Latest technical report by Nigerian Economic Summit Group (NESG), has revealed that the African Continental Free Trade Area (AfCFTA), may lead to one of two outcomes; a win-win outcome for all African countries, or a zero-sum game in which the gain of one country becomes the loss of another and vice versa.
NESG in its, “Impact assessment study and economy-wide implications of the AfCFTA on the Nigerian economy,” released on Monday, said implementation of the continental agreement will trigger a surge in imports across sectors of the Nigerian economy.
The major concern, according to NESG, is the issue of dumping and strict enforcement of the Rules of Origin (RoO), as enshrined in the AfCFTA framework document. The relatively large market size of Nigeria makes the economy a target for dumping.
To protect the economy from the dumping of inferior and substandard products, the report suggests that the RoO needs to be well-strengthened and tightened. This may require Nigeria using the five-year transitional period to negotiate and adjust within the economy.
In view of the findings that Nigeria’s GDP will be negatively impacted when the AfCFTA agreement comes into force, and the need to make the economy more competitive, it was recognised that relying on the inflow of foreign investment to grow the economy may not readily pay off.
The study, therefore, recommends that Nigeria embarks on massive infrastructure upgrades and institutional reforms to improve her business environment. The infrastructure upgrade could be realised through the concession of major infrastructural projects (electricity, roads, bridges, airports, seaports, etc.) to the private sector.
The concessions must, however, be complemented by strong institutional reforms to effectively regulate the operations of the private sector.
It also revealed that producing highly competitive products in the foreign market also requires strengthening government regulations and internal quality control of products produced in Nigeria, with the Standards Organisation of Nigeria (SON), and the Nigerian Agency for Food and Drug Administration and Control (NAFDAC), has a crucial role to play in this respect. These regulatory institutions must be reformed to effectively perform their constitutional regulatory functions.
The report stressed the need for Nigeria to maximise available opportunities in the AfCFTA agreement, by enhancing the space for both domestic and foreign investments, by creating a more business-friendly environment, and reducing existing binding trade constraints impeding investment growth in different sectors of the economy.
In addition to providing a reliable transportation system and power supply, the report urged the government to restore a business-friendly environment by substantially addressing all major security challenges that discouraged foreign investors from doing business in Nigeria.
It also suggests measures to counter the expected negative impact of AfCFTA on government revenue through a combination of trade liberalisation with increased drive for the inflow of foreign saving/investment into the economy.
This would complement the government’s economic diversification efforts, which will, in turn, boost its tax revenue base.
The Report reads in part: “The Government may begin to undertake deliberate measures that will strengthen sectors, including health, education, electricity, transportation, textile, apparel, and footwear to maximise the benefits that are likely to accrue to them when the AfCFTA agreement comes into force.
“This can be done by recognizing these sectors as AfCFTA priority sectors for immediate government support. The government support may include tax breaks/rebate, government-backed preferential loan arrangements from commercial banks, etc.
“For sectors that are expected to suffer the greatest losses (including the chemical, chemical products and electrical; wood and wood products; cement and construction sectors), Government needs to create safeguards or incentives for such sectors. These incentives could come in the form of including the sectors in the sensitive list. This will help delay liberalization of these sectors to a later period and allow for the adjustment of the sectors to realities of the AfCFTA agreement.”