Closed road needs opening to Nigeria’s manufacturing

The African Growth and Opportunities Act (AGOA) is in its second 10-year tenure after being reauthorized by the United States for more African countries to benefit. Nigeria, as Africa’s heavyweight, has fared poorly, a reason why manufacturers are keenly hoping President Muhammadu Buhari’s impending visit to America will turn the tide in the nation’s favour and grow its non-oil export. AJOSE SEHINDEMI writes 

The cornerstone of U.S. economic relations with sub-Saharan Africa since 2000 has been the African Growth and Opportunities Act (AGOA), which gives more than 38 sub-Saharan African countries preferential access to U.S. markets by eliminating import tariffs.

It was designed to foster economic development in African countries, through opportunities to build their capacity in global markets.

Essentially, the trade policy sought to increase market access to Nigeria and other African countries to export about 7, 000 product lines, tariff and quota-free, to the US market. However, for Nigeria, over-dependence on oil in the country’s mono-product economy, perceived lack of adherence to standards and product packaging methods as well as weak manufacturing base and infrastructural challenges, among others, are said to have combined to deny Africa’s largest economy, the opportunity of leveraging on AGOA to become globally competitive.

Even with the second chance afforded the country when AGOA was renewed in 2015 (to end in 2025), it is worrisome to note that nothing tangible appears to be forthcoming from the Nigerian end, which makes it look as if the country’s leaders and business concerns have been blindfolded from seeing the enormous opportunities it could afford the nation’s economy.

According to data from the United States Economic and Regional Affairs department, Nigeria accounted for a paltry volume of $9 million out of $2.7 billion agricultural exports recorded by the continent to the United States in 2017, which affirmed that the low volume recorded in non-oil export was as a result of dependence on oil as Nigeria’s oil export to the U.S rose from $3.4 billion to $6 billion.

Experts say this seriously calls into question Nigeria’s mouthed acclaimed diversification agenda. Though US-Africa trade increased by 15.8 percent in 2017, from $33 billion to $38.5 billion, US exports to Africa rose four percent to $13.1 billion and African exports to the US rose by more than 20 percent to over $24 billion, Nigeria’s contribution to the increase was minimal, a challenge faced by countries that solely rely on oil as a major export product.

Challenges being faced

Some of the challenges being faced by exporters have to do majorly with the quality of their products, which apparently is lacking due to different product specific standards between Nigeria and the U.S.

Other challenges are lack of sanitary and phytol-sanitary requirements, poor standards arising from poor packaging, which makes it difficult for manufacturers, especially the Small and Medium Enterprises (SMEs) to penetrate the US markets, supply-side constraints such as inability to meet up with large volume of orders from the US as many of the exporters playing in the AGOA field are mostly small companies; and weak competitiveness as a result of weak infrastructure facilities plus lack of finance.

Aliyu Abubakar, deputy director, Trade Department, Federal Ministry of Industry, Trade and Investment said the challenges have always been there and even now, more still needs to be done if Nigeria is to tap from the AGOA benefits. This was why Nigeria, in collaboration with the United Nations Commission for Africa (UNECA) had developed the national AGOA response strategy, which had been validated by stakeholders.

It is generally known that locally manufactured products and services in Nigeria, lack global quality certification, which is why they are denied access to markets in developed economies.

The consequence of this is that productivity and competitiveness of indigenous manufacturers suffer. A ready example is the rejection of yam export, from the country by the US, as they are said to be of low quality, There are also concerns about Nigeria’s continued dependence on low-value-added products and natural resources as it exports few of the higher value manufactured products that the policy hoped to encourage.

Abubakar said in order for a country to benefit, it must fulfil basic requirements such as a market based economy that protects property right and adherence to rule of law, including political pluralism.

Others, he said, include the elimination of barriers to US trade and investment, and elimination of economic policies aimed at reducing poverty, as well as, encouraging private enterprise.

What Can President Buhari do? Trade diplomacy centred talks between US and Nigeria will go a long way to mitigate some of the issues if Nigerian companies are able to work around some of the challenges affecting their participation in the AGOA policy.

It is apparent that Nigeria has not been able to get the attention of Donald Trump, US president in more matters of trade. But the impending visit of President Buhari to the White House should provide more than ample time for the two leaders to discuss more trade matters than before.

With Buhari expected to display wits, as was done by Shinzo Abe, Japan’s Prime Minister, during the recent visit of Trump to Japan (Trump agreeing on some concessions during the visit), manufacturers are hoping that he would turn on the charm to get his own concessions for Nigeria and its manufactures.

Buhari has to work to get some of the produce from the country’s industrial firms that are yet to be accepted under the AGOA accord, accepted.

Abubakar said the non-acceptance had brought setback to the economy, as Nigerian manufactured goods find it difficult to get into the US market. For John Isemede, a former director-general, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), who said although he is not condemning AGOA, there is need for Nigeria to assess how she started and where she is today to see whether to go ahead with the old system or to do some adjustments as the policy has not contributed in any way to the development of Nigeria’s economy, neither has it raised the business potential of any Nigerian entrepreneur.

In an interview with business a.m. Isemede lamented a situation whereby America dictates the price of what they buy from the exporting countries under AGOA: “If you are taking produce from Nigeria and we can’t meet your standard, you had better come and invest in Nigeria or bring your own experts to come and teach us the standard. You asked for some certain products and you have every right to determine the quality and quantity, but you don’t have every right to determine the price for what you don’t produce.

What is the essence of determining quality when you have not even worked with our people?” He asked. It also appears that there is a systemic lack of confidence in Nigeria by the US as Ghana has more impact and trade going on under the AGOA when compared with Nigeria.

This may be due to a cutting-edge earned by having the ears of the US. This clearly shows that both countries are viewed differently by the United States.

This position, say analysts, makes it even more necessary for Nigeria to work on her trade diplomacy with the US, as there is a need to work on changing the negative perception that seems to overshadow the country if she must benefit from the extension of AGOA this time.

Back home, the point is also made by international trade relations experts that the president really has his work cut out on this visit to Donald Trump.

They say the president has to provide a system to combat corruption and bribery, protection of internationally recognised workers’ right and non-engagement in gross violation of international terrorism and activities that undermine US national security or foreign policy interest.

The importance of infrastructure, particularly power supply to manufacturers cannot be over emphasized, as it is something that has continued to dog the country, helping to push up cost of production. This has also been partly responsible for the lack of competitiveness among the country’s manufacturers, especially Nigeria’s numerous SMEs.

The U.S., however, has encouraged Nigeria to liberalize to attract greater foreign investment stating that there are many restrictions to doing business in Nigeria thwarting foreign and domestic investment.

Meanwhile, U.S. trade with AGOA’s participants has dropped since its 2008 peak almost to its pre-AGOA total, while African trade relationships with other countries, particularly China, have expanded.