MAN raises red flag on auto, chemical, cable industries as AFCFTA knocks
The Manufacturers Association of Nigeria (MAN) says the auto, pharmaceutical and chemical industries will be adversely affected by the oncoming African Continental Free Area (AFCFTA) if nothing is done to negotiate better terms for the sub-sectors.
In a study carried out by the association to determine the offensive and defensive impacts of the AFCFTA on the Nigerian economy, MAN said with AFCFTA, output will decline in all sectors but with higher magnitudes in motor vehicle assembly, chemicals, pharmaceuticals, electrical and electronic industries compared to others.
“The change in domestic outputs of manufacturing sector is negative and ranges from -10.00 percent to -0.228 percent, thus indicating that operators may close shop,” MAN said.
Man said import will surge in all the 77 manufacturing subsectors in the third phase of the liberalisation, which begins in 2029 and ends in 2033. The first phase starts in 2019 and ends in 2023, while the second phase is between 2024 and 2028.
The AFCFTA is easily the largest trade agreement since the World Trade Organisation (WTO)
in 1994 and a flagship project of Africa’s Agenda 2063, targeted at creating a single market for 1.2 billion people and exposing each country to a $3.4 trillion market opportunity on the continent.
The AFCFTA officially came into force on 30th May 2019 when the required number of ratifications— 22— were obtained, making the agreement a binding international legal instrument. Proper operations, however, are yet to start.
The treaty is expected to raise Africa’s nominal GDP to $6.7 trillion by 2030 and will liberalise 90 percent of products manufactured in Africa. This means that a country can only protect 10 percent of its local industries.
After severe opposition, which prevented President Muhammadu Buhari from signing the AFCFTA in 2018, MAN recently threw its weight behind the treaty. But the association, however, carried out studies to determine the extent of impact the treaty would have on the Nigerian manufacturing sector and the economy in general.
“Particularly, tariff cuts would trigger increases in import for food, beverages and tobacco by 91 percent; chemical & pharmaceutical products by 180.7 percent; plastic and rubber products by 111.6 percent, as well as wood and wood products sub-sector by 96.2 percent,” the association said.
It will also raise imports in textile, apparel and footwear by 55.2 percent ; non- metallic products by 67.2 percent; electrical and electronics by 218.2 percent; and motor vehicles and assembly by 2000 percent, MAN warned.
The association of over 2,000 members acknowledged that the AFCFTA agreement is expected to provide Nigeria ample opportunity for Nigerian firms to look towards the African market to increase exports and diversify non-oil products, stressing that Nigeria is not taking advantage of huge export opportunities in the continent.
It recommended that the Central bank of Nigeria institute an exchange rate policy that balances the need for intermediate imports with that of export orientation, in the form of exportpromoting real exchange rate.
It suggested revitalisation of institutions mandated with inputs development to create appropriate prototypes to solve problems of non-availability and high prices of raw materials.
“We must upgrade and introduce new technical skills for competitive manufacturing,” it said, calling for a public-private partnership framework to boost social and economic infrastructure.
“The high cost and low access to infrastructure services such as energy and water to firms should be subject to a framework that ensures competitive pricing and supply,” MAN said.
It further canvassed access to technology and know-how to create a technical change that will drive exports.
It likewise recommended active subsidisation of research and development and encouragement of foreign direct investment through friendly policies.