The African Continental Free Trade Area (AfCFTA) presents a significant opportunity for African nations, particularly Nigeria, to stimulate economic growth and diversification. However, experts caution that simply removing tariffs, as Nigeria recently did by gazetting its Provisional Schedule of Tariff Concessions and signing the ECOWAS Schedule of Tariff Offers, is insufficient to reap the full benefits. The true potential of AfCFTA lies in industrialization and the production of value-added goods for export within the continent. Currently, many African economies, including Nigeria, rely heavily on exporting raw materials, a practice that limits their potential gains from tariff reductions. A shift towards manufacturing and processing is crucial for maximizing the benefits of intra-African trade.
While the removal of tariffs on 90% of goods traded within Africa under the AfCFTA agreement is a positive step, the lack of diversification in many African economies poses a significant challenge. Professor Akpan Ekpo, an economist and former Vice-Chancellor of the University of Uyo, highlights this concern, noting that many ECOWAS countries primarily export raw materials, leading to limited gains from tariff reductions in the short term. Trading similar unprocessed commodities amongst themselves offers minimal economic advancement. Real progress, according to Ekpo, hinges on shifting from exporting raw materials like crude oil, raw cassava, and unprocessed diamonds to producing manufactured goods and services that command higher values in the market.
Experts like Professor Segun Ajibola, former President of the Chartered Institute of Bankers of Nigeria, acknowledge the potential benefits of the tariff waiver but emphasize the importance of having exportable goods. Ajibola argues that Nigeria possesses a range of potential export products beyond oil, including agricultural goods like cocoa, rubber, and cotton, as well as solid minerals. Leveraging these resources effectively requires focusing on value addition through processing and manufacturing. This will not only enhance the competitiveness of Nigerian exports but also contribute to greater economic diversification, moving the country away from its current reliance on crude oil.
Ajibola also points out that some Nigerian manufacturers already produce export-ready goods and could immediately benefit from AfCFTA incentives. Companies like Dangote, Nestlé, Nigerian Breweries, and Guinness are cited as examples of businesses with existing export capacity. However, addressing concerns about quality and branding gaps that hinder the competitiveness of Nigerian products in the international market remains critical. Improving product quality and building stronger brands are essential steps for ensuring that Nigerian exports can effectively compete within the AfCFTA market. This will not only boost export revenues but also enhance Nigeria’s reputation as a producer of high-quality goods.
The gazetting of Nigeria’s PSTC, as confirmed by the AfCFTA Secretariat, marks a significant commitment to the agreement and provides certainty for businesses engaging in intra-African trade. It signals Nigeria’s intention to grant preferential tariff treatment to eligible imports from other African countries, fostering increased trade flows within the continent. This move has been lauded by Dr. Jumoke Oduwole, Minister of Industry, Trade and Investment, as a significant win for Nigerian trade, potentially unlocking new opportunities for businesses and exporters.
Ultimately, the success of AfCFTA for Nigeria hinges on a concerted effort to industrialize and diversify its economy. This requires strategic investments in manufacturing, processing, and value-added industries. Furthermore, addressing issues of product quality, branding, and infrastructure is crucial for enhancing the competitiveness of Nigerian exports within the African market. By focusing on these key areas, Nigeria can unlock the full potential of AfCFTA, transforming its economy and solidifying its position as a major player in intra-African trade. This strategic approach will not only benefit Nigeria but also contribute to the overall success of the AfCFTA in fostering economic growth and development across the continent.
