Dr. Olusola Oloba, the Agriculture Sector Coordinator at the Secretariat of the National Action Committee of AfCFTA, Abuja, in this interview with EHIME ALEX, explains why AfCFTA may take longer time to realise its objective
Could you bring us to speed with what African Continental Free Trade Area has been doing since it commenced work in January?
The African Continental Free Trade Area is a trade body that aims to create a single market for goods and services in Africa, while the AfCFTA agreement is one of the major trade components that explain economic integration and talk about free trade. We also have the Customs Union. This happens when state parties begin to look at common external tariffs. Precisely, AfCFTA came into play in May 2019 after about 22 states ratified the agreement. But Nigeria signed the agreement in July 2019, making her the 53rd out of the 55 countries in Africa.
What the agreement aims, majorly, is to create a single market for goods and services in Africa, as well as liberalise the market. When people are free to move across borders, goods and services are also free to move. It also contributes to the movement of capital and persons. What do I mean by this? The second phase of the agreement intends to look at what we call “cross-border investment” – the possibility of countries investing in other countries within the continent; for instance, a business tycoon from South Africa coming to invest in Nigeria.
There are phases, actually. We are just at the first phase of the agreement, which is on liberalisation of goods and services. We are looking at a reduction of up to 90 per cent of tariff concession among state parties. This will happen gradually from the first year to the next 10 years. It is meant to lay the foundation of a Continental Customs Union, and it will commence after the free trade agreement area that we are at present.
AfCFTA is just about Africa, like the European Free Trade Association and similar trade bodies we have all over the world. It has begun with the free trade areas, with the hope of having a common market and currency. Today, the European Union has the euro as its common currency. It is this kind of agreement that started the journey for them. That is what we are aiming at with AfCFTA, but we are just starting with the most primary in the agreement, which is free trade area.
A lot of people have actually raised concern around the issue of tariffs. Tell us more about what AfCFTA is doing on this?
Initially, I said the aim of the agreement is to establish a tariff concession up to 90 per cent within the next decade, but it will begin with negotiation. There are two ways of looking at the agreement, which is negotiation and implementation. Though we are at the implementation stage already and trade commenced officially in January, on paper; not all the requirements have been put in place. That is the reason you cannot see any kind of concrete transaction going on among state parties now.
On the tariff, there is a body in charge of negotiation, the National Office of Trade Negotiation. This particular office cuts across all the African countries, including South Africa, Egypt and Kenya. Some of these sophisticated African economies have these offices too that represent them at the negotiation table. The negotiations are ongoing. I learnt it is up to about 80 to 90 per cent completion. But there is the question of, what goods and services should be included in the agreement now, as all the countries will not just allow you to trade with them immediately in all goods? They have to prioritise the goods and services in which they have competitive advantage, and edge to push out to other countries.
Some people are clamouring that by participating in the agreement, Nigeria is going to be losing certain revenues due to tariff waiver, which is a must. However, in the medium to long-term effect, there will be a kind of trade-off that will allow what the country lost to come back through positive net export.
As regards standardisation, how will AfCFTA ensure that goods and services produced and distributed within Africa compete in the foreign arena?
It is about the issue of competitiveness. Of a truth, a number of goods and services produced in Nigeria experience substantial rejects because they cannot measure up to global standard. If you look at the global value chain, Nigeria is nowhere. Part of our mandate at the AfCFTA is to develop Nigerian strategy to play successfully in the African market. We are not doing this alone, but in collaboration with relevant Ministries, Departments and Agencies, as well as the private sector. Of course, the major assignment of government at all levels is to create an enabling environment for the private sector to thrive. We are working with them. The number one strategy we have come up with is competitiveness. So, on the issue of standardisation, we have some regulatory agencies in charge of all of these. The birth of AfCFTA means synergising and resuscitating them to perform on their mandates. Just to be specific, one of the key strategies on the implementation plan is already in the hands of stakeholders for review.
AfCFTA came at a time of the Coronavirus Disease. Now, a lot of economies are trying to recover from it, including Nigeria. What is AfCFTA doing in helping the country fasten its recovery from the pandemic?
It is no longer news that the pandemic came at the time AfCFTA commenced. Initially, AfCFTA implementation was scheduled to commence July 1, 2020, but was postponed.
Now, on how AfCFTA has assisted Nigeria in the recovery, I can vividly recall that back in August 2020, we started doing sensitisation programmes and holding stakeholders’ workshops across all sectors of the economy, virtually. Before the AfCFTA implementation commenced, Nigerians were made to understand that we could actually be working and do not necessarily have to be working physically. Now, we are having this conversation on Zoom with the help of the pandemic. If it were not for the pandemic, we won’t feel like we can have a virtual to get things done. So, at AfCFTA, we were doing everything virtually, connecting with all the stakeholders. In a way, Financial Technology and Information and Communications Technology have been embraced and properly incorporated into the Nigerian economy.
Also, most businesses are being mobilised as we speak; the likes of Dangote Group; Manufacturers Association of Nigeria; Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture; Nigerian Agribusiness Group; and All Farmers Association of Nigeria. All these umbrella bodies are fully incorporated into the AfCFTA activities and they are well aware of the benefits. Recently, Dangote stated that the minimum Nigeria can realise from the AfCFTA agreement yearly is $12bn.
So, the private sector players are completely aware of what they stand to gain from this agreement, and the preparations are ongoing from all quarters. It is just that when you just begin something, you do not see see the result immediately; you have to wait a bit on the efforts you have put in place, and where it will take you to is number one thing. For the fact that the Nigerian economy is so big with over 200 million people to be resuscitated and be told of the advantages in this agreement, the conversation has kept going on all over the place. We cannot stop; we will continue till the last person understands the fact that AfCFTA is here to help us.
Last, in that strategic document, the issue of women and youths are taken seriously. We believe this is the opportunity for Nigerian women to step up their game in terms of productivity. If you look at cross-border trading, women take up to 70 per cent of all the activities.
We can presume there are some challenges you are facing at the moment at AfCFTA. Could you tell us what these challenges are and what AfCFTA intends doing, moving forward?
Like you rightly pointed out, the agreement has commenced, but not all requirements have been put in place. Even sophisticated economies like South Africa and Egypt are still trying to find their feet. Yes, there are challenges!
First, on the pre-implementation, we were faced with how to mobilise the MDAs and the private sector to get all the information needed to develop the strategy. But our effort yielded the result I told you about, which is undergoing review. Second, some of the MDAs we are working with have started forming committees to work with us.
However, the real number one issue is administration. We must successfully implement the AfCFTA agreement to find solutions, even as they do not yield positive results in the short run. Some will have a long run positive effect on the economy.
Challenges in the agriculture perspective are on the area of poor yield, caused by lack of access to improved seedlings and varieties. Nigeria is currently anchoring its diversification agenda, and, if got right, it can improve the economy. There is also the concern of adding value to those products coming from the agriculture sector. The manufacturing sector is also there to pick up.
Locally-produced goods lacked the standard to penetrate the international market. We have talked about this earlier. The only thing we export in this country that contributes to about 90 per cent our foreign exchange is crude oil, which is not competitive. Goods that we have competitive advantage in, which we should be exporting in the African market, are palm oil, cassava, among others, but competitiveness in the inter-continental market is a problem.
I must emphasise that we have to deal with the issue of unrecorded trading activities. Nigeria is at the centre of the Economic Community of West African States, but goods and services coming out of the country are not recorded. That will pose a serious challenge to the implementation of the AfCFTA agreement. Now that AfCFTA drastically wants to reduce tariffs by 90 per cent within the next 10 years, maybe people are going to show interest and make their goods and services available for record purposes.
Poor transportation system is another challenge. In West Africa, where we already have some existing trade corridors such as Abidjan to Lagos, these corridors are not fully operational for free movement of goods and services. However, we are working with stakeholders on the inter-state road transit scheme, among other things, to boost the corridors and prepare them to be fully operational.
There is also the issue of dumping ground. If Nigeria does not take care, the country can become a dumping ground, if necessary checks are not put in place. Another is macro-economic imbalances and exchange rate disruption. There is the issue of competitiveness, which can be both internal and external. From an external perspective, some countries have been initiating several subsidy initiatives to support exports. For instance, countries like Côte d’Ivoire and Ghana have very strong subsidy initiatives to support their exports; thus, their goods will be cheaper to us in Nigeria and even probably with higher quality. Nigeria needs to think along that line. When the cost of export becomes cheaper, businesses are attracted.
The solution options are that we need to look inward on what we can begin to do and how to diversify the economy. Another is to attract Foreign Direct Investment with modern technology into all the sectors where you think Nigeria should diversify its economy, which could even help strengthen the value of the currency as investors come with foreign currencies.
The value addition to any product also will really go a long way in helping us to achieve the desired level of export that we need to diversify the economy from oil.
Another solution is on the ECOWAS Informal Trade Regulation Support Programme, which Africa can adopt because AfCFTA itself is leveraging the existing sub-regional trade blocs within the continent to scale or startup operation. It helps in terms of policy formulation, understanding of the number of persons across gender in the cross-border trade and knowing the worth of their goods for record purposes.
Automated Customs Management System is another one, as some of our Customs’ posts still use the analog system. If automated, it will help take the advantage of the AfCFTA agreement. There is also the need for a single regulatory framework, which can help to do away with multiple posts, bringing a one-stop shop for export transactions.
There should be advocacy for improvement of infrastructure. For instance, if you want to move a cargo from Apapa port to Côte d’Ivoire, you may not be able to see any vessel that will accommodate your cargo. It is so bad that you may have to only rely on a vessel that will go to Europe and from there to Côte d’Ivoire. That has been the trend! If AfCFTA is going to survive, the sea link projects that are aimed at linking all the coastal areas together should be looked into.
Last is the digital payment platforms, which could be developed with the commercial banks. We already have a lot of commercial banks in Nigeria who have wider networks across African countries. So we can begin to work with them to design a digital payment platform that will just be enough for trade to kick off.
