African Continental Free Trade Area (AfCFTA) is a commitment of all Heads of States and Governments of the African Union (AU) at their 18th Ordinary Session in 2012. It is the first step in the implementation of AU Agenda 2063 with the vision of an integrated, prosperous and peaceful Africa
In order to provide business advisory services to manufacturers on the implication of AfCFTA on the sector, Manufacturers Association of Nigeria (MAN) commissioned the study conducted by Centre for Trade & Development Initiatives, University of Ibadan, Nigeria. The study investigated the Defensive and Offensive imperatives of AfCFTA as well as its potential impact on the manufacturing sector.
It is worth mentioning that Government has done justice to most of the items well-articulated actions taken since 21st of March 2018 when the AfCFTA Framework Agreement was first signed by some countries in Kigali Rwanda. However, it is important to recognize the adjustment costs that will arise during AfCFTA implementation and design appropriate framework to mitigate them.
Amehnews recall that Nigeria became the 53rd country to join the African Continental Free Trade Area on Sunday after President Muhammadu Buhari signed the AfCFTA Agreement in Niamey, Niger Republic.
According to the report, MAN pointed out that in view of the high cost of manufacturing operating environment prevalent in Nigeria (well over and above the continental average), AfCFTA would have overwhelming negative impact on the manufacturing sector, even though in differing magnitude.
AfCFTA would also have enormous negative effect on employment, investment and manufacturing output arising from heavy import surge.
The report further noted that Nigeria has the least import penetration in Africa from African countries, averaging about 20% within the period analysed in the study. This obviously makes the country an export target for many African countries in the AfCFTA. Nigeria is as endingly trailed by South Africa, Tanzania, Cameroun and Egypt in the same level recording about 30% import penetration, it was noted.
The MAN report pointed out that a 3-phase liberalization tariff rates from 5%, 10%, and 20% to zero will likely generate higher surge of imported manufactured goods to the tune of about 159.5%, 183% and 251.4% respectively on the average during the 15-year period. The import growths would be higher if there were no room for exclusion.
Association warns that import will surge in all the manufacturing sectoral groups and by extension the77 sub-sectors in the third phase of the liberalization. Particularly, tariff cuts would trigger increases in import for Food, Beverages and Tobacco, 91%; Chemical & Pharmaceutical Products, 180.7%; Plastic and Rubber Products, 111.6%; Wood and Wood Products, 96.2%; Textile, Apparel and Footwear, 55.2%; Non-Metallic, 67.2%; Electrical and Electronics, 218.2%; and Motor Vehicles and Assembly, 2000%.
“Liberalization will spell doom for all the sectoral groups and with automotive being the first casualty thereby eroding the gains from the implementation of the Nigeria Industrial Revolution Plan (NIRP).
“Output will decline in all sectors but with higher magnitudes in Motor Vehicle & Miscellaneous Assembly, Chemical & Pharmaceutical and Electrical & Electronic industries compared to others. The change in domestic outputs of manufacturing sector is negative and ranges from -10.00 percent to -0.228 percent; thus indicating that operators in the sector may close shop.
“Investment and employment in all industries will fall in the third phase (2029-2033) implementation of AfCFTA.”
“The leading supplying African market of Nigeria’s import of manufacturing goods is South Africa accounting for 34.7% of Nigeria’s import from African countries in 2017. 5 out of 15, leading African supplying markets including South Africa, Morocco, Côte d’Ivoire, Swaziland and Egypt account for 79.3% of Nigeria’s import from Africa in 2017.
“Nigeria’s trade integration within Africa is small compared to extra-African trade; only 5.6% of Nigeria’s total imports come from African countries in the last 10 years.
The MAN study critically analysed the likely impact of the AfCFTA on Nigeria manufacturing sector and established that imports into Nigeria will substantially increase as a result of AfCFTA and this will certainly affect domestic production, employment and investment negatively. The continental trade agreement as it is will not only erode the gains of industrialization, it will create greater economic and social problems for Nigeria.
There is therefore need for Government to be cautious if Nigeria is to append her signature to the Agreement. Of course, the basis for categorizing Nigeria as non-LDC in the Framework should be properly considered as any indicator other than Manufacturing Value-added will be misleading since the country’s manufacturing is still developing.