ACFTA as a fulcrum to Nigeria’s economic growth

Two and half years after its creation and over a year since it signed onto it, the Nigerian government has finally ratified its membership of the African Continental Free Trade Agreement to the relief of almost everyone on the continent.

Nigeria ratifying the agreement is very significant for the success of the agreement which comes into effect on January 1, 2021 and creates the largest trading bloc in the world after that of the World Trade Organization: it is Africa’s largest economy and takes 17% of the continent’s GDP. This means without Nigeria, the AFCTA will not be as impactful for the continent.

But what is even more curious is Nigeria’s initial refusal to join the agreement after being a key part of the negotiations that shaped the agreement: it was predicated on the belief that Nigeria will be a dumping ground for imported goods across the continent, especially with firm opposition by the Manufacturers’ Association of Nigeria (MAN) and the Nigerian Labour Congress (NLC).

This sentiment is a popular one among most Nigerians who believe that almost everything we use is imported, and the way to stimulate local manufacturing is to ban the importation of items or increase the import tariffs on them. It also seems to be believed by the current administration and its affinity for policies such as denying forex at official rates to importers of certain items, increasing import tariffs on many goods and closing land borders, thus blocking not just imports but exports as well.

Unfortunately, this sentiment is rooted in wrong facts and theories: Nigeria does not have an import problem, but an export one – as a share of our GDP, importation of goods and services is 17.5%, far below the sub-Saharan average of 30.4% (only two countries have a smaller import-to-GDP ratio) and almost on par with the United States, China and Japan.

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However, when it comes to exports, it is only about 15.5% of our GDP, which would have not been a problem – after all, the three largest economies in the world have similar ratios – but that Nigeria has a small domestic market, classified as a lower middle-income country with a per capita income of about $5,000.

This means that Nigeria needs a vastly larger market for its goods and this is what the ACFTA aims to deliver by making it easier to export our goods and services across the country.

It also needs to be asked: what countries are Nigeria scared of that will dump their goods in our country? Nigeria has a more robust manufacturing base than most African countries and can favourably compete with these countries. Egypt and South Africa, the next two largest economies after Nigeria are separated from Nigeria by distance and insufficient transport links, while countries much closer to us actually import a lot more from us (with the exception of Benin Republic which has benefited from poor port facilities and import processes that make it harder to import directly into Nigeria).

Joining this agreement should make Nigeria rethink its policies that will be geared towards improving its exports across the continent, especially with a view to dominating West and even Central Africa. This also means improving transport links, resolving security challenges and improving our business environment.

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