Aganga advocates pathways for Nigeria to benefit from AfCFTA
The Manufacturers Association of Nigeria (MAN)has just concluded its 51st Annual General Meeting (AGM) with the theme “Setting the Agenda for Competitive Manufacturing under the AfCFTA: What Nigeria needs to do”. The Guest Speaker for the lecture was Olusegun Olutoyin Aganga, CON, an illustrious Nigerian, a consummate accountant, accomplished international transformational economist, former two-time Minister of the Federal Republic of Nigeria; former Managing Director of Goldman Sachs, London; the founder of Nigeria Leadership Initiative and Aspen Global Leadership Network, and the Distinguished Guest Speaker, who delivered an exceptional lecture at the 3rd Adeola Odutola Lecture. Gentechnews was there as the Editor, Tony Nwakaegho writes on the lecture.
The former two-time Minister of the Federal Republic of Nigeria, Olusegun Olutoyin Aganga has highlighted that the African Continental Free Trade Agreement (AfCFTA) which came into effect on January 1, 2021, has created the largest free trade area in the world, covering 54 African countries and a combined population of over 1.2 billion people, adding that this landmark agreement opens up a plethora of opportunities for intra-African trade and economic collaboration.
“AfCFTA is situated within the context of Africa Agenda 2063, also known as “The Africa We Want,”. Africa Agenda 2063 is a strategic framework developed by the African Union (AU) to guide the continent’s development over the next five decades, from 2013 to 2063. Manufacturing plays a central role in the realisation of this Agenda. It is seen as a key driver of economic transformation and industrialisation, capable of generating employment, fostering intra-African trade, technological advancement and the reduction of poverty.
“The emphasis on manufacturing in both the AfCFTA and Agenda 2063 is not surprising given that the manufacturing sector accounts for about 70% of global trade and about 30%-55% of service jobs are related to the manufacturing sector. It presents a unique chance for Nigeria as the largest economy in Africa to bolster its manufacturing sector and become a manufacturing hub for Africa.”
Speaking on whether Nigeria is ready to take advantage of the AfCFTA, Aganga harped on SWOT analysis to buttress his points thus: He noted that Nigeria has abundance of raw materials; Large market and a fast-growing middle class; Predominantly young population with demand for products; Nigeria has one of the most developed industrial sectors in Africa; Low labour costs on dollar terms and largest economy in Africa.
He declared what are the real and perceived weaknesses in the pursuit of the AfCFTA, noting that there is the absence of a shared strategic vision and set goals for industrialisation which are required to provide signals to investors and guide government policies; The absence of a formal government business forum like the Competitiveness Council where issues of competitiveness are addressed and action taken; Relatively high cost of production, sub-optimal productivity, high prices of products due to reliance on imported inputs, high cost of electricity/energy, transportation, overregulation, multiple taxation and levies.
A Global Competitiveness Index issued by the World Economic Forum (WEF) a few years ago ranked Nigeria 132 out of 137 countries in terms of the overall state of infrastructure, 136 out of 137 for quality of electricity; for quality of roads, 127; for air transportation, 125; and for mobile telephone subscriptions, 117. Some of these rankings improved only slightly in more recent reports; Grossly insufficient and unaffordable finance; Difficult, uncertain and very weak macroeconomic environment. Inflation in August was at a record high of 25.8%, Lagos was 29.17%, and food inflation was 36.04%.
He stated that the Naira has weakened significantly and the dollar supply has decreased relative to the previous situation in 2015, adding that the exchange rate to convert Naira to dollar has plunged from about 380 even as recent as 2019 to around N1,000 and rising.
Additionally, the consummate accountant said there is difficult regulatory and business environment with insecurity and according to the WEF’s GCI, Nigeria ranked 133 out of 137 countries surveyed in business cost of terrorism, kidnapping etc; Devaluation of the Naira has not led to significant growth in non-oil exports. There are few competitively produced goods to export; Inconsistency and poor implementation of government policies; Migration of skilled workers which has become a deluge called ‘japa’; Poor local patronage – Preference of Government and Nigerians for imported products; Small capital goods industry and reliance on imported intermediate raw materials, equipment and machinery as well as absence of medium and higher technology industries as a result of the absence of an industrial technology support system.
He affirmed that there is Weak Human Resources with skills relevant for the economy, adding that the WEF identified poor work ethics in the national labour force and inadequately educated workforce as major concerns for Nigeria’s competitiveness; Corporate indebtedness and the drying up of local and foreign investments flow into manufacturing; Shrinking of consumer groups due to high levels of unemployment, poverty, lower disposable income to buy goods and inability to empower the middle class financially; Weak or no institutions to drive industrialization; The educational system does not produce anything close to enough number of graduates with STEM – Science, Technology, Engineering and Mathematics – competencies; Weak or no linkages between industry and innovation/ research institutes; Inadequate metrology and standards; Inability to reverse-engineer and adapt foreign technology to domestic markets, products and scale of production as well as Non-payment of Export Expansion Grant (EEG).
For Africa, the movement of goods and people, he said, is still restricted and connectivity/logistics within Africa remains very difficult.
The 2022 Africa Visa Openness Index (AVOI), which measures the extent to which African countries are open to visitors from other African countries, shows that 10 countries have improved their visa openness score over the past year, although African citizens must secure a visa for 47 per cent of intra – Africa travel, he said.
The report, he said, further showed that 32 countries still require the nationals of at least half of the continent’s countries to obtain a visa before travelling inspite of the increasing global acceptance of the visa on arrival facility.
He stated further that it is important that these weaknesses are addressed as we set the Agenda for competitive manufacturing under AfCFTA.
He emphasized that Nigeria has a great opportunity to become the manufacturing hub in Africa, and with this comes all the benefits of non-oil export such as foreign income and employment which Nigeria desperately needs to move the country forward.
We need, he said “Growth and diversification of Nigeria’s economy and revenue; Attract investments into the economy; To significantly increase the percentage of components produced locally for assembled consumer products; Expand low technology, labour-intensive and resources-based Industries; Create millions of jobs, and reduce the level of poverty and unemployment; Produce for domestic consumer market.”
He explained that this will lead to a reduction in the demand for foreign exchange to buy foreign products which will contribute to a more stable local currency and cautioned that if we don’t take advantage of these opportunities and be fully prepared, we will have to contend with some threats.
The threat, he said, will come from the emergence of lower-cost competitors both from Africa and outside Africa, stressing that China remains the largest importer into Africa partly because our manufacturers do not produce what we consume or are not competitive.
In his words: “Nigeria loses its market and the opportunity to truly move from an agrarian to an industrial economy…. A path all prosperous nations have gone through. The Nigerian market is the largest market and target for almost all countries. This will become a major threat if the Rules of Origins are not well defined and monitored.
“The flooding of the domestic market with cheaper and substandard products. This is one of the reasons why Nigeria’s quality infrastructure needs to be in place; The threat of continued de-industrialisation; Nigeria’s economy will remain very weak. This will of course lead to insecurity, increased levels of poverty, unemployment, borrowing, a difficult macroeconomic environment with high inflation and exchange rates; Balance of payment issues and dwindling of foreign reserves.
“These weaknesses present a daunting and extremely difficult environment for any country to industrialise let alone aim to be competitive. But China and Indonesia were worse than this before they embarked on their industrialisation programs and look at what they have achieved today. If they can do it, Nigeria can certainly do it; better and quicker. All we need is a robust Agenda, total commitment from the Government and the industry, and continuity,” he added.
He noted that it is important to bear in mind, that AfCFTA alone cannot improve intra-regional trade.
“We need to do more! For example, the intra-Africa trade is around 15-20%. This compares with about 50% for intra-Asia trade and over 70% for intra-European trade. The disparity is due to a combination of historical, geographical, economic, and infrastructural factors.
“Historical Factors: European colonialism established strong trade routes and economic ties within Europe and between Europe and its colonies. In Asia, ancient trade networks and historical connections also play a role in facilitating intra-Asian trade. The message here is that connectivity within Africa is critical for AfCFTA to succeed.
“Geographical Proximity: Both Europe and Asia have countries in close geographical proximity, making transportation of goods easier and more cost-effective. In contrast, Africa’s vast size and geographical barriers can complicate transportation and trade.
“Economic Development: Europe and Asia have more developed economies with diverse industries, which leads to higher trade volumes. Many African countries face economic challenges, including limited industrialization and reliance on commodity exports. We expect this to change if Nigeria and other African countries focus on industrialisation.
“Infrastructure: Europe and Asia have well-established transportation and communication networks that facilitate trade. In contrast, inadequate infrastructure in many African regions can hinder efficient trade flows. Again, Africa must focus on trade-related infrastructure and connectivity as I said earlier.
“Political Stability and Insecurity: Intra-African trade can be affected by political instability, trade barriers, and inconsistent regulations among African nations. Europe and Asia have generally enjoyed more stable political environments.”
He opined that addressing historical, economic, infrastructural, and political challenges will be crucial for increasing intra-African trade to levels comparable to intra-Asia and intra-European trade.
These recommendations, Aganga added are intended to help establish a strategic framework or Agenda for industrial plans, policies and strategies which the government through the Ministry of Industry, Trade and Investment may wish to take up, working very closely with MAN, research institutes, universities, and other MDAs, in order to strengthen Nigeria’s industrial competitiveness in the immediate, short and medium term.
