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 into a single trade platform.
Though, government of Nigeria has signed into the said AFCFTA agreement, after so much debates across the country, the MAN Advocacy on the agreement did not stopped there as it went further to conducted a study which 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 Manufacturers Association of Nigeria (MAN) study pointed out that there is the need to call for the revision of the 90:10 market access offers and also push for a transitional or phased liberalization of twenty years of five years each. The first five year should be a period for Government of countries in Africa to address the concerns of its private sector and make necessary adjustments that will position their countries to benefit from AfCFTA while in the second five years, tariff lines that are currently 0-5% will be liberalized. Those within 10-20% would be liberalized in the third five years and tariff lines from 35% and above would be excluded.
“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 manufacturing sectoral groups but with higher magnitudes in Motor Vehicle & Miscellaneous Assembly, Chemical & Pharmaceutical and Electrical & Electronics industries compared to others. The change in domestic outputs of manufacturing sector will be alarming with a negative impact ranging from -10% to -0.228%; thus indicating that virtually all manufacturing companies will close shop.
The fact sheet report noted that a tariff cut at 50% and 100% would also produce a decline in employment and investment in practically all the sectors except Chemical & Pharmaceutical, and Textile, Apparel & Footwear sectors where investors (both domestic and foreign) may increase investment to take advantage of the market access, especially within the first phase.
“MAN is not against AfCFTA; the leadership of the Association believes that Nigeria being one the largest economies in Africa, has the clout to dominate trade in an African Continental Free Trade Area.”
The implications on are:
- a fall in investment in five out of the ten industries considered and no change in investment in three other industries; these industries include, respectively; food, beverages & tobacco; chemical & pharmaceutical products; plastic & rubber products; wood & wood products; non-metallic products; electrical & electronics; motor vehicles & assembly and electrical & electronic;
- a significant fall in employment in wood, and wood products but either remain constant or fall marginally in food, beverages & tobacco, and plastic & rubber products; a marginal rise in employment in chemical & pharmaceutical products; non-metallic mineral, basic metal iron & steel and higher in pulp, paper, printing & publishing and textiles, apparels & footwear.
- a significant fall in output in the wood & wood products, textiles, apparels & footwear, non-metallic mineral; marginal fall in output in food, beverages & tobacco, plastic & rubber, basic metal iron & steel, and motor vehicle & assembly; except in three sub-sectors (chemical & pharmaceutical products; basic metal, iron & steel, and pulp, paper, printing and publishing.
- no significant change in investment and employment during the first and second phases of liberalisation; a fall in investment in all industries in the third phase (2029-2033), except in electrical and electronics and textile, apparel & footwear industries where they will rise;
- a rise in employment only in chemical & pharmaceutical; textile, apparel & footwear; Basic Metal, Iron and Steel and Pulp, Paper, Printing and publishing subsector in the third phase (2029-2033).
- a significant decline in output in all industries in the second and third phases except in three of them (chemical & pharmaceutical industries, Basic Metal, Iron and Steel and Pulp, Paper, Printing and publishing).
- a decline in investment in nearly all the ten industries except textile, apparel & footwear, electrical & electronics and Pulp, Paper, Printing and publishing industries
- a fall in employment in wood and wood products, electrical and electronics, and motor vehicle and assembly sectors; no change in employment in food, beverages and tobacco, and plastic & rubber during the second and third phases of the tariff reform; a rise in employment in the other industries;
- a fall in output in seven industries, but the reduction will be more in the wood and wood products and electrical & electronics industries than the other industries; fall in output will be more during the third phase of the liberalisation period than the second phase because the impact is cumulative.
“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 though Nigeria has appended 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.”