in the country as most manufacturing companies in the country will be made to die quick death.
The Association’s President, Frank Jacobs vowed that the body would not support federal government’s adoption and ratification of the agreement establishing the African Continental Free Trade Area (AfCFTA) until issues of market access and enforcement of rules of origin were addressed.
Similarly, the organised labour, through the Nigeria Labour Congress (NLC), had pleaded with the federal government not to sign the CFTA, warning that it would destroy the nation’s economy.
However, some experts believe it is befuddling that Nigeria would pull out of a landmark, historic agreement like the CFTA. According to them, it was absurd that the federal government would shy away from a regional agreement that could potentially open up Nigeria’s market to the rest of the continent and beyond and improve the nation’s balance of trade. They said in a global and competitive market, protectionism benefits no one.
As the federal government continues with its consultations, we applaud its decision to err on the side of caution. It would have been a great error if the government had gone ahead with signing such an agreement in a hurry. This is because as a country, we are not competing efficiently and signing the AfCFTA will open the nation’s economy to all sorts of things. Also, Nigeria should only sign economic partnerships based on mutually beneficial considerations and after due diligent assessment. After all, it is not how far but how well.
Nigeria signed the World Trade Organisation’s partnership in 1995 but China did not sign it until 2000 while Russia signed it in early 2000 and that did not stop these countries from having great economies today.
Nigeria has infrastructure deficit and the real sector is having difficulties competing because the country produces raw materials and hardly adds value to the mainstay of the economy, petroleum products.
Furthermore, there are countries looking for ways to enter the Nigerian market and if measures are not put in place, such an agreement may open the back door for them to enter and reverse the gains made especially in the area of agriculture.
It appears there had not been adequate consultation on the Continental Free Trade Area. It was after the endorsement that serious engagements began with the stakeholders, particularly with the manufacturing sector. So, there was a need to have a rethink. The manufacturing sector in Nigeria is focused more on the domestic market and if this market thrown open to all comers, the sector will practically collapse because it cannot compete internationally.
After due diligence, the country can still join other nations if it is convinced signing the agreement is in its best interest. The AU said countries that have reservations and have not finalised their national consultations, could still be part of the agreement as the AU will have another summit in Mauritania in July where such countries are expected to also sign. If all 55 African Union member countries eventually sign up, the AU said the CFTA will create a bloc with a cumulative GDP of $2.5 trillion (2 trillion euros) and cater to a market of 1.2 billion people.