Wednesday, July 31, 2019
Tuesday, July 30, 2019
Monday, July 29, 2019
Monday, July 22, 2019
AfCFTA Implementation Strategies-Part-3: The Challenges Of Regional Trade Agreement-2
This is the third in the series of Articles on
AfCFTA implementation strategies and it will continue from where I stopped in
part two. This edition will be focused on challenges and factors that have
hindered many countries from enjoying the benefits of other FTAs around the
world despite the great benefits that such agreement has to offer the member
countries. All the challenges to be highlighted in this article are to empower
the AfCTA’s Implementation committee with the necessary information and insights
that will guide the formulation of the implementation strategies by the
committee members.
The inability to maximally utilize the FTAs
especially among various countries has been attributed to different factors
based on different surveys done by several researchers across the world. It is
also interesting to note that, there seems to be a convergence on the major
challenges hindering the utilization of FTAs by some of the reports. The most
prominent of these factors, in several research works done across the world is
the issue of information. This has emerged as a major limiting factor that hinders
utilization of FTAs and this include access to information about the FTA,
understanding the information contained in the FTA and cost of acquiring the
knowledge to understand the information about the FTA.
According to the 2018 report of Ecorys, 11% of the
respondent said that one of the barriers to utilising the FTA is the fact that
the information contained in the FTA is hard to understand while 21% stated
that limited information is available about the FTAs. Other researchers stated
that the compliance process constitutes a major reason why many companies do
not utilise the FTAs and they went further to state that compliance process
starts with acquisition of information which comes at a cost and this is
regularly incurred either when an existing FTA is reviewed or when a new one
has just entered into operation.
In another report titled Maximizing the Utilisation
of ASEAN-Led Free Trade Agreements, It was reported that lack of technical
expertise on how to use the FTA and inadequate information on the opportunities
in the foreign market were major limitations to the full utilisation of the
FTAs. The lack of technical expertise has been manifested through understanding
the issue relating to the Rule of Origin (RoO). The rule of origin guides the
procedure for determining that a product originated from a designated free
trade area. It is designed to ensure that product from countries outside the
free trade area do not find their way into the trading bloc.
This RoO has been described as another factor that
militates against the utilisation of FTAs in different parts of the world. This
can be seen in inadequate understanding of product requirements, difficulty in
complying with RoO with respect to the administrative requirement, and existing
products which are already being exported but do not comply with the RoO. All
these factors relating to RoO were pointed out by 32% of the respondent in the
survey done by Ecorys in 2018 and this was corroborated by another report done
by the PricewaterhouseCoopers also in 2018 among Australian exporters. It was
stated in this report that delay in processing and the cost relating to
obtaining the Certificate of Origin (CoO) to validate the compliance of a
product with the RoO was a major factor that hindered trading partners from
utilising FTAs.
Coming home to the West African region, the ECOWAS
Trade Liberalization Scheme (ETLS) was a free trade agreement launched in 1990.
The objective was to remove both tariff and non-tariff barriers to the trade
transactions in the region. Despite the huge opportunities that this FTA
presents to the member states in ECOWAS, the rate of utilisation has been very
low with no appreciable improvement in the last 5years. The fourth quarter
report of the National Bureau of Statistics (NBS) in 2018 showed that the total
Nigerian export to the ECOWAS countries have remained plateaued and under 10%
in the last four years. Despite this low export from Nigeria, the report of
UNCTAD in 2018 showed that Nigeria has the largest share of the export into the
region with a contribution of 44.6% in the year 2015.
The fact that Nigeria is the largest exporter into
the region despite its low export volume to ECOWAS countries when compared to
its shipments to the rest of Africa and the world showed the abysmally low the
total intra-regional exports of all ECOWAS members states. This has been
underscored in the 2018 report of Africa Export-Import Bank which stated that
the total shipment of all the ECOWAS member states into the region in 2017 was
10.6%.
As I conclude this third article, I will like to
state that the reason for taking a lot of time to highlight these challenges is
to enable the implementation committee to be able to have a holistic view of
the challenges that have plagued many FTAs around the world in the past in
order to be able to design a well thought out strategies to make the AfCFTA
work for Nigeria.
While the current edition of these series of
articles on AfCFTA implementation strategies dwelled more on the challenges of
FTAs outside Africa, the next edition which will be the fourth edition in the
series will dwell more on the challenges that have bedeviled the FTA of ECOWAS.
From the fifth edition, I will commence the proposed solution to tackling these
challenges and I am hoping that the government will adopt some of the
recommendations that will be prescribed in order to make the implementation of the
AfCFTA create the necessary jobs that will lift out of penury, the tens of
millions of Nigeria that are currently living below the poverty line.
Bamidele Ayemibo
bayemibo@3timpex.com
Tuesday, July 16, 2019
Monday, July 15, 2019
AfCFTA Implementation Strategies-Part-2: The Challenges of Regional Trade Agreement-1
It is great to know that Nigeria has finally signed the African Continental Free Trade Agreement (AfCFTA), however, it is also very important to point out that this is not an end in itself but rather a means to an end. This is because, regional free trade agreement like the AfCFTA presents an opportunity to do more trade with member countries and thereby increasing productivity, GDP, per capita income, wealth and lifting many people in the countries involve out of poverty. However, this will only happen if the agreement is well implemented.
The signing of bilateral and regional Free Trade Agreements (FTAs) among nations has become a common place in today’s world. The aim of this kind of agreement is to remove the tariff and non-tariff barriers that hinders the free flow of trade among them. Apart from the elimination of tariff and non-tariff barriers, other important features that are generating attention in the FTAs signed in recent times has include rules relating to the protection of rights to intellectual properties, rules on competition, rules on labour rights protection and on environmental protection.
The FTAs have been described as viable tool that contributes significantly to the growth of export trade volumes of nations involve. Studies have shown that the bilateral trade volumes of some nations involve in an FTA experienced 100% growth within a period of 10years. This has been corroborated by other reports that showed an increase of over 400% in the trade volume of China within a space of 35years. This probably explains the reason why the number of both bilateral and regional FTAs signed among nations of the world has been on the increase since 1990s. According to World Trade Organisation (WTO), 319 regional FTAs were already in force as at January 2012. Another report showed that the number FTAs in force as of January 2013 have increase to 354.
Despite the huge opportunities made available to businesses in nations around the world by continental, regional and bilateral FTA, it is sad to know that the utilisation of these agreement has remained low especially among the developing and under developed countries. Several surveys have been conducted across the world by numerous researchers in different countries and for different bilateral and regional trade agreements, to ascertain the level of utilization of the various FTAs and hence the impacts of these agreements on different countries and trading blocs. According to the report of the survey done by Thomson Reuters and KPMG International In 2016 only 23% of the respondent were fully utilising all the FTAs that are available to them. Contrary to this, the report of PricewaterhouseCoopers on the same subject in 2018 showed that in Australia, 78% of the importers used at least one FTA when procuring any item from abroad while 62% of the exporters use at least one FTA to penetrate an export market.
Other researchers, in 2017 reported that China exported 55.87% of the total products available for concession under the FTA between Pakistan and China while Pakistan could only utilise 5%. On the contrary, the utilisation among the member states of the European Union (EU) is reasonably high. The report from the Commission to the European Parliament, the Council showed that the EU utilisation of the FTA between Switzerland and EU in 2018 is about 80%. This report from EU was corroborated in another study carried out by Ecorys on The Netherlands in 2018 which showed that 83% of the respondent make use of FTAs in their import-export transactions while the remaining 17% do not use any form of FTAs in their international trade transaction.
Unlike the case in Europe, Australia and some other part of the world, the situation in Africa is very different because of the very low intra-African trade which consequently leads to a much lower FTA utilization. According to the United Nations Conference on Trade and Development (UNCTAD) report, in 2015, only 18% of the total export from Africa were traded with other countries within the continent. This trend is also seen in all the regional FTAs within the continent. According to the this report, the share of intra-regional trade among countries that made up Southern African Development Community (SADC) was 20.7% and this is the highest among all the regional FTAs on the continent. The next to this is Eastern African Community (EAC) which has intra-regional trade share of just 10.6%. This is very close to that of Economic Community of West African States (ECOWAS) which equally recorded a very low intra-regional trade share of 10.0%.
The question then is, while are some FTA very successful while the others are not? This will be the focus of the part 3, which is the next edition of these series of articles on the AfCFTA Implementation Strategies. It is my hope that the government will adopt some of the recommendations that will be put forward at the end of these series of articles in order to make the implementation of the AfCFTA create the necessary jobs that will lift out of penury, the tens of millions of Nigeria that are currently living below the poverty line.
Bamidele Ayemibo
bayemibo@3timpex.com
Thursday, July 11, 2019
AfCFTA Implementation Strategies-Part-1: The Committee
It is interesting to know that Nigeria has finally signed the African Continental Free Trade Agreement (AfCFTA) at the last summit of the African Union in Niger. This was an historic event for Nigeria because of the much-awaited desire for Nigeria to sign the AfCFTA. President Buhari initially planned to sign this free trade agreement during the launching at Kigali, Rwanda in March 21, 2018 but he later changed his mind because of some concerns raised by Manufacturers Association of Nigeria (MAN) and other organized private sector on the likely negative impact of this agreement on Nigeria.
Now that Nigeria has signed, the question we need to ask is how does Nigeria enjoy the benefit of this agreement? What does the country needs to do to ensure that it is well implemented for the benefit of Nigerian populace? How do we ensure that it does not become one of those agreements that Nigeria has signed in the past which are of no value to the citizen?
I will attempt to answer these questions in my next series of articles on AfCFTA Implementation Strategies. This edition is introductory, and it is focused on the composition Inauguration of AfCFTA’s implementation committee. The Inauguration of implementation committee becomes extremely important because of the inability to fully enjoy the benefits of such agreement in the past. Even though, Nigeria is a major beneficiary of ECOWAS Trade Liberalization Scheme (ETLS), I think this actually happened by default because many businesses are not aware of it because there is no regular, active and deliberate effort to maximize the utilisation of the agreement. In a recent survey conducted by 3T Impex Trade Academy, it was observed that majority of SME manufacturers in Nigeria, and particularly in Lagos do not know about the ETLS, not to talk of how to go about registering their product for it. The few that know about it have a lot of issues on why they will not use it and this will be highlighted in the subsequent editions of this article. However, the major issue that came out of the survey was the lack of sensitization on the details of the programme (ETLS), the processes involve and the profits to the businesses in West Africa.
In other to ensure that the Nigerian businesses enjoy in full the benefits of the AfCFTA and also that the prediction of those that are against the signing AfCFTA does not come to pass, there is a need to begin to actively and intentionally put in place programs and policies that will ensure proper implementation of the agreement. I am of the opinion that the proposed implementation committee should include people from both public and private sector. Public sector should include but not limited to the likes of Nigeria Export promotion Council (NEPC), Nigeria Custom Service (NCS), Standards Organization of Nigeria (SON), National Agency for Food and Drug Administration and Control (NAFDAC), Ministry of Foreign Affairs, Ministry of Trade and Investment, Presidential Enabling Business Environment Council (PEBEC), Small and Medium Scale Enterprise Development Agency of Nigeria (SMEDAN) and the Nigeria Office of Trade Negotiation (NOTN). On the other hand, the private sector should include but not limited to the representatives from National Association of Chamber of Commerce Industry Mines and Agriculture (NACCIMA), Bankers Committee, National Association of Small and Medium Scale Enterprise (NASME), Nigerian Association of Small Scale Industrialist (NASSI) and Manufacturer Association of Nigeria (MAN).
In the subsequent series of this article, I will be sharing some thoughts on the challenges and factors that have hindered the implementation of these type of agreements in other parts of the world including the ETLS and several things that this committee needs to begin to do in order to be able to ensure that Nigeria fully benefits from this agreement. The strategies to be deployed in overcoming the challenges of implementing free trade agreement in general and AfCFTA in particular is summarised in the Six-Pillar Model of Implementation of Free Trade Agreement. These pillars include Communication, Coordination, Collaboration, Capacity, Commitment and Cooperation.
The need to properly implement the AfCFTA is becoming highly imperative. From the 2019 first quarter report of the foreign trade statistics released by the National Bureau of Statistics, there is an increase in the non-oil export volume which contributed about 13.3% of the total export volume from Nigeria. The major sector contributing to this increase is the manufacturing sector which constitute 77.3% of non-oil export and 10.19% of the total export in the first quarter. This is a step in the right direction because majority of what Nigeria will have to export to Africa will be manufactured goods.
The implication of this is that, our manufacturers will now have more markets since they will be exporting duty free and therefore selling at a price that is most likely going to be cheaper than the ones from other continents of the world. This will consequently increase production and invariably increase the propensity of the manufacturers to hire more staff and thereby creating jobs and consequently reducing poverty in the African soil.
Bamidele Ayemibo/bayemibo@3timpex.com
Wednesday, July 3, 2019
Ecowas Single Currency- A Solution To Remitance Problem in W/Africa
The ECOWAS Head of State
and Government last week, adopted ECO as the name of the single currency to be
used for business and trading in West Africa starting from January 2020. This
is a step in the right direction when viewed from the perspective on
international trade. This is because, one of the major factors contributing to
the low trade volume in the region is the issue of remittance and payment of
the proceeds of the export done which has to be in foreign currencies like the
US Dollar.
With this new
development, eight of the ECOWAS
countries which include Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali,
Niger, Senegal, and Togo who currently jointly use the CFA franc will now switch
to ECO while the other seven countries which include Nigeria, Liberia, Mauritania,
Gambia, Guinea, Sierra Leone and Ghana will be changing their various different
currencies to ECO. The different currencies used in the region has been a
hinderance to trade because whenever trade
is being done, the sellers tend to find it difficult to source dollar to make
the necessary payment. This has strongly reduced the progress of the trade in
west Africa and has led to increase in informal trade within the region which
has also motivated the rise in the number of informal currency exchange who
will collect CFA from an importer in Togo and pay NGN to an exporter
in Nigeria.
The decision of the west
African government to adopt a single currency for trade in west Africa will
surely contribute to the reduction of informal trade and increase the possibility
of capturing most of the trade transactions being done in the region. It will
also increase the business opportunities among countries in the region via likely
renewed interest of trading companies to do business within the region as a
result of the ease of remittance. This likely increase in demand from the
region could therefore lead to increase in the volume of production of
businesses in the region and hence increase job opportunities, increased profitability
and of course increase in wealth and Gross Domestic Products of countries in
the region.
There is no doubt that
adopting a single currency will contribute to the growth and development of the
region if it is well implemented. A case in point is that of the European union
who adopted euro as a single currency, and this has contributed significantly
to the growth of trade among the member countries in the region. With a
population of about 500 million, the EU is contributing about 30% of world
trade and more than 60% of these trade take among the EU member countries.
Even though, the
introduction of single currency comes with great benefits, several economists
have expressed concern about the lack of integration policies among member
countries in the region. According to them, a single currency will only
work if all the countries involved are economically aligned and this is
currently not the case in the ECOWAS region. This is why the
implementation of this economic policy is very germane for the region to enjoy
the benefits
Finally, the decision of
the Nigerian president to sign the AfCFTA and the adoption of ECO as a single
currency in west Africa are strong indications that ECOWAS and indeed Africa
are in the right direction to begin to grow their trade volume from the abysmal
low level of less than 3% and begin to favorably compete with other trade blocs
around the world.
Bamidele Ayemibo/bayemibo@3timpex.com
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