Vanguard News Nigeria | 5 April 2021
AfCFTA: concern over dumping mounts as trade deficit widens
By Yinka Kolawole
The fears that Nigeria might become a dumping ground for manufactured goods, especially with the advent of the African Continental Free Trade Area (AfCFTA), has heightened as Nigeria’s Trade in Goods Statistics show rising deficit in manufactured goods trade.
Analysis of the Foreign Trade in Goods Statistics of the National Bureau of Statistics (NBS) from the fourth quarter of 2019 (Q4 2019) to Q4 2020 revealed a steady increase in the value of imported manufactured goods compared to exports in consecutive quarters.
Stakeholders in the manufacturing sector are apprehensive that without strict enforcement of rules of origin when the AfCFTA becomes fully operational, Nigeria may end up a dumping ground for foreign manufactured goods.
Statistics from the NBS show that the value of manufactured goods trade in Q4 2019 stood at N10.12 trillion with exports component of N4.77 trillion and imports component of N5.35 trillion, indicating a deficit of N580 billion.
In Q1 2020, the value of manufactured goods trade was N3.106 trillion with N444.5 billion and N2.661 trillion exports and imports components, respectively, showing a trade deficit of N1.217 trillion.
The manufactured goods trade value in Q2 2020 stood at N3.04 trillion, with N254.2 billion exports component and N2.786 trillion imports component, indicating N2.532 trillion deficit, while in Q3 2020, the value of manufactured goods trade was N3.565 trillion, with exports component of N133 billion and imports component of N3.432 trillion, showing a deficit of N3.299 trillion.
For Q4 2020, the value of manufactured goods trade stood at N3.955 trillion. Of this, the exports component accounted for N129 billion, leaving the value of imports of manufactured goods at N3.826 trillion, indicating a trade deficit of N3.697 trillion.
President, Manufacturers Association of Nigeria (MAN), Engr. Mansur Ahmed said: “To ensure that we do not allow dumping to take place, there is a need to ensure that all countries operate based on the rule of origin that has been agreed. But the difference is that while some countries will ensure that these regulations are complied with, others unfortunately will not do so.
“This calls for an effective monitoring mechanism to be put in place to ensure that all countries do the right thing.”
Also commenting, Director General, MAN, Segun Ajayi-Kadir, said that if the harsh domestic conditions of 2020 remain unchanged, it may be difficult to prevent a situation where Nigerian industries are handicapped to match the onslaught of foreign imports.
He stated: “There are quite a number of initiatives that are ongoing to boost local productivity. The manufacturers are bracing up for market penetration, especially in the 1.2 billion African market. We are coordinating the efforts of our members in that regards and sensitizing them on the goings on under the AfCFTA.
We are also promoting cross-border manufacturing value chain development.
“This is in addition to our collaboration with the National Action Committee on AfCFTA and its parent ministry, the Federal Ministry of Industry, Trade and investment. Through this arrangement, we are able to reach out to other MDAs to obviate the challenges confronting the sector. The success of these efforts should determine the extent to which we can allay the fears, if not the looming danger.”
Looking ahead, Ajayi-Kadir further said: “Although, Q1 2021 is far gone, it is important for government to intentionally position the sector from Q2 2021 by addressing some of the core challenges identified in Q4 2020 that impeded the performance of the sector by given priority consideration to resolving the following: Difficulty in accessing forex for importation raw-materials and machines that not available in the country by the sector; Delay in approving Usage of Forex on forex sourced outside the official market by manufacturers; High cost of power due to the recent increase in electricity tariff and fuel pump price; and High cost transportation also due to increase in fuel pump price.
“Others are: Low demand of manufactured goods in the country due to unpaid salaries and outstanding contract sums for completed projects and the recent VAT increase from 5% to 7.5%; High cost of shipping due to erosion in the Naira foreign exchange; Unavailability of raw-materials locally and the need for the development of machine industry, iron & steel, and petrochemical industry, etc through refocusing on backward integration and resource-based industrialization.
“Should the domestic conditions remain unchanged, we may not be able to prevent a situation where our industries are handicapped to match the onslaught of foreign imports.”
Analysts at Proshare Nigeria Limited, a financial information service hub, said: “If Nigeria is going to take advantage of AfCFTA and douse the fear that Nigeria will be a dumping ground, concerted efforts must be taken towards driving productivity and trade with other African nations while ensuring that proper goods standards are met and empowering its customs with technology to prevent smuggling of counterfeited goods.
“It is pivotal that Nigeria focuses on deepening its manufacturing sector by increasing the provision of credit facilities, tax incentives and eliminating all encumbrances that will hinder its manufacturing sector’s competitiveness.”
The federal government has however given assurance that efforts are ongoing to establish a trade remedies authority to enforce rules of origin and tighten borders against fraudulent invoicing.
Minister of Industry, Trade and Investment, Otunba Adeniyi Adebayo, disclosed this on a visit to Lagos as part of the nationwide sensitisation visit to Lagos by the National Action Committee on AfCFTA.
He said the federal government was committed to establishing Nigeria’s designated competent authority for administering the AfCFTA rules of origin as well as automating the process for managing exporter and product registration.
Adebayo said the National Action Committee on AfCFTA is collaborating with the National Trade Facilitation Committee to facilitate the execution of the regional trade facilitation roadmap.
He highlighted the AfCFTA implementation plans to include domestication of the AfCFTA agreement, border enforcement and rules of origin enforcement, trade facilitation and ease of doing business, production and service capacity growth, power and trade logistics infrastructure, market access, skills and human capacity development , and quality infrastructure.
Also, last week, the federal government launched the N50 billion Export Expansion Facility programme as part of the N2.3 trillion fund set aside under the Nigeria Economic Sustainability Plan, NESP.
The facility focuses on cushioning the effects of the COVID-19 pandemic on non-oil export businesses thereby safeguarding jobs and creating new jobs.
At the launching, the Trade and Investment Minister, Adebayo stated: “The Ultimate aim of the Export Expansion Facility Programme as an intervention following the devastating economic effects of COVID -19 to exporters and MSMEs in Nigeria will be to save jobs, create jobs, support resilience in shoring up foreign exchange, diversification, modernization of Nigeria’s economy and acceleration of economic growth and economic support”.
MAN President, Ahmed, commended government on the unveiling of the facility.
“This is a most welcome development. If the facility is properly administered and targeted at the appropriate beneficiaries it would help us position our country for effective participation in the AfCFTA,” he added.