ICSAN Conference Deciphers How Nigeria Can Benefit from AfCFTA, Dominate Intercontinental Trade
The Institute of Chartered Secretaries of Nigerian (ICSAN) has rounded off its 45th Annual Conference/AGM in Lagos calling on Africa policymakers and Nigeria, in particular, to prioritize investments in regional infrastructure so as to catalyze integration and facilitate intercontinental trade as it has the potential to lift 30 million people out of extreme poverty.
However to achieve this onerous objective, a sound infrastructure development policy setting, is a key ingredient for sustainable long-term growth for the continent, hence validating the conference’s choice of theme: African Continental Free Trade Area (AfCFTA) and national development, Issues, Challenges, and Opportunities; with the first-sub theme built around, “Nigeria Infrastructural Deficit and African Continental Free Trade Area (AfCFTA): What Connections? What Solutions?”
The conference, which opened with Chairman’s opening remarks delivered virtually by the Honourable Minister of Industry, Trade and Investment, Otunba Adeniyi Adebayo set the agenda to dissecting the challenges and inherent benefits the AfCFTA charter portends for the African nation and Nigeria in particular.
The ICSAN President, Taiwo Gbenga Owokolade, FCIS, in his welcome address, similarly challenged the erudite faculty assembled for the conference to decipher a way out for the nation from her present economic predicament. The ICSAN president believes a diligent and intentional in-depth review of the AfCFTA charter to which the nation is a signatory, can be a pointer to a way out of the current economic doldrums.
According to the lead speaker, Prof. Akin Oyebode, SAN, the Continental Free Trade Area endorsed the action plan on boosting Intra-Africa Trade which identifies seven areas of cooperation, namely: Trade Policy, Trade Facilitation, Productive Capacity and Trade-Related Infrastructure. Other areas are Trade Finance, Trade Information and Factor Market integration.
“The rationale behind the trade agreement is to create a single market for goods and services. This trade agreement is aimed at helping African Countries to boost economic and trade growth, transform their economies and achieve SDGs and AU agenda 2063, Prof. Oyebode highlighted. “The AU agenda 1963 is a shared framework for inclusive growth and sustainable development for Africa to be realized in 50 years”, he said.
Adequately harnessed, a Free Trade Agreement like the AfCFTA, promises a number of benefits for diverse players in the economy. For instance, “from a consumer point of view, continental integration is likely to increase access to a wider variety of products as well as fostering competition among continental producers”.
The AfCFTA, according to the World Bank, will create the largest Free Trade Area in the world measured by the number of countries participating and connecting 1.3 billion people across 55 countries with a combined GDP valued at US $3.4 trillion.
“It also has the potential to lift 30 million people out of extreme poverty, though this depends on putting in place significant policy reforms and trade facilitation measures”, the World Bank report claimed.
However, currently, trade between African countries is considerably low compared to trade between Africa as a continent and other continents. “Total trade from Africa to the rest of the world averaged US $760 billion in current prices in the period 2015 -2017, compared with $481 billion from Oceania, $4,109 billion from Europe, $5,104 billion from America and $6, 801 billion from Asia”.
Intra – Africa trade, defined as the average of intra- Africa exports and imports, was around a paltry 2% during the period 2015- 2017, while comparative figures for America, Asia, Europe and Oceania were, respectively 47%, 61%, 67% and 7%.
According to the speaker, it is on record that Sub-Saharan Africa has the highest cost to export compared with all other regions.
However, a quick look at the Continents with a seemingly high volume of internal trade reveals that they share certain positive variables that may have aided the high level of trade. These variables range from the improved infrastructure, such as power, good transport networks, affordable internet services, to more efficient trade structures and policies. Conversations around tariffs and taxes are also clear and there is enhanced certainty around trade policies and their implementation, the keynote speaker explained.
“If these variables are the major catalysts of intra-continental trades in these other regions, one will then not be surprised by the abysmally low level of trade amongst African nations”, he declared.
Infrastructure, according to the speaker, is the general term for the basic physical systems of a business, region or nation. Examples include Transportation systems, Communication Networks, Sewage, Water and Electric Systems. “These systems tend to be a capital intensive and high-cost investment and are vital to a country’s economic development and prosperity”, he declared.
Infrastructure, being the foundation upon which the structure of the economy is built, he categorized these into Soft Infrastructure, Hard Infrastructure and Critical Infrastructure alongside these is IT Infrastructure which termed as a technical system.
The speaker highlighted that “that poor funding, poor governance, corruption, economic sabotage, poor maintenance culture, population explosion, neglect of urban and regional planning laws accounted majorly as the factors responsible for inadequate infrastructure provisions in Nigeria”.
“Poor infrastructure is one of the major obstacles to doing business in Nigeria. The infrastructural deficit is the result of a steady decline in government infrastructure spending combined with a steady increase in the cost of building additional infrastructure”.
Nigeria’s growing infrastructure deficit remains a major concern among economic experts and stakeholders, according to the conference, poor infrastructure is one of the biggest impediments to smooth business operation and it also limit capital inflows into the country.
“The IMF estimates Nigeria infrastructure stock at C. 25% of GDP, far below the 70% international benchmark, underscoring the need for government to consider unconventional methods of financing to bridge this huge infrastructure deficit”.
Also speaking on the sub-theme: Nigeria Infrastructural Deficit and African Continental Free Trade Area: What Connection, what solutions?, Dr. Oyesola Oyekunle emphasized that availability of infrastructure plays important role in markets connectivity and trade promotion while the lack of infrastructure disrupts markets and retards trade.
“Infrastructure makes a huge difference in the process of development and the comparative edge of an economy particularly in trade”.
To underscore the paucity of infrastructure especially in the country, Dr. Oyesola painted the picture of a trader that imports leather from Hamburg in Germany to Lagos in Nigeria and pays $968 for a 40-foot container, however, to transport the same container from Lagos to Tema Port in Ghana costs $1566 due to transportation challenges.
The state of infrastructure does not only affect the transportation of goods but also affects business owners and their ability to be competitive, Dr Oyesola declared adding that the infrastructural problem is so prevalent that private individuals and business owners have to take the initiative and invest their resources to construct roads leading to their factories, dig boreholes and generate electricity to facilitate production and logistics.
Back home, he lamented that the absence of adequate infrastructure in the country, “biggest economy in Sub Saharan Africa and by the letters of AfCFTA to which Nigeria is a signatory”, has forced companies to detour to neighbouring Ghana due to better infrastructure and tax holidays, yet Nigeria remains the target market for all the goods.
Hence, he recommends the country and governments close the infrastructural gap to help the economy as such moves will foster industrial development, provide Employment Opportunities and serve as Catalysts for Growth.
“The Federal Government has tackled our infrastructural challenges with a combination of improved capital budgeting and implementation, initiatives such as Public-Private Partnership (PPP) model, concessions and privatization of state-owned enterprises, raising of Sukkuk of model funding to finance road projects. All these efforts are commendable”.
While commending the efforts of the current government at tackling infrastructural challenges, the speaker noted the government needs to further explore unconventional methods of financing to bridge the huge infrastructural deficit.
In the meantime, while Nigeria is not doing well in manufacturing yet, which according to the third sub-theme speaker, Jaiyeola Olaoye, currently contributes just about 9%, he sees huge opportunities for Nigerian business support services professionals such as lawyers, accounting, or company secretarial/corporate governance practitioners to exchange their professional services for value across the African borders. “They can ply their trades as experts not only in Nigeria but across the continent, the AfCFTA offers vast opportunities”, he said.
However, a reduction of the country’s infrastructure gap will not only boost economic growth, but it will also give the country a competitive advantage under the Africa Continental Free Trade Area (AfCFTA) agreement, Dr. Oyesola argued, in line with other speakers and panellists.