By Sunday Oghayei, Ph.D.
A lot has been written on the refusal of Nigeria to sign the CFTA on March 21, 2018. Government provided reason to hold further consultations with stakeholders before signing. Stakeholders’ consultations are key to trade negotiations and implementation. However, it ought to be part of the process leading to the negotiations of the agreement and not after the agreement had been concluded. Rightly or wrongly, the consultation is on-going. The consultations should be structured to support policy decisions by government to sign or not to sign. The outcome is expected to provide policy recommendations on the desirability for Nigeria to enter into CFTA with non-traditional partners, and to highlight priority issues to be considered to make that decision.
What should be the consideration during the consultations? There is no doubt that the CFTA would create market access but new markets are difficult to break through. There are usually initial market entry challenges. Discussions should review initial market entry challenges and the need to articulate a robust export strategy is desirable. It should also, focus on benefits and costs of expanding Nigeria’s engagement with 54 non-traditional trading partners in Africa.
Interestingly, the focus of stakeholders’ interest is on market access. Without a study, it would be difficult to understand the issues in the market access. Discussions on market access should be holistic based on impact assessment study particularly the sector(s) affected as well as the cushioning measures to be put in place by government. The context of the study should include using a Gravity Model analysis that is conducted to establish realistic benchmarks for Nigeria’s potential exports, taking into account factors such as distance to market, size of partner economies, complementarity in terms of comparative advantage, commonalities that work to reduce trade costs and ex post analysis of the effectiveness of existing CFTA.
The study should also analyze a range of scenarios using a Computable General Equilibrium (CGE) modelling, including more or less ambitious CFTAs modalities, taking into account alternative assumptions about the supply response to the new opportunities opened up by the CFTA particularly intra-REC trade. These studies should inform the current consultations.
The consultations has however, raised issues as to what Nigeria should be doing during the ‘self-imposed grace’ period. In the light of the fact that trade liberation must be accompanied with complementary policies to lead to growth and development, Nigeria should focus and discuss the following.
Trade promotion and market information: are required because of the currently low levels of bilateral trade and investment and the ignorance of each other’s markets. A trade agreement should therefore go beyond mere statements of intent to cooperate and establish observable targets for cooperation in this area.
Logistics and transport issues: should be taken seriously as a key impediment to trading in Africa. Finding solutions to them will be important in order for a trade agreement to lead to actual increases in trade. Therefore, the CFTA should entail a (monitorable) commitment by all parties to work on transport and logistics issues through finding joint solutions, either based on existing capacities or new solutions to be developed. Whatever the solution, a joint approach to be developed in the framework of an agreement is important.
Technical barriers to trade and sanitary and phytosanitary issues: affect bilateral trade in many goods. Accordingly, enhanced cooperation of norm-setting bodies and conformity assessment bodies would be welcome.
Business and Trade facilitation initiatives: are another area of key importance and would be suitable to be addressed jointly, within the framework of commitments to be established in a trade agreement.
Some of these issues are already identified in the architecture of the CFTA but yet to be discussed in details to warrant confidence of the stakeholders in the agreement. The consultations ought to highlight Nigeria’s positions on these issues to enable stakeholders buy-in. A number of other trade related areas are important to foster trade between Nigeria and African countries, either for specific sectors or in the longer term. These include intellectual property issues (essential for the creative industries and a number of other services sectors), joint R&D, the promotion of regional value chains, language training, and cooperation in education & training. Some of these areas would necessarily have to be addressed in a trade agreement between Nigeria and the respective African partner.
The way forward
Fundamental aspect in the way forward for Nigeria’s participation in the CFTA is for the Government to get its act together by performing a detailed investigation of what Nigeria needs from the CFTA, (i) what is the overall strategy the country wants to pursue which should be much more than merely the trade policy strategy; (ii) It has to include the interlinkage of the national strategies for the development of other important sectors in the domestic economy.
This will ensure that the CFTA is not pursued in isolation; rather it is well embedded in the overall national policy objectives. This can be effectively done where the Nigeria outlines its main challenges and how best they can be tackled. The results of such an analysis should be use to guide the country’s national strategy. Even if the results point to the adoption of a strategy where the loopholes within the CFTA are exploited to the country’s benefit, then this path should be pursued. It is a key necessity for consultation.
Another key factor in reaching a well-suited national strategy is the deployment of the proper data dissemination and information center to enable well-informed decisions to be taken. Currently, intra-African trade has high informal trade that are not captured by official statistics. There must be up-to-date data on imports and exports, broken down to the simplest components in terms of product definitions, as convenient, to facilitate simulations on how to improve the country’s trade performance.
Similarly, there should be comprehensive data on the trade performance of other African Countries in a similar situation to the Nigeria as well as on other African countries having a similar economic and trade structure to Nigeria. All of this points to the importance of relevant data in effective policy formulation, analysis and implementation, especially for the CFTA.
The Nigerian government authorities must also ensure that the private sector are kept well informed of the rules, agreements and preferential treatment that can be exploited for the country’s benefit. With the establishment of the appropriate cooperation with the private sector, it will become easier to identify the few industries that can be develop for exports, with economies of scale, to allow Nigeria enjoy an acquired comparative trade advantage.
Finally, Nigeria needs to develop an Export Strategy for the CFTA. In this way the shortcomings of Nigeria in other trade agreements will be reduced by the proactive role of the NEPC in directing Nigeria towards a more rewarding participation in the CFTA. This will undoubtedly contribute positively towards efforts of countries such as Nigeria to fully integrate her economy into the African economies.
Finally, the details of the key issues are missing in the on-going consultations. With current approach, implementation would be difficult in Nigeria. Nonetheless, integrating her economy into the African economies is in Nigeria’s interest but Nigeria needs to approach the issues with “its eyes open”.
Oghayei is Regional Trade Advisor, COMSEC/EC (Hub & Spokes II Programme), he contributes this piece from CARICOM Secretariat Turkeyen, Greater Georgetown-Guyana.