Four months after Nigeria officially commenced its involvement in the African Continental Free Trade Area (AfCFTA) via the Guided Trade Initiative, Nigerian exporters are reporting significant obstacles stemming from the country’s ongoing foreign exchange (forex) crisis, which is impeding their engagement in this expansive trade network valued at a combined Gross Domestic Product (GDP) of $3.4 trillion. In July, the Nigerian Federal Government, through the Nigeria AfCFTA Coordination Office, proclaimed that ten Nigerian companies would initiate the export of locally manufactured products to various countries across East, Central, and North Africa. During a ceremony in Lagos to commemorate Nigeria’s inaugural shipment under the Guided Trade Initiative, the National Coordinator, Olusegun Awolowo, highlighted the ambitious plans, emphasizing this as a pivotal moment for Nigerian businesses and African economic integration.
The ten selected companies are set to export a diverse range of products, including bags, smart cards, and clinkers, to countries such as Kenya and Cameroon. For instance, Le Look Nigeria Limited is tasked with exporting bags to Kenya, while Secure ID Limited will be exporting smart cards to Cameroon. Other participants include Dangote, which will export clinkers to Cameroon, and Avila Naturalle, known for its black soap and shea butter exports. Awolowo posited that these enterprises would create a benchmark for fellow exporters, aiming to enhance Nigeria’s presence in the continental market. This initiative is expected to offer a myriad of opportunities, fostering trade relationships and stimulating economic growth across the region.
Despite the initial enthusiasm surrounding these export ventures, the Chief Executive Officer of Le Look Nigeria Limited, Mrs. Chinwe Ezenwa, has voiced concerns about the crippling impact of high freight costs on their operations, a direct consequence of the forex situation in Nigeria. She explained that the inflated logistics costs stem from airlines raising their prices due to currency fluctuations, constraining the export volume significantly. Ezenwa reported that she has only managed to export 5,000 bags since the launch of the initiative, substantially less than the anticipated 20,000, attributing this shortfall directly to the forex crisis. While she has successfully established a warehouse in Kenya and partnered with a local distributor, the potential for higher exports remains unfulfilled due to financial constraints.
Ezenwa further advocated for governmental intervention to support exporters by providing more accessible loan facilities with favorable interest rates. She believes that enhancing awareness and assistance for small and medium-sized enterprises (SMEs) is crucial in overcoming existing hurdles in the export landscape. This appeal underscores a need for financial stability and guidance, which she argues is paramount for enabling businesses like hers to thrive and contribute to Nigeria’s economic objectives under the AfCFTA framework.
In a broader evaluation of Nigeria’s challenges in realizing its trade potential, Dr. Obiora Madu, Director-General of the African Centre for Supply Chain, articulated critical observations regarding the sluggish pace of progress. Madu attributed the difficulties facing Nigerian exporters to a deficient export culture and constrained capabilities rather than a lack of market opportunities. He emphasized that fostering a robust export culture, alongside imparting the necessary knowledge and skills to potential exporters, is vital in overcoming the obstacles currently affecting trade participation. This commentary suggests that any meaningful progress will require a multifaceted approach that not only addresses forex issues but also works toward cultural shifts in how businesses engage with international markets.
Overall, while the entry of Nigerian companies into the AfCFTA signifies a promising step toward enhancing trade across the continent, the journey is fraught with challenges, particularly relating to foreign exchange accessibility and logistics costs. The feedback from industry leaders underscores the necessity for a strategic response from the government and relevant stakeholders to facilitate smoother export processes and empower local businesses. Until these systemic issues are adequately addressed, the potential of AfCFTA to galvanize Nigeria’s economy and meet the ambitious trade goals may remain hindered. The collaborative efforts between the government, financial institutions, and exporters will be key in navigating the complexities of this evolving trade environment to unlock the benefits envisioned by the AfCFTA.
