News: Why did Nigeria U-turn on African free trade agreement?
After years of negotiations, 44 African countries endorsed an agreement to establish the African Continental Free Trade Area (AfCFTA) on March 21, 2018. It’s a move that brings the African Union’s vision of a single African market one giant step closer but there were some significant omissions from the list of countries supporting the proposed agreement.
Nine African Union (AU) member nations delayed their assessment of the treaty at the same meeting in Kigali, Rwanda, and they’ll need to be brought onside before the agreement can be implemented.
This includes Nigeria, Africa’s single largest economy, who backed out of the agreement just days after the Federal Executive Council announced that President Buhari would sign the framework agreement in Kigali. So what made the AfCFTA’s most crucial partner pull out of the agreement at the last minute and what does this mean for the proposed single African market?
The official reason for Nigeria pulling out
After Nigeria pulled out of the agreement in Kigali earlier this month, President Muhammadu Buhari explained his decision was the result of complaints from major stakeholders for not being consulted on the terms of the agreement. At no point has the Nigerian president said his country will refuse to sign the agreement indefinitely but simply needs more time to assess the treaty and what it means for Nigeria.
“Nigeria fully recognizes & appreciates the efforts of the African Union Commission so far, regarding the implementation of a sustainable Continental Free Trade Agreement(CFTA) for Africa. We also acknowledge that our continental aspirations must complement our national interests,” the president said on Twitter.
“As Africa’s largest economy and most populous country, we are committed to ensuring that all trade agreements we sign are beneficial to the long-term prosperity of the continent,” he said in another Tweet.”
We are therefore widening and deepening domestic consultations on the CFTA, to ensure that all concerns are respectfully addressed. Any African Free trade agreement must Fairly and Equitably represent the interest of Nigeria, and indeed, her African brothers and sisters.“
Resistance against the AfCFTA from within Nigeria
Nigeria Labour Congress (NLC) and the Manufacturers Association of Nigeria (MAN) are among the country’s loudest voices opposing the free trade agreement. NLC National President Ayuba Wabba has warned that the agreement is “extremely dangerous,” calling it a “radioactive neo-liberal policy initiative, driven by a Ministry of Trade and Investment which seeks to open our seaports, airports and other businesses to unbridled foreign interference.”
Various stakeholders in the aviation industry have expressed similar concerns, too. One of the key terms of the agreement is an open skies policy across member nations which, coupled with the freedom of movement for people between countries, would make travel easier and cheaper for Africans. It would also expand the market for Africa’s largest airlines but stakeholders argue this would come at the expense of Nigeria’s smaller airlines who would be priced out of the market. It would also mean foreign airlines could operate within Nigeria without needing to employ locals or pay taxes in the country.
Meanwhile, the Manufacturers Association of Nigeria (MAN) has also rejected the ratification of the AfCTA until certain issues regarding market access and the enforcement of rules of origin are addressed.
Nigeria’s manufacturing sector is struggling and MAN President Frank Jacobs has condemned the proposed removal of tariffs in the AfCTA, which would apply to 90 percent of goods and services coming into Nigeria from overseas. He argues the remaining tariffs on 10 percent of goods isn’t enough to revive and sustain the country’s manufacturing sector, calling on the government to put national interests ahead of everything else before signing any AfCTA agreement.
Media Adviser to the president Femi Adesina has insisted this is precisely what the country’s leader is doing as he holds off on signing any agreement. On March 21, the advisor said the president “would not agree to anything that would impede local entrepreneurs” or “anything that would encourage the dumping of finished goods, which is contrary to Nigeria’s interest.”
Can Nigeria have the best of both worlds?
President Buhari’s stance on the AfCTA is filled with commendable rhetoric and compelling statements but it’s difficult to see what it will achieve. Nigeria’s economic power gives it a certain amount of negotiating power but there’s not a great deal of room for compromise with the AfCTA.
Yes, it’s true that singing the treaty will hurt smaller, local businesses but this is the inevitable outcome of any free trade agreement. Single markets make it easier for large businesses to operate across borders, allowing them to push their prices down in favour of expanding their reach, and this always comes at the expense of small businesses who can’t compete.
It makes sense for stakeholders to push for a deal that minimises the impact on smaller businesses and local markets but there’s a limit to how much they can achieve. Either Nigeria signs the AfCTA and accepts that a free trade agreement helps progress economic development at the highest level or it focuses on protecting national interests at ever level – it can’t do both.