By Merit Ibe [email protected]
Nigeria’s ability to fully capitalise on the opportunities presented by the African Continental Free Trade Area (AfCFTA) is increasingly under threat due to emerging challenges. Experts warn that without strategic planning and robust policy execution, the country may struggle to realise the full economic benefits of the landmark trade agreement.
As a signatory to the trade agreement, Nigeria stands on the brink of a transformative shift in intra-African trade.
However, some hurdles have been listed to stand in the way. They include persistent infrastructural deficits, regulatory bottlenecks and insufficient trade facilitation mechanisms.
Nigeria’s participation in AfCFTA, which aims to create a single market for goods and services across 54 African countries, is critical not only for its growth but also for the initiative’s overall success.
AfCFTA aims to eliminate trade barriers, reduce tariffs and create a single market for goods and services across Africa. .
At a recent meeting in Lagos with the state Technical Working Group on AfCFTA, Folashade Ambrose-Medebem, the Commissioner for Commerce, Cooperatives, Trade, and Investment, responded to concerns raised by stakeholders after Nigeria’s inaugural shipment under the AfCFTA’s Guided Trade Initiative (GTI) in July last year. A major point of discussion was the country’s infrastructural challenges, particularly in critical areas such as transportation, logistics and energy.
Eight companies took part in the pilot scheme, with several concerns raised, including issues of pricing, unfair competition, and the need for a stronger manufacturing sector capable of meeting the high quality and volume requirements for export under the program. Additionally, the absence of clearly defined trading guidelines was highlighted. Folashade Ambrose-Medebem stressed the importance of nurturing intra-African trade, with a clear vision to empower African businesses and promote sustainable growth across the continent.
In Nigeria, transportation networks are fragmented and inadequate road, rail and port facilities contribute to delays and higher business costs.
The lack of modern, well-maintained transport infrastructure not only raises the cost of trade within the country but also limits its connectivity to other African markets.
Intra-regional trade under AfCFTA requires smooth and efficient cross-border transportation routes, but Nigeria’s rail and road networks are largely insufficient. These deficiencies are compounded by the high costs of energy, another critical component for trade facilitation.
Stakeholders have pointed out that one of the major obstacles to Nigeria’s success in AfCFTA is the convoluted and inefficient regulatory framework that businesses are forced to contend with.
An SMEs expert, Daniel Dickson-Okezie, viewed that while AfCFTA is designed to boost the trade of goods, the reality is that Nigeria’s industrial sector is not sufficiently developed to meet the demands of an open continental market.
“AfCFTA aims to harmonise trade tariffs and reduce non-tariff barriers. For Nigeria to align with these objectives, it must overhaul some of its processes and improve transparency.”
Dickson-Okezie noted that another challenge bedevilling the intra trade is poor government policies and inadequate funding.
“These bottlenecks increase the cost of trade and reduce the country’s competitiveness on the continent.
“A report by the National Bureau of Statistics showed that the contribution of the manufacturing sector declined by 20.95 per cent in Q2 2024 when compared to the same period in 2023. The NBS report also showed that the sector’s contribution declined from 16.04 per cent in December 2023 to 12.68 per cent in June 2024.”
He lamented that the country remains heavily dependent on oil exports, with petroleum accounting for over 80 per cent of total export revenue.
“Non-oil exports, such as agricultural products, textiles, and manufactured goods, are not competitive enough in terms of quality or volume to meet the demands of other African countries.
“One of the major reasons for this low industrial capacity is the country’s reliance on outdated manufacturing techniques, which makes its products more expensive than those from other African countries.”
According to the Manufacturers Association of Nigeria, the country’s industries are burdened with high production costs, driven by expensive energy, lack of infrastructure, and limited access to finance. Until these issues are addressed, Nigerian manufacturers will struggle to take advantage of AfCFTA’s opportunities for increased intra-African trade. Nigeria’s trade policy has traditionally been protectionist, with high tariffs and import restrictions aimed at protecting local industries. However, such policies clash with the principles of AfCFTA, which seeks to reduce tariff and non-tariff barriers across the continent. The implementation of AfCFTA requires Nigeria to gradually dismantle some of its protectionist policies, which may face resistance from domestic industries that are not yet competitive enough to withstand free market competition.
Stakeholders have continued to lament that barriers, such as inadequate infrastructure, regulatory bottlenecks, and operational inefficiencies continued to hinder the seamless flow of goods across the continent.
The Chief Executive Officer of Le Look House of Bags and Shoes, Mrs Chinwe Ezenwa, viewed that in Nigeria, there are core maritime/ logistics issues that should be addressed to make AfCFTA a success.
“Freight forwarding in Nigeria also must be rejigged and tailored towards modern innovations and transparent operations. The advanced port infrastructure supports intermodal transportation. This means cargo can seamlessly transition between ships, trucks, trains, and aircraft, enhancing supply chain efficiency.”
Ezenwa advised that if Nigeria must fully benefit from AfCFTA, some key issues have to be addressed to enable the continent to effectively optimize this trade treaty.
“Logistics is a big concern which must be addressed to enable AfCFTA to deliver on the immense potentials, which we already know. New deep seaports in Nigeria will have to be ready to compete in terms of infrastructure, efficiency in operations, service-driven costs, modern technology, transparency, and ease of doing business. Freight forwarding in Nigeria also must be rejigged and tailored towards modern innovations and transparent operations.”
Meanwhile, Nigeria’s overreliance on the import of finished goods, particularly from Europe and China, further undermines the benefits of the agreement. While AfCFTA promises to enhance Nigeria’s access to African markets, the country’s current trade balance heavily favours imports, especially for consumer goods, electronics, and machinery. Without significant changes in local manufacturing and agricultural productivity, this imbalance will persist.
The Nigerian government’s commitment to AfCFTA is another crucial factor in determining the success of the agreement. While Nigeria signed the AfCFTA protocol, the slow pace of implementation and lack of clear policy direction have raised concerns about the government’s commitment to the agreement.
Additionally, the lack of alignment between Federal and State Governments regarding the implementation of AfCFTA is a major issue. While the Federal Government is responsible for negotiating and implementing international agreements, states are the primary actors in infrastructure development, including roads, ports, and industrial zones. This disconnect complicates the country’s ability to establish a cohesive national strategy to maximise AfCFTA’s potential.
For David Etim, President of the Calabar Chamber of Commerce and Industry (CALCCIMA), for Nigeria to overcome these challenges and fully benefit from AfCFTA, substantial reforms are needed across multiple sectors. The government must prioritise infrastructural development, particularly in transportation and energy, to facilitate the smooth movement of goods.
He pointed out that public-private partnerships will play a crucial role in unlocking the necessary investments in these areas.
“Regulatory reforms are equally essential. Streamlining border processes, reducing corruption, and implementing electronic systems across the entire supply chain would significantly improve the country’s competitiveness.
“Nigeria must also invest in industrialisation and export diversification. Providing support for small and medium-sized enterprises which make up over 90 per cent of Nigerian businesses could enhance the country’s manufacturing output.
“Additionally, investing in human capital, innovation, and technology would help local industries become more competitive in the African market.
“Finally, the government must show greater political will to implement AfCFTA effectively. Strengthening institutions, ensuring cross-governmental collaboration, and building trust with the private sector will be key to overcoming the challenges Nigeria faces in implementing the agreement.
“While the AfCFTA presents significant opportunities for Nigeria, the country’s ability to harness these benefits will depend on overcoming its infrastructural, regulatory, and industrial challenges. By addressing these issues head-on through comprehensive policy reforms and investment in key sectors, the country would position itself as a major player in the African trade landscape. The time to act is now, as AfCFTA has the potential to transform not just Nigeria’s economy, but the entire continent.”