When Nigeria’s name was missing among the list of 44 countries that signed the Africa Continental Free Trade Area (AfCFTA) agreement last March 21 during the 18th Extraordinary Session of the Assembly of AU Heads of State and Governments in Kigali, Rwanda, Africa was virtually thrown into a frenzy.
Now, Nigeria’s Chief Trade Negotiator & Director General, Nigerian Office for Trade Negotiations (NOTN), Ambassador Chiedu Osakwe, told a select group of journalists in Abuja, including Business Editor, Bassey Udo, the country is finally getting ready to sign. The only problem is knowing when. EXCERPTS:
PT: Africa Continental Free Trade Area (AfCFTA) agreement was Nigeria’s original baby. But, a lot of people were surprised Nigeria withdrew from signing when the agreement was ready. What really happened?
OSAKWE: No, Nigeria did not withdraw from signing the agreement. The President’s decision was suspend signing till industry and sector-wide negotiations/consultations have been concluded. So, I will not characterize it as withdrawal of signature, but actually suspension of signature.
From March 15, we have basically concluded the negotiations and consultations with the Nigerian Bar Association Section on Business Law on June 28, after three month long process.
PT: What were the key findings from interest groups consulted in the course of negotiations?
OSAKWE: First, let me say that the consultation was a hugely beneficial exercise. From both public and private sectors consulted, it was an unprecedented exercise in the way we have conducted trade by trade policy.
Beyond that, there was significant nationwide support for Nigeria to go ahead with the agreement initiated by the AfCFTA.
But, at the same time, interest groups were clear the pace of work by government in partnership with private sector should be accelerated with regards to a range of long standing issues.
Those long standing issues were power supply, which is absolutely key factor in the cost of doing business. We need to intensify efforts in what government is doing across the board to ensure predictable cost effective power supply.
The enabling environment for business. Although a lot of progress has been made as registered in the 2017 World Bank report, going up 24 places and in the top ten reforming countries in the world, a lot still needs to be done to scale-up, deepen, and intensify.
Private sector stakeholders were really aggravated by the “harassment” in the domestic market by representatives of security agencies.
The tolls, proliferation of taxes, checkpoints, even agents coming into domestic markets. What this means is that key to major improving competitiveness is to remove the burdens arising from harassment of people inside the domestic market.
From the North East and South-South, the trade corridors leading to markets, informal trading by Nigerians with Cameroon, Sao Tome and Principe, Equitorial Guinea, should be kept open, because it accounts for jobs and livelihood in those areas.
In the North East region, we were taken through the trade corridors of Dikwa, Bama, Gamboru Ngala.
These trade corridors take products manufactured in Nigeria into Chad, Niger, Cameroon, Central Africa to East Africa. Others go right up to North Africa.
They say this trade corridors have been there for over 100 years and accounts for the welfare and livelihood of the people.
The current situation is that for a long time the periods of three to four years, these borders were closed for all sorts of reasons, including security.
Then, they were partially reopened, in the case of the North East. They currently open on Tuesday and Fridays, in the course of the week.
When they took us through these corridors, we saw trade convoys of about 200+ vehicles.
In the North East, they have an expression for them – Giwa-Giwa. And they are carrying Nigerian produce out into other African countries, boosting intra-African trade.
So, keeping the trade corridor was a key finding.
Compromise on all trade agreements have to be found. The other key finding from another group of interest groups is, there should be more effective border controls.
We should be able to close our borders when we want to. We should be able to open them when we want.
On the one hand, there are those who kept open, because this agreement is for intra-African trade, and these trade corridors have been there for upwards of over a century.
On the other hand, you have those who want tighter, stricter, more restrictive controls of the borders.
Related to that is the transshipment and dumping, which is real. But, for the dumping, here lies the technical details.
The agreement establishing the AfCFTA is to boost intra-Africa Trade. In other words, Trade within African countries that would become state parties to the AfCFTA after they have signed it and ratified it and become members.
What’s unfair in terms of the feedback is that it has the potential to create risk from outside the continent being brought into Africa, including through neighbours escaping rules of origin control and being dumped in the Nigerian market below market price.
A key feedback was for Nigeria to put in place a credible, tight, trade remedy infrastructure, which is legitimate.
We had a strong reason from the Association of Women Entrepreneurs to integrate women, and bring them into trade, have a trade empowerment of women.
This was coalition and mutually reinforcing, but still a bigger issue finding, which is, over 60 per cent of Nigeria’s economy is undocumented, not receipted in the informal economy.
So, a key finding was to make sure in implementing the AfCFTA, bring in the informal sector into the formal Nigerian economy.
This was a major point in all the geo-political zones in Nigeria. We have those who wanted government to explain the arrangement we had for establishing of a scaled up implementation of the coordination mechanism for rules of origin. But, how do you implement it?
Another issue was to have a modern, 21st century trade policy coordination, implementation and monitoring mechanisms for trade. This is absolutely important. There were coordination mechanisms that existed before. But, they are dated. They are not inclusive. There are questions of transparency well before we came, and they wanted a coordination, implementation and monitoring arrangement of a scaled-up, modernized, more 21st century like.
The final thing is that studies have established a baseline on the impact of the AfCFTA on the Nigerian economy different from the multilateral and regional. Current studies have been done in a sense, but by Nigerian researchers largely.
These were the feedback we got in terms of the findings. But again I need to be clear about the starting point the significant feedback was this, the agreement establishing the AfCFTA is laudable, commendable, Nigeria should join it, sign it and at the same time scale up the pace activities.
PT: You sound as if Nigeria is now ready to sign the agreement?
OSAKWE: Almost. But that’s a decision to be made by Mr. President.
PT: Other interest groups, like the Chambers of Commerce and Manufacturers Association of Nigeria (MAN) expressed some concerns about the AfCFTA. Are they now convinced about the benefits and no threats to their joining the AfCFTA?
OSAKWE: Both NACCIMA and MAN support the objectives and ideals of the agreement establishing the AfCFTA. We need to be clear about that.
Their concerns are legitimate and need to be addressed. The Nigerian economy is based on goods and services. The goods sector in the Nigerian economy accounts for approximately 9.5 per cent and a little less of the gross domestic product (GDP) of Nigeria.
The services component of the Nigerian economy is approximately 55 per cent +. So, both the goods and services sector will have to be taken on board with regards how we establish and work out a zone of compromise moving forward.
Every trade agreement has two dimensions to the negotiations – the external (with other parties), in the case of Nigeria, it is 54 other member countries of the AU, and negotiating.
This is not different for Nigeria as it is for other countries the domestic negotiations. The way it works in practice is, whatever domestic compromises are, we have to establish a zone of compromise.
We also have to interact with our counter party in establishing a zone of compromise. In other words, there is a national interest for Nigeria. There are also 54 other national interests. All of them have to be brought into the zone of compromise.
We are working systematically with MAN, NACCIMA, Nigerian Association of Small and Medium Enterprises on goods. But on services, with a considerable range of interest groups in the area of services accounting for 55 per cent+ of the wealth of this country.
Specifically, the issues we are dealing with are the particular tariff lines that shall be liberalized.
In other words, fall within the 90 per cent level of ambition and on the other hand, what are the product lines that will fall within the 10 per cent category restricted, excluded from liberalization exclusion list and the sensitive list.
What we are doing is to establish a technical working group on goods market access, consisting MAN, ministry of finance, National Bureau of Statistics, NACCIMA.
We asked MAN to give us the list of products they would like to see in the 10 per cent. They have sent since May 11, 2018.
In other words, everything MAN asked to be included in the exclusive and sensitive list (10% not for liberalization) have been done.
But, there is a process underway because it is yet to be validated by our superiors. One other thing you need to bear in mind is this, manufacturers are not monolithic.
There are those who want some things liberalized. There are those who do not want some things liberalized. We need to be sensitive with regards to domestic consultations, which is still on the way.
The external negotiations in the AfCFTA are not as thorough as the negotiations domestically.
The toughest negotiations in trade are not those with other countries. They are the internal ones. Does it frustrate me? No!! Does it aggravate me? No!! What does it do to me? What it does is that there has to be a greater understanding on the part of all interest groups domestically.
That it cannot be ‘winner take all.’ That we have to work together because every Nigerian is a stakeholder in the Nigerian economy.
What we have to do is to get into the technical working groups (good market access i.e. merchandise and services market access) set up and work through the issues.
PT: Recently, ECOWAS, which has 13 of its member nations as signatories to the AfCFTA, circulated a goods market access offer, a draft market access offer on goods for ECOWAS countries to be deposited in the AfCFTA. This puts Nigeria, which is yet to sign, in dilemma. But, we have obligations in ECOWAS in accordance with the ECOWAS Common external tariff. Are you not worried that we are gradually being isolated?
OSAKWE: We expect a particular number of countries to ratify the AfCFTA agreement before it is activated.
PT: If Nigeria is not one of the countries that ratifies this agreement but eventually the agreement gets the required number of countries to ratify it where does that leave Nigeria?
OSAKWE: About 47 countries have signed the agreement as at Sunday in Nouakchott. Approximately 10 have ratified. To come into force, only 22 ratifications are required to be deposited. And then 30 days after 22 have deposited their instruments of acceptance, the AfCFTA comes into effect.
So, basically we are dealing with an agreement that is now de’jure and no longer de’facto.
But, which will come into effect with the 22nd. On the question where that leaves Nigeria when it comes into force, if Nigeria neither signs nor ratifies, my answer is, let’s deal with that when we get there. I don’t want to speculate.
PT: On ECOWAS draft offer to AfCFTA and the fears of dumping in Nigeria, are we not opening the road for powerful manufacturing economies from the west to eventually use the AfCFTA to dump goods into Nigeria?
OSAKWE: You are right there. The risks increases. But, in the agreement establishing the AfCFTA, which Nigeria has not signed, we have a provision on trade remedies or dumping, on the basis of which a party can apply for certain duties for products sold below market price from a producer or importer into Nigeria.
So, we have anti-dumping clause as a trade remedy in AfCFTA. Also, we have countervailing measures on subsidies. If the importer from another country has used illegal and trade distorting subsidies like export grants, subsidies, loans that some countries give to their businesses, which they never ask back, to give them an unfair advantage.
So, in the agreement, we have a clause on countervailing duties to products that have enjoyed or benefited from illegal trade distorting subsidies.
As part of the troika of the trade remedies infrastructure clauses in the AfCFTA deal, we have the preferential safeguard what it does (it’s not anti-dumping or countervailing duties), it’s a safeguard provision in all trade agreements to deal with the probability that when you liberalize in some instances you have a surge of imports.
And what that preferential safeguard does is simply a ‘hand break’ to apply to stop the imports.
What the manufacturers are saying, which is equally legitimate, is that we have domestically in our infrastructure of trade that would implement those clauses.
PT: currently, how does it work? As a country, how do we implement the rules of origin?
OSAKWE: Certificates of origin are issued by NACCIMA, not a government agency certifying a product being imported meets origin criteria. Enforcement is by the Nigerian Customs Service and the border agencies.
But, in terms of the AfCFTA, because we have to keep moving between the AfCFTA and what we are doing domestically. In terms of the AfCFTA, what did we negotiate on the rules of origin?
There is an agreement on rules of origin that is annex to the protocol for trade in goods. The agreement on general rules of origin have been agreed as part of what was signed in Kigali, what is work in progress still in the AfCFTA are the product specific rules of origin.
In other words, when you are dealing with rules of origin, you have to disaggregate them into two: the general rules of origin and product specific rules.
On the general rules of origin, what you will have will be general criteria like whole extracted, substantially transformed. You have verification procedures.
But, on the product specific rules of origin, you would have to determine the rules of origin that go into the components of making a product for example a phone. In the WTO we are still working on the product specific rules of origin.
Product specific rules take a while, because a lot of it is technology, dynamic transformation, built into value chains parts being made in different countries.
PT: How soon will Nigeria sign this agreement, given that some reforms will have to be carried out on some agencies?
OSAKWE: I won’t put a timeline to this. In my view, there is more domestic needs to be done that all of us should not be dismissive about.
I believe what Nigerian interest groups I interacted with. There was such keenness, fervor and patriotism. They want to see a Nigerian economy with improvements in domestic economic coordination.
Everyone across the board want to see serious coordinated permanent investment in trade and economic infrastructure.
They want to see stronger determination to accelerate on all parts. They want to see agencies of government strongly for Nigeria in coordinated and coherent manner. These are legitimate concerns. They don’t want to see business as usual. They support the AfCFTA.
A number of the questions, concerns are not matters for the NOTN: power, border security.
The domestic market hosted in the North Central part of the country, their feedback was that before we can satisfactorily and meaningfully engage in the AfCFTA, there has to be a reduction in the level of violence and insecurity to life and property. That’s not for the NOTN. These are legitimate issues from one Nigeria to another.
These are long standing issues, and progress is being made. It will take a while. So, the question of the timing will depend on the political decision of government on when they want to and when Nigeria should join.