The recently release data on the nation’s trade balance by the Nigerian Bureau of Statistics showed that total trade with Africa countries closed the first quarter of 2019 at N1.6 trillion. This came as other countries in Africa started implementation of the African Continental Free Trade Area agreement, of which Nigeria, Benin and Eritrea were found missing in action.
In its analysis of the impact of the country’s failure to ratify the free trade area agreement, Afrinvest ,an investment banking firm in Lagos had noted that trade with Africa, in particular West Africa, could suffer
“Total trade with Africa was worth N1.6 trillion in the first quarter in 2019, with the economic communities of West Africa States (ECOWAS) taking a large share at N328.3 billion. Nigeria’s trade with Africa was 18.3% of its total trade while trade with ECOWAS was 20.8% of Nigeria’s intra-Africa trade. There was a trade surplus with Africa and ECOWAS at N292.7 billion and N272.9 billion respectively in the first quarter”, Afrinvest stated in its review.
The firm noted that analysing the structure of Nigeria’s trade with Africa suggests that imports constituted 40.7% while this was 8.4% for trade with West Africa. Meanwhile, it noted that the data does not provide the split of trade into oil and non-oil for countries; hence the analysts are somewhat restricted in the analysis.
“However, we can glean insights from data on Nigeria’s top ten exports destination which was split into oil and non-crude oil. We observe that three countries serve as the destination for 73.0% of Nigeria’s exports to Africa – South Africa happens to be the 4th largest trading partner, Angola is ranked 6th and followed by Ghana taken 9th position – and they all feature in the top ten destinations of Nigeria’s exports”.
“Our analysis further reveals that 50.7% of Nigeria’s export to these countries are non-crude oil. As a result, we believe Nigeria’s trade, especially non-crude oil, and knock-on effects such as FDI would suffer due to the refusal to sign AfCTA”, Afrinvest said in the report.
The AfCTA plans to ease non-tariff barriers to trade on the continent, such as the reduction of red tape (which improves the time to export and import), removal of quotas & licenses, and easing of rules of origin, among others.
Analysts said it is expected that the agreement would lead to cheaper consumer goods prices which will drive improved wellbeing and promote access to cheaper intermediate goods for the industrial sector. Noting that there is also the case for economies of scale as firms try to sell to the bigger African market, leading to increased efficiency.
The last benefit is that countries would be more committed to industrialization to really benefit from the bigger African market as exports in much of Africa is currently primary commodities.
To compete, efforts to bolster competitiveness through structural reforms, human capital and infrastructure investment is expected to intensify. Without these, the value to be derived may be low in the continental market.