AfCFTA will force Nigerian producers to upgrade operations, improve products, says Osinbajo, Finance Minister

The Vice President, Prof Yemi Osinbajo and the Minister of Finance, Mrs Zainab Ahmed, on Tuesday, highlighted reasons behind the Federal Government’s ratification of the African Continental Free Trade Area (AfCFTA), saying that the move would put pressure on Nigerian producers serving the domestic economy and challenged them to upgrade their operations and improve their product offerings.

Both the Vice President and the minister of finance were speaking at a Roundtable Dialogue on the impact of the African Continental Free Trade Area (AfCFTA) on Medium, Small, and Micro Scale Enterprises (MSMEs) in Nigeria, organized by the Nigeria Employer’s Consultative Association (NECA) in Abuja.

According to the minister of finance, the ratification of AfCFTA would challenge Nigerian exporters and producers to compete with other producers on the continent who gain access to Nigerian markets.

Besides, Mrs Ahmed said Nigeria’s ratification would provide a unique opportunity for Nigerian exporters to enhance their productive and export capabilities as they enter into a larger continental market for their goods and services.

“It also places healthy competitive pressure on Nigerian producers serving the domestic economy as they are challenged to upgrade their operations and improve their product offerings to compete with other producers on the continent who gain access to Nigerian markets,” she emphasized.

However, she warned that the potential positive outcomes she highlighted above for exporters and producers within the country may not be guaranteed, except Nigerians are proactive take certain strategic steps.

She said: “As widely documented in the literature on international trade, there are winners and losers from trade, thus the potential positive outcomes for exporters and producers in Nigeria which I have just outlined are not guaranteed. To achieve positive results for exporters and the wider economy, we must be proactive and strategic in taking steps to improve the ability of Nigerian companies to compete with other producers on the continent.

“This roundtable dialogue is appropriately focused on the impact of Nigeria’s accession to the African Continental Free Trade Area on MSMEs. MSMEs account for 96% of all businesses in Nigeria according to the 2017 Survey of MSMEs in Nigeria conducted by the National Bureau of Statistics (NBS) in collaboration with the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).

“The same study hands that MSMEs contributed 49.8 per cent to total nominal GDP in the same year, in contrast with a contribution of only 7.6 per cent to total exports. The relatively low contribution of MSMEs to exports is concerning given their significant contribution to nominal GDP and for this reason, urgent steps are being taken to alleviate the binding constraints limiting MSME participation in cross-border trade.”

The minister added, however, that “the National Action Committee (NAC) for implementation of the AfCFTA, which was inaugurated by Mr President in December 2019 to engage with stakeholders and prepare them for the operationalization of the AfCFTA, is actively engaged in increasing the capacity of MSMEs. Two pilot initiatives, namely the MSME Aggregation Program and Digital e-Commerce initiatives were identified in the course of stakeholder
engagements as critical to scaling up the output of MSMEs to meet export demands and create access to markets.

It is my belief that the implementation of these and other initiatives by the NAC will place MSMEs in a stronger position to secure Nigeria’s place as a trading and production hub on the continent.”

she pointed out that the ongoing COVlD-19 pandemic has negatively impacted MSMEs and for this reason, several interventions were introduced in the Economic Sustainability Plan to support MSMEs.

These interventions, according to her include the reduction of NAFDAC product registration and administrative charges for license renewal, creation of a survival fund to give payroll support to struggling businesses and the creation of a N100 billion credit facility by the CBN to enhance access to finance.

In his speech, the Vice President, Prof. Yemi Osinbajo, who was represented by the Minister of Industry, Trade and Investment, Otunba Niyi Adebayo said the AfCFTA has the capacity to boost intra-African trade.

The Vice President pointed out that AFCFTA “is expected to deliver an integrated continental market, consisting of 1.27 billion consumers with an aggregate GDP of USD 3.4 trillion. As the largest economy in Africa, Nigeria has the potential to greatly increase its trading volumes, production capacity and generation of foreign investments.”

However, he also warned that the country can only fully benefit from this opportunity “if we are adequately prepared for the impending changes that will affect our business environment.”

He added: “It is necessary that we understand the full-scale impact that AfCFTA will have on all people and businesses, especially in terms of job creation and economic activities. We need to effectively utilise the opportunities that will be created by this trade agreement to develop our local production capacity and achieve our industrial aspirations.”

Representative of Centre for International Private Enterprise (CIPE), Mrs Omowunmi Gbadamosi, said international trade should be simpler, faster, and more cost-effective, creating new business opportunities, enabling greater economic and social development, and reducing poverty.

She commended the CIPE Nigeria Organised Private Sector (OPS) partner, currently chaired by NECA, which is seeking, especially by organizing the Roundtable Dialogue, to tackle trade barriers with a business mindset.

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