By; Chika Okeke
The African Continental Free Trade Agreement (AfCFTA) officially came into force on May 30, 2019 after clearing a key procedural hurdle and being ratified by the parliaments of 24 countries.
The agreement creates a single continental market for goods and services as well as a customs union with free movement of capital and business travellers. Countries joining AfCFTA must commit to removing tariffs on at least 90% of the goods they produce.
However, one of the biggest challenges to AfCFTA and its implementation is Nigeria’s refusal to sign the African Continental Free Trade Agreement. This has also become a subject of intense deliberation by stakeholders within and outside the country.
I laud President Buhari’s insistence on Nigeria not signing the AfCFTA at this time until key elements of the AfCFTA have been clarified and strengthened, most especially the “Rule of Origin” clause.
Nigeria’s agro-processing industry which is currently at its lowest ebb will be sounded a death sentence if key elements of the AfCFTA are not well strengthened and clarified to prevent Nigeria from becoming a dumping ground for agro products imported from other continents into Africa, which would make their way into the Nigeria.
Let me buttress my point with Nigeria’s palm oil industry and allied products.
Nigeria’s palm oil processing industry and in fact the Oil palm production value chain is currently plagued by a myriad of problems that have led to the closure of many palm oil processing mills around the country. Also in recent times, there has been a consistent decline in the interest of investors to invest in the development of oil palm plantations around the country.
One of the major factors contributing to the collapse of palm oil processing industry and also Oil Palm plantations development in Nigeria is the issue of palm oil importation and smuggling into Nigeria.
Nigeria’s annual demand for crude palm oil (CPO) is put at an estimated 1.9 to 2 million tonnes. However, the country’s annual crude palm oil production is estimated to be around 900,000 MT, leaving a deficit of about 0.9 million tonnes.
To make up for the deficit, Nigeria has resorted to the importation of crude palm oil, spending as high as $800 million on palm oil importation mainly from Malaysia, Indonesia and also neighbouring Cote d’Ivoire.
It is also pertinent to note at this point that Cote d’Ivoire as a West African country currently exports its surplus crude palm oil to Nigeria in line with the ECOWAS Trade Liberalization Scheme (ETLS) policy. Also note that under ECOWAS Trade Liberalization Scheme [ETLS], with the objective of reducing trade barriers among member nations, import duty on the trade of produce with origin within these member nations are waived.
Also, note that crude palm oil importation is not banned in Nigeria. However, with high import duties levied on its import in Nigeria, importers have resorted to high smuggling of crude palm oil into Nigeria through the land borders of neighbouring African countries.
Also note that with Nigeria’s inability to resolve its power challenges and provide stable electricity, local palm oil processors in Nigeria end up with palm oil that is largely expensive compared to the imported ones and unable to compete in prices at the markets. Also, they are forced to sell even at a loss to the prevailing imported palm oil which has now become a benchmark that determines what palm oil traders and merchants are ready to pay for every tonne of palm oil supplied.
The high rate of crude palm oil importation and smuggling have reached an alarming rate in recent times, reaching its peak in 2018 and forcing many local palm oil processors in Nigeria to shut down operations.
The Central Bank of Nigeria, under the leadership of the bank’s Governor, Mr Godwin Emefiele has recently unveiled an ambitious policy that will boost local production to about five million tons from 600,000 tons a year by investing as much as 180 billion naira ($500 million).
If any hope exists for this new concerted action to revive Nigeria’s palm oil production, it will be sustained by Nigeria’s insistence at this time not joining or being a signatory the African Continental Free Trade Agreement (AfCFTA) in the interest of Nigeria’s agro-processing industry.
In following the “Putting America First” trade and foreign policy mantra of the United States of America whose democracy and processes we so much emulate, let Nigeria’s courtship with AfCFTA not be out of any obligation to please or meet any regional interest but on putting Nigeria’s economy first.
Chika Okeke is the Co-Founder & Executive Director of Feed Africa Initiative; A UK based Advocacy NGO, promoting a new global and stakeholders’ approach to achieving food security in Africa.