AfCFTA: Gas players call for accelerated manufacturing

[By Sopuruchi Onwuka]

Fears are high among local manufacturers that the African Continental Free Trade Agreement (AfCFTA) which came into effect on New Year day will open another chapter of gloom in the Nigerian economy unless the government accelerates domestic manufacturing capacity to catch up with competition in the continent.

NLNG MD Tony Attah

Under the agreement, member countries must phase out 90 percent of tariff lines over five years for more advanced economies or 10 years for less developed nations. Another 7.0 percent considered sensitive will get more time, while 3.0 percent will be allowed to be placed on an exclusion list.

Every African country except Eritrea has signed on to the AfCFTA framework agreement, and 34 have ratified it. Some 41 of the zone’s 54 member states have submitted tariff reduction schedules; but the AfCFTA is yet to conclude an annex on rules of origin which is essential to determining which products can be subject to tariffs and duties.

The free flow of goods and services in the continent is expected to evolve new value chains that create additional businesses which the World Bank estimates could substantially assist the continent beat down poverty by 2035.

The AfCFTA is projected to collapse the 1.3 billion African population into one economic bloc with cumulative gross domestic product of over $3.4 trillion. The market size emerging from the AfCFTA is calculated to surpass any existing free trade area since the establishment of the World Trade Organization.

According to industry captains who debated on the inevitable trade war among African countries as AfCFTA dismantles tariff and other import barriers in the continent, Nigeria’s uncongenial business environment for the manufacturing sector would make it difficult for players in the domestic environment to rise to the emerging competition.

However, the ongoing national gas expansion programme of the government which seeks to diversify fuel options for the industrial and commercial sectors of the economy could lighten up hope for the country to dominate the African energy market.

Speakers at the 2020 conference hosted by the Nigerian Gas Association (NGA) agreed in the online debate that gas offers Nigeria the opportunity of boosting its competitiveness in the trade war.

The panelists drawn mainly from the petroleum industry emphasized that the ongoing fuel diversification programme of the federal government could be driven across borders to power continental industrial activities.

The outgoing President of NGA, Mrs Audrey Joe-Ezigbo expressed apprehension over Nigeria’s weak industrial and manufacturing capacity to compete in the continental free trade, stressing that a lot of Nigeria’s economic fundamentals are still in bad shape.

To capture the economic benefits of the , Mrs Joe-Ezigbo declared that Nigeria must accelerate its industrial productivity in order to catch up with continental peers. She added that fixing the nation’s gas industry remains the fastest way to boost manufacturing capacity and match up with emerging competition in the AfCTA.

Mr Taaj Shobajo who represented the Country Chair of Shell companies in Nigeria, Mr Osagie Okunbor, described Nigeria’s unpreparedness for the AfCFTA as the nemesis of years of official mismanagement of the economy, lamenting that the “evils of the past” are finally catching up with the country.

He pointed at the country’s parlous industrial status and the uncongenial state of the domestic business environment as factors that would weaken Nigeria’s prospects of taking early advantage of the emerging trade opportunity in the AfCFTA.

In his argument, the Managing Director of Axxela, Mr Bolaji Osunsanya, lamented that the AfCFTA may become another missed economic opportunity for Nigeria, explaining that the country is currently unable to take advantage of the continental free trade due to low internal production capacity.

According to Mr Osunsanya, the AfCFTA should have been a natural advantage if the country had sustained capacity growth in its manufacturing sector. He however pointed out that Nigeria still holds the advantage of fueling manufacturing in the continent with well harnessed energy resources.

Mr Osunsanya who has traversed the full business cycle in the oil, gas and power sectors pointed that while the National Gas Expansion Programme (NGEP) of the government has provided opportunity for the industrial sector to improve its energy efficiency and commercial competitiveness, government must also improve the domestic operating environment with efficient factors of production to make Nigerian goods competitive in the coming AfCFTA context.

The Oracle Today reports that Nigeria provides the biggest market in the African Continental Free Trade Area (AfCFTA) with its population of about 200 million consumers, porous borders and mass importation of goods as primary feed to the domestic market.

With low manufacturing capacity, huge infrastructure and facility deficits, as well as low fiscal and policy incentives for local production, fears are high that the country which leans heavily on petroleum income will form the dumping ground for manufacturers in northern and southern parts of the continent.

The fears of Nigeria’s unpreparedness for the continental trade competition led to the hesitation of the President Muhammadu Buhari led government in signing the country onto the free trade agreement which aims to boost continental local content and spur industrial growth.

Independent economic analyst, Mr Jeffrey Oresanya, told our correspondent in Lagos that fears of Nigeria’s loss of advantage in the AfCFTA are belated and narrow since, according to him, the country has been conditioned to form market for colonial manufacturers since its formation by Britain.

He argued that the AfCFTA has offered the country the needed opportunity to confront the task of nation building by creating a competitive platform from the government to benchmark its policies and programmes against needs and objectives.

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