Implementing AfCFTA in Nigeria - the journey so far

The adoption of the agreement establishing the African Continental Free Trade Area (AfCFTA) by the Heads of States of the African Union, in March 2018, marked a significant step towards tackling the perennial challenges and barriers that had inhibited intra-Africa trade for decades. As at end April 2022, 54 African countries had signed the AfCFTA agreement, and forty-three (43) countries had ratified it.

The AfCFTA seeks to drive sustainable and inclusive socio-economic development of the continent through a single market for made-in Africa goods and services facilitated by free movement of persons.

By eliminating tariffs on 90% of tariff lines and with product specific rules of origin, the AfCFTA will drive industrialization through economics of scale, specialization and regional supply and value chains development. Through customs co-operation, harmonization of standards and tracking of non-tariff barriers, the agreement will facilitate more trade transactions while reducing cost. By harmonizing policies and regulations, AfCFTA will also grow intra-Africa trade in services. The AfCFTA will also promote rules-based trade through cooperation on investment, intellectual property rights, competition policy and digital economy.

It is estimated that reduction in tariffs, and the dismantling of non-tariff barriers, particularly at borders will unlock about $450 billion in income gains to the continent out of which $292 billion will come from simplifying border procedures and facilitating the free movement of goods and persons across the continent.?The Rules of Origin protocols are designed to ensure that companies operating within the trade area are incentivized to build out and exploit the opportunity of regional value and supply chains to connect suppliers to markets across borders.

It is also remarkable that the AfCFTA is progressing despite increasing uncertainty arising from recent trade wars and consequent protectionist trade policies. The growing regionalization and diversification of supply chains that resulted from the COVID-19 pandemic, the AfCFTA provides additional incentive for foreign companies in labour incentive industries?to relocate their production centers to Africa.?

Although official commencement date of trading under the AfCFTA was 1 January 2021, no trade has yet taken place under the AfCFTA regime. This is primarily due to delays in the conclusion of negotiations on rules of origin and trade in services. As of 31st May 2022, rules of origin have been concluded on 88% of tariff lines. Outstanding are rules of origin for automobiles, textile and apparels, fisheries, sugar and tobacco. Also, under discussion is how to treat goods produced within free trade zones and special economic zones.

In a bid to fast-track the commencement of actual trade, the Council of AfCFTA Ministers at its meeting in February 2022, agreed to commence trade based on the agreed rules of origin, thus paving the way for State Parties to gazette the legal instruments needed at the national level to introduce procedures enabling customs departments to operate under the new regime.

It has been acknowledged that the gains from AfCFTA will only materialize through comprehensive and sustainable implementation focused on outcomes. In this regard, Nigeria has established the National Action Committee on AfCFTA to coordinate the implementation. The Committee has developed a national implementation strategy with specific interventions to drive our mission, strategic objectives for AfCFTA. We have also developed a result management framework to ensure that our efforts are focused on achieving tangible outcomes. The strategy and results management frameworks are currently being validated with policy and regulation agencies prior to approval by the Federal Executive Council.

Our national strategy envisions leveraging AfCFTA to make our states, cities and communities economically viable and resilient through intra-Africa trade. Our mission is to become the preferred supplier of value-added products and services to Africa. Our strategic objective is to capture 10% of Africa’s imports from the world to double Nigeria’s export revenue by 2035.

To achieve our AfCFTA mission and objectives, we have anchored our strategy on eight (8) pillars, which are aligned to the African Union’s framework for boosting intra-African trade.

The first pillar focuses on establishing the institutional framework to coordinate the multiple agencies in the public and private sectors involved in implementing the provisions of the AfCFTA Agreement. On this pillar, our priority is to fulfil all national requirements to enable Nigerian business to commence trading under AfCFTA once the necessary legal documentation become available from the AfCFTA Secretariat. So far, Nigeria Customs Service has been designated as Nigeria’s Competent Authority for the administration of the rules of origin. With that, efforts are now underway to finalize the import and export processes, procedures and forms for the administration of AfCFTA rules of origin and gazetting of the legal documents to enable trade to commence.

The second pillar focuses on growing our "production for export" capacity to $50bn per annum focusing on selected priority product value chains and on growing highly productive workforce to earn premium wages in Nigeria & Africa. We have identified our arrowhead, high potential and frontier products and services for AfCFTA considering Africa’s demand and our industrial policies set out in the national development plan, national industrial policy, zero oil plan and other sector policies. AfCFTA with its focus on trade of value-added products and services presents huge possibilities for State government to grow their economies by attracting and supporting business focused on export trade. A subnational AfCFTA programme is already underway to support States to develop their strategies for AfCFTA. On this, the Secretariat of the National Action Committee on AfCFTA in collaboration with the Nigeria Governors Forum organized a 3-Day Subnational Strategy workshop on AfCFTA in November 2021 and over ten (10) States have set up their Technical Working Group (TWG) on AfCFTA. Our charge to the States is to build an ecosystem around a specific product/ service value chain to achieve a minimum of $1.2bn of exports by 2035.

Another component of this pillar focuses on aggregating SMEs for AfCFTA. This programme involves working with aggregator companies and large companies to train and onboard SMEs into their supply chains.

?The third pillar focuses on trade facilitation, reducing time and cost of trade by simplifying, modernizing and harmonizing import and export processes and procedures. It also focuses on automation of administrative and regulatory compliance processes.

The fourth pillar focuses domesticating the AfCFTA agreement by updating trade and complementary policies regulations and laws to align with the provisions of the AfCFTA Agreement and to conform with contemporary practices. On this pillar, the review and update of Nigeria’s trade policy is underway led by the Nigerian Office for Trade Negotiations (NOTN). The national AfCFTA strategy has revealed a need to update and align the national industrial policy to the trade and investment policies. Furthermore, in partnership with United Nations Economic Commission for Africa, the National Action Committee on AfCFTA has commenced a project to define the requisite updates to our policies regulations and laws, identify similar updates to request from our trading partners and define areas where we should pursue mutual recognition and cooperation agreements.

The fifth pillar focuses on trade infrastructure including energy, digital, water and logistics infrastructure to enable intra-Africa trade. In 2020 Nigeria ranked 110 out of 160 countries assessed in the Global Logistics Performance Index evidencing the existing challenges in the quality of trade and transport infrastructure, ease of arranging competitively priced shipping, timeliness, and ability to track and trace shipments.?Achieving efficiency, reducing the time and cost required to move cargo and persons across the various transportation modes, will be an important enabler of trade competitiveness for Nigeria and therefore a critical imperative for Logistic and Supply Chain.??

Considering the magnitude of the deficit in infrastructure, innovative mechanisms are required to prepare for AfCFTA. Some of these include cluster developments along trade corridors, leveraging eligible customer scheme and off-grid solutions for electricity in industrial zones and renewables for SMEs.

Government have leveraged on sukuk financing to rehabilitate large sections of the roads on the Lagos-Lakaji and Port Harcourt-Ngala trunk roads. It has also invited private participation in critical road infrastructure rehabilitation through the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme.

Nigeria is currently in the phase 2 of its 25-year vision to modernize her railways. Notable achievements include the Lagos – Ibadan rail with a spur line to Apapa Port, Warri – Itakpe rail line and Abuja to Kaduna line.

Efforts are also underway to increase the utilization of eastern ports especially Onne Ports. River Ports are being concessioned and several deep sea and inland ports are under development. All the above when completed will go a long way in decongesting Lagos ports and reduce cargo dwell time at ports.

In Aviation, Nigerian private airlines such as Air Peace have joined other African airlines such as Ethiopia Airlines, Kenya Airways and ASky in connecting cities across the continent, leveraging, SAATM.

Beyond improving the quality of infrastructure along key trade corridors, the criticality of investments in transport & storage facilities (cold/wet/dry cargo), indigenous marine fleet, transport education (seafarers, aviators, engineers, etc), Freight Forwarding and Supply Chain Management Services amongst several others cannot be overemphasized.?The private sector has a key role to play in this regard as partners, unlocking the opportunities in AfCFTA with investments in transport and logistics, leveraging technology to increase visibility across supply chains and improving customer experience.

On digital infrastructure, with over four (4) subsea fibre-optic connecting Nigeria to the rest of the world through Europe, States in Nigeria such as Lagos, Edo and Kaduna are already positioning to become data superhighways. With this capability, they will be uniquely positioned to build digital technology ecosystems and attract young, highly productive talent as well as investment from digital infrastructure and services companies.

The sixth (6) pillar focuses on trade finance and involves configuring and strengthening financial service institutions and businesses for continental trade including financing export trade, providing banking, insurance and related services. Some of the issues to be resolved include how to de-risk lending to businesses in both domestic and regional markets, pool together funding and transactions, standardize credit rating, as well as extending insurance coverage for regional transactions.

The seventh (7) pillar focuses on bridging the gaps in trade information. This involves providing product and market information to the trading community. Already Nigeria has signed up to the African Trade Observatory project which will collate trade statistics and other relevant information from all participating State Parties.

The eighth (8) pillar focuses on facilitating mobility of Nigerian labour across Africa and market access. On market access, we will take deliberate steps to take Nigerian products and services to Africa leveraging innovative logistics solutions, creating strong national brand and matchmaking Nigerian businesses with their African counterparts.

Also, as part of this pillar, is an AfCFTA export facilitation programme currently under development and which will involve profiling exporters for AfCFTA, conducting firm level needs assessment and providing firm specific facilitation support.

In addition to all of the above, we have also embarked on a nationwide sensitization programme, understanding that a foundation pillar for the successful implementation of the AfCFTA is awareness of the programme, specifically, what it offers, what regulators and policy makers need to do to domesticate the agreement, the opportunities for businesses and the processes that businesses would need to follow to take advantage of it. The sensitization programme which is focused on sector and subnational levels is being conducted in stages.

Stage one which has been ongoing since January 2021 is focused on creating awareness on the AfCFTA and to gather information and insights from stakeholders to inform the implementation programme. Stage two will focus on training the business community, regulators and implementing organizations on the AfCFTA trading rules and compliance processes.

Furthermore, in partnership with the Lagos Chambers of Commerce and with support from Nigerian Export Promotion Council, we have commenced a project to onboard Nigeria SMEs onto e-commerce platforms focusing initially on three cities, namely: Lagos, Aba and Kano.

In partnership with the Federal Ministry of Agriculture and Rural Development, we have commenced a project to commercialize agricultural research findings available in the various research institutes across the country as one of the steps to improve yield as well as incentivize research and innovation for agricultural products development for export.

The Nigerian Office for Trade Negotiations is leading efforts to update Nigeria’s trade policy and to establish a trade remedies authority to ensure that we have robust capabilities to tackle the threat of unfair subsidies, dumping, smuggling and other predatory trade practices.

Following the approval of the National Quality Policy by the Federal Executive Council, the institutional framework for its implementation has been established and the execution of the implementation plan has commenced.

In conclusion, the AfCFTA journey has commenced in earnest and intensive preparations are underway across agencies of government. The National Action Committee on AfCFTA is working assiduously to conclude the national AfCFTA strategy and the associated results management framework and to coordinate all public and private sector actors involved in implementing AfCFTA to ensure that tangible outcomes are achieved.

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