NACCIMA-Deloitte Dialogue Series on African Continental Free Trade Area (AfCFTA) and the Private Sector
July 30, 2019
Potential impact of the AfCFTA and the strategic responsibility of the Nigerian Private Sector in the
implementation
Presented byFrancis Anatogu
Senior Special Assistant to the President on Public Sector Matters (OCOS)
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
Presentation Outline
2
1 AfCFTA - Background and strategic intent
2 Potential impact - Benefits and Threats
3 AfCFTA Implementation
- Readiness requirements
- Implementation approach
- The role of the private sector
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
AfCFTA – Background & strategic intent
3
The AfCFTA is in furtherance of the Abuja Treaty (1991) which aims to:… strengthen Africa’s regional economic communities…establish a free trade area, common external tariff and common market and…gradually remove obstacles to free movement of persons, goods, service and capital
The AfCFTA is one of the pillars
through which Africa intends to
achieve its Economic
Integration ambition
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
AfCFTA – Background & strategic intent
4
DriversAfrica
Trade in goods $930.65bn
% of global trade volume 2.63%
Import Volume $504.17bn
Export Volume $426.48bn
Extractive Goods 26%
Manufactured Goods 42%
Trade
Balance
-$77.69bn
Africa
Trade in services $263.61bn
% of global trade in services 2.70%
Services import volume $162.9 bn
Services export volume $100.7 bn
Trade
Balance
-$62.2bn
1. Fragmented market – high barriers to trade• Multiple jurisdictions
• High tariffs
• high transaction costs
• Restricted movement of labour and capital
2. Low production capacity…Africa is not self
sufficient in both goods and services
3. High transaction costs – poor infrastructure,
bureaucratic trade environment
Regional trade pattern
Intra-Africa 15%
Intra-Europe 70%
Intra-America 46%
Intra-Asia 60%
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
Objectives
• To expand intra-African trade
through better harmonization and
coordination of trade liberalization
and facilitation across Africa’s
Regional Economic Communities
(RECs).
• To enhance competitiveness at
the industry and enterprise level
through optimization of
opportunities for scale production,
continental market access and
better reallocation of resources
The African Union (AU) intends to improve intra-African trade with the establishment of a continental free trade area
5
Architecture
Agreement establishing
AfCFTA
Trade in Goods
Trade in Services
Rules and Procedures on the settlement of disputes
Competition Policy
Investment
Intellectual Property Rights
Annexes• Schedule of Tariff
Concessions• Rules of Origin• Customs Cooperation
and Mutual Administrative Assistance
• Trade Facilitation• Transit Trade and
Transit Facilitation• Technical Barriers to
Trade• Sanitary and
Phytosanitary Measures
• Non-Tariff Barriers• Trade Remedies
Protocols
Annexes• Schedules of Specific
Commitments• MFN Exemption• Annex on Air
Transport
Phase 1Annexes
AdoptedUnder Discussion
Phase 2
Future
AfCFTA – Background & strategic intent
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
AfCFTA – Impact and Readiness Assessment
The impact assessment covered:
• Impact on government revenue, fiscal and monetary policies;
• the implications of change in intra-Africa trade patterns on the economy;
• impact of legacy trade agreements and predatory trade practices on AfCFTA; and
• national security implications of the free movement of persons
• Foreign policy implications of AfCFTA
The readiness assessment scope covered:
• Trade capacity (production and service capacity; export capacity, quality infrastructure)
• Trade infrastructure (Power, trade logistics)
• Trade environment (Trade facilitation, fiscal and monetary policies, ease of doing business)
• Trade enforcement (border enforcement, movement of persons, trade remedies)
• Legal and institutional (AU/ECOWAS) transitional arrangements
Scope
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
AfCFTA Impact Assessment - Findings
7
Potential Impact
Context Benefits Risks
Alignment with the National
Development Plans
• AfCFTA complements the ERGP’s economic diversification and industrialization agenda
• Preferential access to Africa’s $504.17bn import market -mostly finished goods; and
• $162bn worth of imported services
• Private sector investment needed to grow production and service capacities
Preferential Market Access
Nigeria ranks 123rd out of 136 countries in terms of foreign market access
• AfCFTA will eliminate tariff on 90% of tariff lines
• National treatment clause provides level playing field in African markets
• eliminates existing unfair tariffs and non-tariff barriers on Nigerian products and services
• 92% of Nigeria’s trade is oil and with non-Africans so product and service diversification is a key requirement
• Preferential trade agreements with non-African trading partners is also required to achieve Nigeria’s economic diversification ambition
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
Pre-AfCFTA Market Access
8
Unlike Egypt, South
Africa and Kenya,
Nigeria currently does
not enjoy preferential
market access in its
bilateral trade
agreements
Mainly due to its
mono-export product
orientation
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
AfCFTA Impact Assessment - Findings
9
Potential Impact Context Benefits Risks
Impact on economic
performance
• Increase in demand and price of exports
• Made in Africa goods will displace non-African goods
• Increase in imports will lower prices for consumers which will lower inflation
• Lower production cost due to cheaper inputs and labourfrom Africa
• Reduction of government revenue by 1.5% (N131.6 bn) due to loss of import duties
• GDP and Savings decline by up to 0.14% and 4.8% respectively
(Above risks can be mitigated by broadening income tax base)
• Imports will grow faster than exports until new production capacities materialize –impact on foreign exchange
• Interest rates - likely to rise in the short term due to higher demand for credit to fund exports.
• But will decline in the long term as foreign investment rises to take advantage
Impact on productivity
• Competitive pressure will drive improvements in productivity
• Increased mobility of skills will encourage specialization and create jobs
• Dependent on realization of readiness projects
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
AfCFTA Impact Assessment - Findings
10
Potential Impact Context Benefits Risks
Impact on local
industries
• Growth and investment opportunities for some manufacturing sectors e.g. Petrochemicals, refined petroleum products, iron/steel, cement, leather
• AfCFTA provides for Sensitive and Exclusive lists
• In the long-term, export to both African and non-African countries will grow
• Competition from finished goods from other African countries
• Without protection, import surge will lead to drop in output, investment and jobs in some manufacturing sectors, e.g. Auto, Chemical, Pharma and Electronics
• Increase in smuggling of products in the sensitive and exclusive lists
Impact on predatory
trade practices and legacy
trade agreements
• Import quotas to be negotiated into the Phase I Agreement to check predatory trade
• AfCFTA includes protocol on dispute resolution
• Smuggling, under-declaration of imports and abuse of trade of origin is likely to rise as African countries lack will and capacity to enforce borders
• Increased complexity in enforcing rules of origin (55 countries)
• Legacy issues at ECOWAS if not tackled will impact success of AfCFTA
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
11
Trade EnvironmentKey Findings (Trade Enforcement)
Smuggling activities are conducted through manned and unmanned entry points.
* - This does not include smuggling through unmanned borders
0.13
0.15
0.34
0.57
0.66
0.75
1.54
6.79
Netherlands
France
U.K
Hong Kong
India
Niger
Korea Rep.
China
Underreported Mirror Trade, 2017 ($’ billion)
Sources:
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
Impact Assessment - Manufacturing
12
Legend
Import Surge
0-50%
50% -150%
150% - 200%
>200%
Investment
Employment,
Output
>0%
-30% - 0%
< -30%
<-60%
• Import surge will be significant across most segments of the manufacturing sector especially for products currently at 20% and 10% tariff rates.
• Employment, investments and output will grow in five different sub-sectors, decline in three while two sectors will witness minimal change due to AfCFTA;
• Wood and Wood Products and Motor Vehicle and Assembly sub-sectors will be most threatened as it will lose output, investment and jobs. Pulp, paper, printing and publishing subsector will be the most favoured as it will gain in all three areas;
• Food, beverage and tobacco will witness negligible changes in output, investment and employment in spite of the surge in imports
Tariff Rate
Phase Food, Beverages and Tobacco (%)
Chemical & Pharma
Products (%)
Plastic or Rubber
Products (%)
Wood and Wood
Products (%)
Textile, Apparel and
Footwear (%)Non-Metallic
(%)
Electrical & Electronics
(%)
Motor Vehicles and Assembly (%)
Basic Metal, Iron and Steel
(%)
Pulp, Paper, Printing & publishing
(%)
Po
ten
tial
Imp
ort
Su
rge
5%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 45.5 90.4 55.8 48.1 27.6 33.6 0.0 0.0 38.0 93.9
3.0 91.0 180.8 111.7 96.2 55.2 67.2 0.0 0.0 76.0 187.8
10%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 120.8 63.8 52.0 50.5 96.2 34.0 100.1 1.1 23.7 29.6
3.0 241.7 127.7 105.1 101.0 192.4 68.0 200.1 2.2 47.5 59.2
20%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 152.3 26.5 35.6 66.0 226.9 216.7 80.6 194.7 141.2 160.1
3.0 304.7 53.0 71.3 132.0 113.4 108.3 161.2 389.4 70.6 320.2
Investm
en
t
5%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 -0.4 -1.2 -42.4 -0.6 15.0 -1.3 0.0 0.0 -2.5 5.0
3.0 -0.4 -2.4 -84.8 -1.3 30.0 -2.5 0.0 0.0 -5.0 10.0
10%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.0 -3.1 -25.0 -87.5 -25.0 12.5 -37.5 62.5 0.0 -37.5 6.3
20%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 -1.2 -62.5 -25.0 -18.8 62.5 -62.5 18.8 -1.2 -59.4 6.3
3.0 -2.3 -9.4 -59.4 -43.8 118.8 -9.4 43.8 -2.3 -9.4 12.5
Ou
tpu
t
5%
1.0 0.0 8.0 0.0 -2.0 0.0 0.0 0.0 0.0 -2.0 2.0
2.0 0.0 62.5 0.0 -24.0 -28.0 -34.0 0.0 0.0 16.0 8.0
3.0 0.0 12.0 0.0 -48.0 -50.0 -72.0 0.0 0.0 32.0 14.0
10%
1.0 0.0 6.7 0.0 -2.0 0.0 0.0 0.0 0.0 -2.0 2.0
2.0 2.0 46.7 0.0 -26.7 -90.0 -36.7 -36.7 -2.0 10.0 4.0
3.0 4.0 86.7 0.0 -46.7 -16.7 -70.0 -70.0 -2.0 20.0 6.0
20%
1.0 -2.0 10.0 -2.0 -2.0 -2.0 -2.0 -2.0 -2.0 -2.0 0.0
2.0 0.0 24.0 -2.0 -30.0 -10.0 -10.0 -30.0 -14.0 30.0 10.0
3.0 2.0 38.0 -2.0 -64.0 -240.0 -240.0 -56.0 -26.0 64.0 10.0
Em
plo
ym
en
t
5%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 -2.1 125.0 -2.1 -45.8 33.3 8.3 0.0 0.0 16.7 100.0
3.0 -2.1 25.0 -2.1 -91.7 62.5 20.8 0.0 0.0 33.3 75.0
10%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.0 -2.0 20.0 -2.0 -100.0 24.0 24.0 -72.0 -2.0 24.0 64.0
20%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.0 4.0
2.0 0.0 40.0 0.0 -68.0 12.0 32.0 -18.0 -6.0 32.0 16.0
3.0 0.0 84.0 0.0 -12.0 28.0 72.0 -40.0 -12.0 68.0 32.0
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
Impact Assessment - Manufacturing
13
Legend
Investment
Employment,
Output
>0%
-30% - 0%
< -30%
<-60%
• There will be no import surge in scenario 2
• Investment losses will be seen across the 3 phases, albeit at a decreasing rate. The worst hit sector will be the plastics or rubber products
• Output loss will be experienced across most sectors, although at a decreasing rate from each phase. Food & beverages will experience no output losses, while electronics will be worst hit
• Employment will generally experience growth, except in electrical & electronics and motor vehicles &assembly subsector. This 2 sectors will experience the worst job losses in the 2nd phase
Tariff Rate
PhaseFood,
Beverages and
Tobacco (%)
Chemical & Pharma Products
(%)
Plastic or Rubber
Products (%)
Wood and Wood
Products (%)
Textile, Apparel
and Footwear
(%)
Non-Metallic
(%)
Electrical & Electronics
(%)
Motor Vehicles
and Assembly
(%)
Basic Metal,
Iron and Steel (%)
Pulp, Paper, Printing & publishing
(%)
Inv
estm
en
t
5%
1.0 -5.0 -43.8 -81.3 -31.3 25.0 -37.5 62.5 -5.0 -62.5 12.5
2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
10%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 -2.0 -32.0 -76.0 -32.0 10.0 -40.0 56.0 -16.0 -40.0 4.0
3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
20%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.0 -40.0 -12.0 -72.0 0.0 12.0 -12.0 28.0 -40.0 -2.0 16.0
Ou
tpu
t
5%
1.0 0.0 -66.7 -5.0 -41.7 -58.3 -83.3 -83.3 -15.0 33.3 16.7
2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
10%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 5.0 87.5 0.0 -43.8 -18.8 -75.0 -68.8 -18.8 25.0 6.3
3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
20%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.0 0.0 72.2 0.0 0.0 25.0 66.7 -22.2 -16.7 66.7 38.9
Em
plo
ym
en
t
5%
1.0 27.8 0.0 -12.5 33.3 13.3 8.9 -24.0 -4.0 4.0 25.0
2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
10%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 0.0 20.0 0.0 -100.0 24.0 24.0 -72.0 -76.0 24.0 64.0
3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
20%
1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
3.0 0.0 72.2 0.0 0.0 25.0 66.7 -22.2 -16.7 66.7 38.9
Sources: MAN Econometric Model
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
AfCFTA Impact Assessment – Findings (Comparative Advantages)
14
2010 2011 2012 2013 2014 2015 2016 2017 Average
Mineral fuels, lubricants and related materials
87.9 61.9 48.1 49.4 47.1 153.2 102.1 87.9 79.7
Agricultural Products (Food and live animals)
66.0 35.8 37.4 100.1 28.7 45.2 23.3 16.4 44.1
Manufactured Products (Beverages and tobacco)
2.9 6.6 7.7 6.9 5.3 5.8 13.3 14.5 7.9
Crude materials, inedible, except fuels
17.9 3.5 8.9 1.7 0.3 7.1 1.1 1.0 5.2
Miscellaneous manufactured articles
3.5 3.2 4.9 9.6 2.7 5.6 0.3 0.4 3.8
Manufactured goods classified chiefly by material
14.4 1.5 1.7 1.7 1.0 2.4 2.2 2.5 3.4
Manufactured products (Machinery and transport equipment)
0.8 3.0 2.1 3.0 2.6 2.7 0.0 2.1 2.0
Manufactured goods (Chemicals and related products)
1.1 2.2 1.0 3.1 1.4 1.9 1.5 2.1 1.8
Our study showed that Nigeria has comparative advantages within Africa on the following products
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
AfCFTA Impact Assessment – Findings (Products)
15
Key Findings (African Trade)
ProductNigeria’s
Total Export ($ mn)
Africa’s Import ($
mn)
Nigeria’s export as a % of Africa’s
import
Refined Petroleum
151 38174.2 0.40%
Iron/Steel 21.5 28000.2 0.08%
Plastics 85.2 17726.1 0.48%
Crude Oil 36,057 10732.0 335.98%
Gas 5,687 7002.0 81.22%
Rubber 55.4 5651.6 0.98%
Fishery 49.6 4251.4 1.17%
Aluminum 33.3 3972.9 0.84%
Cement 58.4 2917.0 2.00%
Leather 73.9 1334.1 5.54%
Soya 26.8 1162.2 2.31%
Petrochemicals 165.7 802.1 20.66%
Cocoa 238.1 660.6 36.04%
Lead 27.4 93.6 29.28%
Sesame 135.7 88.1 153.97%
Cashew 32.5 46.3 70.15%
Ginger 8.3 16.6 50.11%
Flowers 8.2 19.6 41.75%
Products
Nigeria’s Total
Export ($ mn)
Africa’s Import ($ mn)
Nigeria’s export as a % of Africa’s import
Auto &parts
0.836,002.
50.00%
Textile 0.2 11,664.6 0.00%
Chemicals
1.8 10,697.0 0.02%
Sugar 0.06 6,866.0 0.00%
Rice 0 6,717.0 0.00%
Oil Palm 2.7 4751.2 0.06%
Fertilizer 0 3,731.9 0.00%
Cotton 5.5 3,170.7 0.17%
Beef 0.1 1,553.4 0.01%
Livestock 0 1,017.3 0.00%
Zinc 5.6 555.8 1.01%
Gold 0 578.5 0.00%
Nigeria has identified 35 priority products across its development plans (Zero Oil Plan, 7 Big Wins, Agricultural Promotion Policy, FMITI - Industrial Development Dept).
• 18 of the 35 products are exported by Nigeria and have a demand of $122.7 bn in Africa.
• Nigeria exports $42.9 bn of these products globally. Excluding crude oil and gas, the export value decreases to $1.2 bn.
12 of the 35 products have minimal export value from Nigeria (US$17 million) with a demand of $87.3 bn in Africa.
Priority Product
Auto/Auto parts Soya
Iron/Steel Livestock
Plastics Petrochemicals
Textile/Garment Cocoa
Chemicals Zinc
Crude Oil Gold
Gas Lead
Sugar Sesame
Rice Tin
Rubber Cashew
Oil Palm Ginger
Fishery Flowers
Aluminum Gum-arabic
Fertilizer Cowpeas
Cotton Cassava
Cement Yam
Beef Refined PetroleumLeather
Sources: ITC, NEPC, FMARD, FMITI, MPRFigures in red represent products for which Nigeria’s exports cannot sufficiently supply Africa’s demand
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
16
• 10 sectors have been chosen as priority sectors for liberalization. These sectors are aligned with the 5 priority sectors of the AfCFTA.
• Of the 36 subsectors under the 10 sectors listed above: 8 subsectors (22.2%) are fully liberalized, 27 subsectors (75%) are partially liberalized and 1 subsector is unbound.
• Nigeria is the 5th largest exporter of services (US$5 billion) and the largest importer of services (US$18.2 billion) in Africa.
• Nigeria’s service exports are only able to address 4% of Africa’s US$121 billion market.
• Nigeria’s trade in transport, travel and other business services account for 86% of total services imports and 76% of exports
• Nonetheless, other large African markets exist for players who seek to export these services. These countries include Egypt, South Africa, and Algeria etc.
-
5
10
15
20
25
US
$ B
illi
on
s Trade in Services (2017)
Export
Import
Nigeria’s Priority Sectors Export ImportAfCFTA Priority
Business Services $0.05bn $5.394bn P
Communication Services $0.28bn $0.43bn P
Distribution Services O
Educational Services O
Financial Services (incl Insurance) $0.36bn $1.35bn P
Health Related and Social Services O
Tourism and Travel-Related Services
$2.54bn $5.79bn P
Transport Services $1.3bn $4.64bn P
Construction and Related Engineering Services
$1.1bn O
Others: Energy-Related and Digital Services
O
AfCFTA Impact Assessment – Findings (Services)Key Findings (Trade in Services)
Sources: ITC, Nigeria’s Schedule of Service Offering for AfCFTA, AfCFTA
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
The assessment of Nigeria readiness for the AfCFTA highlights challenges within its ability to trade, a dearth in infrastructure and a marginally favourable operating environment
17
Legend
Score (%) Interpretation
0-35 Significant action required (Critical)
36 – 64 Marginal action required
65 and above Ready
Thematic Areas Readiness Area Definition Score %
Trade CapacityProducts, Services and Export Trade
Product and Service Homogeneity 0.73 27
Human Capacity 51.06 51.06
Foreign Market Access 2.4 34.29
Trade Infrastructure
Power Quality of electric supply 1.42 20.29
Road Quality of roads in Nigeria 3.8 54.29
Rail Quality of railroad infrastructure 1.5 21.43
Aviation Quality of air transport infrastructure 3.2 45.71
Ports Quality of port infrastructure 2.8 40.00
Communication Communication 45.91 45.91
Trade Environment
Trade Facilitation Overall Trade Facilitation Index Score 0.82 41.00
Ease of Doing Business Overall Ease of Doing Business Score 0.52 52.89
Cost of Money Access to finance 3 42.86
Enforcement CapacityPhysical Security 3.1 44.29
Internal and External border cooperation 0.83 41.50
Legal Domestic Market Access 3.7 52.86
Computation:▪ Score:
Provided Index Score
▪ %: (Nigeria’s Index Score ÷Maximum Index Score) ×100%
▪ Readiness Score: Average Thematic Area Score
Nigeria’s current state within the thematic areas require certain levels of actions.
Sources: Enabling Trade Index, Global Competitiveness Index, Herfindal Hirschmann Index
AfCFTA Readiness Assessment
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
S/
NKey Gaps
Impact to
TradeRecommendations
1Low productive capacity to
harness intra-Africa trade
• Develop productive capacity to harness intra-African trade
• Improve capacity utilisation of existing producers
• Develop logistics, power and communication infrastructure in and
around the industrial and service clusters
• Facilitate the completion of the 167 ERGP project
• Expedite the Made-in-Nigeria for Export (MINE) project
which seeks to create Special Economic Zones to attract
global manufacturers to Nigeria
• Conduct further studies to ascertain how much additional capacity
will come on-stream upon completion of the ERGP projects and the
current production capacity of products and services with market
potential across all the states
2Misalignment of products with
Africa’s top demand
• Realign products to match Africa’s top demanded products
• Streamline priorities to a smaller group of high value products such
as, refined petroleum, auto & auto parts, steel, and plastics
3
Reduced preferential market
access for Nigerian products in
Africa
• Achieving preferential market access and most favoured nation
status is critical to realizing the export oriented economic
diversification
4
Low quality infrastructure
capacity
• Expedite the approval National Quality Policy (NQP)
currently at FMITI
• Develop and pass the National Quality Bill
• Fund the NQIP implementation budget (NGN 4.6 billion
over 5 years) and leverage the funding to attract more
donor funding to extend the project
5 Credibility
• Define and execute a strategy to improve its financial credit ratings,
provide low cost financing for the services sector, tackle the scourge
of piracy and promote its image in the international community
Trade CapacityKey Actions for Trade
HighMediu
mLow
Sources: TWG Analysis, UNIDO, NiNAS
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
Trade InfrastructureKey Findings (Energy)
Nigeria’s power sector lags behind its peers using Access to electricity and Quality of Electricity Supply as measures.
Nigerians and their businesses spend almost $14B USD annually on alternative means generation that is expensive ($0.40/kWh or more), noisy, and polluting.
As at Q3 2018:
• Average power generated in represented 58.7% of the total installed generation capacity
• Actual power transmitted in represented 55.7% of total installed capacity
• Actual power distributed in represented 51.2% of installed capacity
• Inefficient gas supply and limited distribution infrastructure were identified as the biggest constraints across the value chain.Sources: NERC, TCN,
13300
7000 6288
11800
5300 5200
7804
3900 3222
15255
Generation Transmission Distribution Estimated 2025 Demand
Power Supply and Projected Demand
Installed Capacity Available Capacity
Ongoing Projects
Generation Transmission
72 generation
projects with
supply capacity
of ~20,000 MW
56 Transmission
projects split 19
330kv and 37
132kv
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
Trade Infrastructure (Roads)
Nigeria ranks 93rd out of 136 countries (score of 3.8/7) in terms of availability and quality of road infrastructure on the Enabling Trade Index. Nigeria’s ranking is striking considering that it is heavily reliant on its road infrastructure for trade, due to the limited capacity of other modes of transportation.
The Zero Oil Plan identified two main routes, as the
most important roads for trade as they connect the
raw material locations and the industrial and service
clusters to the ports for export. These are:
• Lakaji corridor (Lagos to Mokwa (A1), Diko (A124), Kano (A2), Jibiya (A9) and
• Port Harcourt to Ngala (A3); and3 connecting routes, namely:
• Road A237 connecting Kano (A2) to Potiskum (A3)• Road A234 connecting Diko (A2) to Akwanga (A3)• Road A121 connecting Shagamu (A1) to Benin (A2)
and Road A232 connecting Benin (A2) to Enugu (A3)
Key Findings (Road)
Sources: National Association of Road Transport Owners, NEPC, Ministry of Power, Works & Housing
• Port
Harcour
t
Calaba
r PortPH
Po
rt
Lag
os
Port
Badagr
y Port
(planne
d)
Key
Export
Roads
Key
Sea
Ports
LEGEND
Red Transport
Corridor
Blue
Transport
CorridorInter
Corrid
or
Linkag
es
Corridor
Infrastructure
Readiness for AfCFTA involves connecting the agricultural centres, industrial and
commercial centres to these major highways
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
Lack of a centralized source for end-to-end trade information• Various trade information portals exists, but provide information in segments, making
it difficult to determine requirements of trade processes from a singular source.• Countries such as Benin, Cote d’Ivoire, Ghana and Togo, which share same corridor
with Nigeria have implemented single windows.
High turn around of time and cost to import and export• It is easier for Nigerian manufacturers and smugglers to import and export from
Nigeria’s neighboring countries as average costs and time are 58% and 64% above the African average. This is due to:
• practice of physical inspection• wrongly filled forms• Absence of Authorised Operator criteria• Prevalence of irregular payments and bribes at borders, with a score of 1.9 out of 7
(132nd) in the enabling trade index
Low level of Customs cooperation with neighbouring countries• The absence of a harmonized data requirements, computer language and common
facilities between Nigeria and its neighbouring countries reduces its capacity to facilitate trade. This is further compounded with the poor implementation of joint border controls.
Nigeria’s key issues with trade facilitation centre on the availability of trade information, export/import time and cost and reduced cross-border cooperation.
Country TFI Score*
Nigeria 0.82
Co
mp
ar
ato
r
Co
un
trie
s
Egypt 1.19
Morocco 1.41
Kenya 1.21
South Africa 1.50
Ghana 0.90
Cote d’Ivoire 0.70
Ne
igh
bo
ur
ing
Co
un
trie
s
Benin 0.62
Cameroon 0.96
Chad 0.32
Niger 0.37
* - Maximum score is 2
Trade Environment
21
Key Findings (Trade Facilitation)
Sources:
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
Trade Environment
22
Indicator Nigeria Egypt KenyaCote d’
IvoireGhana Morocco S/Africa
Access to finance
(Average of A-C)3 4.1 4.1 3.3 3.5 3.7 5.3
A. Financial services
meeting business
needs (1-7)
3.7 4.5 4.5 3.7 4.0 3.9 6.0
B. Affordability of
financial services (1-
7)
2.5 3.8 3.5 3.5 3.2 3.6 4.6
C. Ease of access to
loans (1-7)2.6 - 4.3 3.7 4.0 3.6 5.2
Key Findings (Cost of Money, Monetary and Fiscal Policies)
• The AfCFTA does not involve a unified regional currency arrangement and as such Nigeria’s domestic monetary policy is not significantly impacted.
• The independence of monetary and fiscal policy, external reserves and exchange rate makes it more likely for Nigeria to adjust its policies in response to any possible risk in joining the AFCFTA.
• In the event of exchange rate volatility which can be a constraint to realization of the broad objectives of the AfCFTA, both traditional and non-tradition instruments can be deployed to achieved desired macroeconomic balance.
• Nigeria’s existing monetary policy results in one of the highest rates amongst comparator countries. This impacts access to finance and by inference the cost of money.
• Nigeria lags behind comparator countries in terms of access to finance (cost of money) on the Enabling Trade Index. To compete more favourably, Nigeria needs to target single digit interest rate.
14
96.75
17.75
2.254.5
22.5
5.252.5
14
5
0
17.8
13.7
10.4
18.2
5.8 5.3
Nigeria Kenya SouthAfrica
Egypt Morocco Cote d’Ivoire
Comparative rates as at 30 November, 2018
Monetary Policy Rate Cash Reverse Ratio
Sources: TWG Analysis, Enabling Trade Index, CBN
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
Implementation Approach
23
Economic Diplomacy
• Enforce treaties and trade agreements
• Enforce trade rules
• Drive foreign investment
• Gather trade intelligence
• Drive trade support
Quality Infrastructure
• Approve and operationalise
the National Quality Plan
Governance & Policy Coordination
• Develop and implement national trade policy
• Operationalize trade policy governance council
• Manage trade policy performance
Growing Intra
African Trade with
AfCFTA
Trade Facilitation and Ease
of Doing Business
• Align with ongoing
programmes
Policies, Laws &
Regulations Update
• Progress all critical
AfCFTA related bills,
policies and
regulations
Border Enforcement
• Progress short medium
and long-term border
enhancement initiatives
Trade Logistics Infrastructure
• Deliver critical trade infrastructure
projects and facilitate the resolution of
issues and challenges
Production, Services and Trade
Capacity Growth
• Facilitate new investment
• Fast track development agenda
provisions (e.g. food security,
priority products and services)
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
Role of the private sector
Private sector – major engine for
sustainable economic growth and
poverty alleviation
• employs 90% of working age
population
• accounts for 80% of production
• contributes 66% of investment
• provides 75% of total credit(Source: Tralac)
Private players
• Multinational and large companies
(5%)
• SMEs (95%)(Source: Tralac)
Private sector companies objectives
• Maximize shareholders value
• Maximize customer value
• Maintain social license to operate
1. Leverage AfCFTA to drive value
• Invest in production and service capacity to trade in
Africa
• Grow cross border trade capacity
• Grow forward and backward linkages
• Leverage national, regional and continental
partnerships (for economics of scale, labour, capital)
2. Drive advocacy and stakeholder engagements to
galvanise the business ecosystem
• Engage all sectors nationwide
• Engage counterparts across the continent
(Afrochampion initiative)
3. Grow research and intelligence capabilities
4. Grow strong partnership with government
• Trade mission
• Match making business
• Progress and outcome monitoring
• Transactions (e.g. M&As)
• Implement the agreement (e.g. tackle NTBs, test
trade remedy rules, flag obsolete regulations/laws)
Private sector profile Role on AfCFTA Implementation
Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement
Thank You