By VINCENT NWANI
After initial delays, Nigeria finally joined other African countries by signing the African Continental Free Trade Agreement (AfCFTA) in July 2019 at the summit of the African Union held in Niger. It is widely believed that the Agreement will afford African countries the opportunity to increase the trading activities among themselves and thereby increasing the African contribution to world trade and consequently creating more jobs and wealth. As the African Union (AU) continues to perfect the operational details required to enable smooth implementation of the Agreement effected from second half of 2020, this report lend some perspectives on the Nigerian sectors that hold the most prospects in the new dispensation.
Services sector has been of increasing importance to the Nigeria economy and its growth prospects for more than two decades. The sector now accounts for more than half of Nigeria’s GDP. It accounted for 50.79% in 2015, 52.37%, 58.2% and 55.8% in 2016, 2017 and 2018 respectively. The National Bureau of Statistics (NBS) indicated that the sector recorded a further growth rate of 1.83% in Q3-2019. The components of the sector considered in the NBS analysis of growth include information and communication, financial and insurance services, arts, entertainment and recreation, construction, transport and storage, electricity supply, water supply, waste management, and health and social services. Although, the sector does not exhibit or encompass sufficient levels of competitiveness, sophistication and efficiency to act as backbone of economic activity for industry and agriculture, with the exception of a few sub-sectors in few African countries including Nigeria. The creation of a continental market could provide suppliers of services the scale of operations and the long-term finance they need to boost competitiveness in services provision and, in turn contribute to improving trade facilitation on the continent and strengthening the gains from the Agreement stemming from increased trade in goods.
In addition, the services sector is an enabler of other components of domestic economic activities, the gross domestic product (GDP). The sector drives manufacturing, agriculture and agri-business, oil production and trade, mining and quarrying, retail and wholesale distributions, housing and real estate, among others. Services sector has been identified as the segment of the economy with the highest propensity to generate resources that ensure stability of the macro economy, particularly employment generation, domestic investment and foreign investment inflows and overall growth in domestic economic activities.
The performance of manufactured products export as a percentage of non-oil export in Nigeria has been growing steadily. The data from the NBS showed a continuous upward trend in the volume manufactured goods exported out of Nigeria from 2016 to 2019. According to the NBS, the trade report of the first quarter of 2019 revealed that the manufacturing sector contributed 10.19% to the total export done during this period and this represents 66.6% of the total non-oil export done during the same period.
The NBS data also showed that the non-oil export products of Nigeria to African countries are majorly manufactured goods while Agricultural and mineral products are largely shipped to Europe and Asia. If there has been an upward trend in the non-oil export of Nigeria to ECOWAS and other African countries with major export of Nigerians to Africa being manufactured goods, then we can safely conclude that the post AfCTA implementation presents an interesting era for industrial players in Nigeria.
We believe that Nigeria has a minimum of 65% upside potential to succeed in the new AfCTA dispensation depending on the actions or inactions relating to infrastructure provision and sectoral reforms moving forward. It is recommended that the details of AfCTA should be well communicated to the business community including capacity building to empower businesses with skill to benefit from the agreement by the committee put in place to drive AfCTA implementation. Commitment of the government to support manufacturers with necessary incentive that will reduce their cost of production and make them more competitive is germane. Finally, the committee should work in collaboration with the private sector in order to understand what they need from the government especially with respect to monitoring shipments into the country to prevent free entrance of goods from third countries and marketing their goods at exhibitions in various African countries.
Dr. Vincent Nwani is an economist and Managing Consultant, RTC Advisory Services Ltd