Post by Ismail AbdulAzeez on Oct 18, 2019 18:08:56 GMT 1
WHY NIGERIA MAY NOT BENEFIT FROM AFREXIMBANK’S INTERVENTIONS - AFCFTA
The African Export-Import Bank (Afreximbank) has made available some of trade facilitation and financing instruments to strategically incentivise and position Nigerian manufacturers and other domestic economic actors to take advantage of the trade liberalisation deal.
The bank recently made available $500 million from its Nigeria-Africa Trade and Investment Promotion Fund to support the manufacturers to take advantage of the numerous opportunities offered by the AFCFTA.
Adopted by the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union (AU) in Addis Ababa, Ethiopia, in January 2012, AfCFTA seeks to create a continental trade bloc of 1.2 billion people, with a combined Gross Domestic Product (GDP) of about $2.5 trillion.
The agreement was seen as an important milestone in promoting Africa’s regional integration and helping to increase intra-African trade. It planned to do this by committing countries to liberalising services and trade and removing tariffs on 90 per cent of goods.
It was also expected to help expand and diversify trade and increase domestic and foreign investment, apart from its inherent capacity to promote economic growth and development, reduce poverty in the partnering countries.
After 16 months of dragging, President Muhammadu Buhari signed the trade treaty on July 7, this year, at the opening of the 12th Extraordinary Summit of the AU Launch of the Operational Phase of the AfCFTA in Miami, Niger. As at August 21, Afriacan countries except Eritrea had signed the deal.
With the AfCFTA coming into force, Afreximbank, the premier institution driving African integration and trade, has moved in to position African manufacturers to maximise the benefits in the agreement, but with special focus on manufacturers and other players.
In throwing the $500 million lifeline to the manufacturers, the Afreximbank President/ Chairman of Board of Directors, Prof. Benedict Oramah, said the opportunity for Nigerian and African manufacturers under the AfCFTA was phenomenal with the availability of $500 million
Oramah, who spoke at the 47th Annual General Meeting (AGM)/Manufacturers Annual Lecture/Presidential Luncheon of the Manufacturers Association of Nigeria (MAN) held in Lagos, noted that intra-regional trade in the manufacturing sector could rise to more than $150 billion by 2022.
“The AfCFTA has come into force. It is expected that it will by 2022 bring the share of intra-African trade to 22 percent, up from current levels of about 16 percent, and bring total intra-African trade to about $250 billion, from about $160 billion currently.
“Since manufactures account for about 60 percent of total intra-African trade, intra-regional trade in manufactures can rise to more than $150 billion by 2022. The opportunity for African manufacturers is, therefore, phenomenal.” He said.
In his presentation titled: “From commodities to a global manufacturing hub: The road ahead for Nigeria,” Oramah said this was timely and relevant because it demonstrated MAN’s commitment to prepare its members for the opportunities that the AfCFTA presents to make Nigeria a global manufacturing hub, akin to what China.
“MAN represents, perhaps, the largest collection of entrepreneurs in Nigeria. Just as most of the great European cities were built on entrepreneurial risk-taking, it is on the enterprise of the members of MAN that Nigeria’s future prosperity can be built. And it is trade that will expand the frontiers of that enterprise,” he added.
Not only will $500 million facility be made available to Nigerian manufacturers to diversify exports and produce goods and services that will be traded competitively under the AfCFTA, the bank has also unveiled the Fund for Export Development in Africa (FEDA), a key instrument through which it intervenes in the form of equity or quasi equity.
There is also the Export Contract Availability Guarantee, to enable Nigerian and other African export manufacturers to secure long-term export contracts with bank financing. The guarantee will cover the risk associated with situations where the contract against which financing has been provided becomes unavailable before an agreed period.
Also, Afreximbank has put in place an Inter-State Transit Guarantee aimed at facilitating and easing the flow of goods and services across borders and also reduce transit time and costs. This guarantee, The Nation learnt, would be useful for exports to other African countries.
Specifically, the bank has executed a Memorandum of Understanding (MoU) with the Federal Ministry of Industry, Trade and Investment (FMITI) to facilitate the establishment of Industrial Parks (IPs) and Export Processing Zones (EPZs) within the six geo-political zones under Project MINE.
Under Project MINE, Special Economic Zones (SEZs) will be used as the mechanism for making Nigeria a pre-eminent manufacturing hub in Sub-Saharan Africa and a major exporter of Made-in-Nigeria goods and services regionally and globally.
The immediate past Minister of Trade, Industry and Investment, Dr. Okechukwu Enelamah, said the Federal Government planned to spend N250 billion for the development of the SEZs across the six geo-political zones of the country in pursuit of the country’s industrialisation agenda.
He said Project MINE initiative was aimed at developing what he described as world-class export-oriented SEZs, pointing out that one of the factors leading to industrialisation was the development of SEZs.
Under the MoU, which Afreximbank executed with the FMITI, the bank identified priority projects, such as the Lekki-Epe Model Industrial Park, located on 1,000 hectares of land in the Northwest of the Lekki Free Trade Zone.
The Clothing Textile and Garments (CTG) and agro-processing have been identified as the sector focus for this park. For Enyimba Economic City, located on 1, 600 hectares in Enyimba Economic City in Aba, Abia State, CTG, agro-processing and light manufacturing are the selected sectors of focus.
Also, Afreximbank is supporting the development of an internationally-accredited centre for testing, inspection and certification of products, particularly agricultural and agro-processed products. This was to ensure compliance with international technical regulations.
The bank has already established the African Quality Assurance Centre (AQAC) in Ogun State, believing that the development of adequate conformity assessment infrastructure would contribute to creating confidence for importers and ensure that exported products meet international standards to avoid rejection of shipments.
Through its Continental Trade Fairs, the bank will hold biennial Intra-African Trade Fairs (IATF) that will connect Nigerian and African buyers and sellers, provide trade and market information and also facilitate B2B (Business-to-Business) exchanges.
The maiden trade fair, which held in Cairo, Egypt, last December, attracted over 1000 exhibitors from 45 countries, with over $32 billion in deals generated. And the second edition is scheduled for September1-7, 2020, in Kigali, Rwanda.
Meanwhile, there are fears that this will not be a walk in the park for Africa’s most populous and largest market, majorly because of lack of internationally accredited quality and trade-related infrastructure.
Trade-carrying infrastructure includes hard infrastructure, such as roads, rail, bridges, ports, and soft infrastructure (one stop border posts, warehousing, cold chain storage, jetties, ferries, logistics platforms and ICT solutions, such as single windows and electronic cargo tracking systems.
Frankly, weak trade-related infrastructure is not peculiar to Nigeria. Africa’s infrastructure needs, according to Afreximbank, are estimated at between $130 and $170 billion yearly, with a financing gap in the range of $70–$110 billion.
However, Nigeria’s share of the continent’s huge infrastructure gap is mind-boggling. For instance, the Financial Derivatives Company (FDC) put this in perspective when it said Nigeria requires $15 billion, about N4.59 trillion, worth of investments yearly for 15 years to adequately develop her infrastructure nationwide.
The economic and financial research firm, in its bi-monthly Economic and Business report for February, last year, said: “Nigeria’s under-investment in infrastructure has left it with a core stock of infrastructure of just 20 per cent to 25 per cent of GDP, compared to an average of 70 per cent of the GDP for more advanced middle-income countries of similar size.”
The dearth of supportive infrastructure, particularly power supply, has continued to push up cost of production, instilling fears of competitive disadvantage into the minds of Nigerian manufacturers, especially the especially the Small and Medium Enterprises(SMEs), against their counterparts from other African countries.
At present, Nigeria lacks adequate and functional laboratories to test and ensure that exportable agric products and other goods meet required international quality and standards.
There should be improvement in the supply of electricity, access to our ports and operating efficiencies. The condition of most of our highways and waterways and a credible rail network will go a long way in ensuring efficiency in all our economic sectors.