Remarks by the UN Resident Coordinator in Nigeria, Mr. Edward Kallon, at the Opening Ceremony of the National AfCFTA: Forum on ‘Effective Implementation for Industrialisation and Inclusive Economic Development in Nigeria'
On 30th May 2019, the momentous African Continental Free Trade Area (AfCFTA) Agreement entered into force. On 1st July 2020, tariff dismantlement will begin.
Honourable Minister of Industry, Trade and Investment,
Your Excellency the President of ECOWAS,
The Honourable Commissioner from the African Union,
My colleague the Executive Secretary of the Economic Commission for Africa,
Your Excellencies, Members of the Diplomatic Corps,
Colleagues from the African Union and ECOWAS,
My colleagues from the United Nations,
Distinguished captains of industry and leaders in the Private Sector,
All participants at this very important and timely Forum,
Distinguished ladies and gentlemen,
I am delighted to be here today at this crucial and timely National Forum on the Africa Continental Free Trade Agreement (AfCFTA). I wish to thank the Federal Government of Nigeria, the African Union, ECOWAS and the UN Economic Commission for Africa for organising this Forum.
We have two important projects: Agenda 2063 for African Development and the Agenda 2030 for sustainable development. The two agendas are aligned, and both aim at a fair globalization, development that is sustainable and inclusive, and both cannot be implemented without financing. The size and breadth of these Agendas present both opportunities and challenges for governments and other development actors. Generating enough resources to reach these aspirational goals will be a major challenge.
The Addis Ababa Action Agenda of 2015 provides the global framework for financing the implementation of the Agenda 2030. One of the key action areas is the enhancement of international trade as an engine for development. Trade, whether local, regional or international, will be critical. Trade, and trade policy, are referenced across the different SDGs including eradication of poverty (goal 1), health and wellbeing (goal 3), gender equality (goal 5), decent work (goal 8), industry, innovation and infrastructure (goal 9) and addressing inequalities (goal 10), but the importance of international/regional trade will be particularly critical in three clusters of issues namely: Food Security (Goal 2); Sustainable Energy (Goals 7 and 12) and; Oceans (Goal 14).
The Nigerian AfCFTA Forum is happening at an opportune time as we embark on the Decade of Action to accelerate implementation of the Sustainable Development Goals (Goals). We are learning that industrialization, trade and job creation for young people remains a critical pathway to prosperity in Africa. SDG 1-6 is all about social investment while SDG 7-15 is focused on a functioning economy. This implies, for Africa to fund social investments, the economy must function, and industrialization and trade remains the gateway.
Between 2018 and 2019, African growth decelerated due to mixed performance in Angola, South Africa and Nigeria, the three economies which account for more than a third of the continents GDP. Africa’s projected GDP growth rate is slightly higher than the projected population growth rate resulting in a per capita growth of less than one percent. Africa’s deficit is also forecast to be about 2.7 percent of GDP in 2020.
Growth in real income per capita remains below the target rates necessary to change the living standards of the people on the continent and the quality of economic growth must be considered. Climate change also presents another challenge to Africa, given that Africa will have a more difficult time mitigating and adapting to changes than other continents.
Addressing these challenges will require funding, and reforming African policies to improve domestic resource mobilization. The relative low tax revenue to GDP ratio of African countries suggest that there is still significant revenue that can be shifted towards sustainable development.
Ladies and gentlemen,
On 30th May 2019, the momentous African Continental Free Trade Area (AfCFTA) Agreement entered into force. On 1st July 2020, tariff dismantlement will begin. At this historic juncture, the real test is how quickly, and effectively African countries will be able to implement the agreement. Like all free trade agreements, the AfCFTA will have both positive and negative effects and create both winners and losers.
Unlike many other countries, Nigeria carried out a thorough readiness impact assessment of the AfCFTA before signing the Agreement. This means that the country has a good understanding of the potential benefits and costs of the AfCFTA and readiness requirements for its successful implementation. The participatory, consultative and consensus-building efforts government has taken will be key to ensuring that the opportunities of the AfCFTA are maximized and the challenges of intra-African trade are overcome. I would like to commend the Federal Government of Nigeria for taking these crucial steps.
At the same time, the Nigeria’s Organised Private Sector has played an incredibly valuable and crucial role in ensuring that the AfCFTA generates real gains for Nigeria’s manufacturing and services sectors. We are now at a time when the Nigerian government and private sector both acknowledge the game-changing role the AfCFTA can play in supporting the country’s diversification and inclusive development. This is why we are here today, to develop a coordinated programme for implementation of the AfCFTA. The AfCFTA is a continental agreement, but implementation will take place at the national level. We must work together to make it a success.
For the AfCFTA to have a positive influence on long-term investment in productive capacities, we will need to develop appropriate supporting policies, build the requisite infrastructure and ensure an educated work force. We will need to actively promote productive employment and decent work, women’s empowerment and food security and; reduction in inequalities.
The United Nations is here to support Nigeria to make the AfCFTA work for the county’s people, for the MSMEs, and for the women and youth entrepreneurs. To aid this process, ECA recently carried out modelling exercises on the expected impact of the AfCFTA on the Nigeria’s economy, trade and welfare. What did we find?
Following the implementation of the AfCFTA, both GDP and exports of Nigeria are expected to increase. The AfCFTA would be a game changer when it comes to stimulating intra-African trade. Precisely, the exports of Nigeria to Africa would increase significantly and between 10% and 15% in 2040 compared to baseline without the AfCFTA in place. The more ambitious the trade liberalization the greater the expansion of Nigerian exports to its African partners. We found that the increase in Nigeria’s exports to its African partners would be most pronounced in agricultural and food sectors closely followed by industrial sectors, thereby offering invaluable opportunities to industrialize through trade.
Looking deeper into specific sectors, Nigeria’s exports to the rest of Africa would increase by more than 15% in fishery, textile, wearing apparel, leather, wood and papers, metals, electronics, vehicles and transport equipment and machinery (for industrial sectors) and in meat and poultry, milk and dairy products, rice, other cereals, plant-based fibers and other crops, fruit, vegetables, nuts, vegetable oils, other food products, beverage and tobacco as well as livestock (for agriculture and food sectors). Following the AfCFTA reform. Nigeria’s exports would increase significantly towards all African sub-regions, outside West Africa, with most impressive expansions to countries such as Botswana, Cameroon, Egypt, Ethiopia, Kenya, Malawi, Morocco, Mozambique, Namibia, Rwanda, Tanzania, Uganda and Zimbabwe.
Another interesting finding is that despite a projected slight decrease in tariff revenues in Nigeria, ranging between 2.6% and 3.1%, the welfare of Nigeria would increase with the AfCFTA, thanks to the great expansion of exports towards African partners. Finally, due to Nigeria’s sheer economic size, it is among the nations expected to experience the largest absolute expansion in intra-African exports following the AfCFTA, and the ECOWAS member expected to receive the largest boost to intra-African exports.
Distinguished ladies and gentlemen,
Making the AfCFTA a reality will require creating national institutions for implementing the Agreement, in addition to institutional coordination mechanisms for execution between public sector, private sector and donors. The Nigerian government will need to identify new opportunities for diversification and value chain development under the AfCFTA, and complementary actions needed to overcome the existing constraints to intra-African trade. This must be achieved through adopting a cross-sectoral approach, considering not just trade, but also closely related areas such as agriculture, industry, macroeconomic management and infrastructure development.
The AfCFTA embodies reforms that liberalise and facilitate trade along the export path. They include reducing tariffs, the traditional heart of free trade agreements, but also liberalizing service sectors, supporting customs cooperation and addressing non-tariff barriers. At the same time, implementation of the AfCFTA must include complementary policies to ensure that its benefits are shared equitably. ECA’s Assessing Regional Integration in Africa (ARIA) IX Report on “Next steps for the AfCFTA” puts forward five complementary measures for ensuring inclusive AfCFTA implementation, namely, finance and investment, production, trade facilitation, trade-related infrastructure and import defence measures. These speak very closely to the familiar seven clusters of the AU Boosting Intra-African Trade (BIAT) Action Plan, that is, trade policy, trade facilitation, productive capacity, trade-related infrastructure, trade finance, trade information and factor market integration.
These complementary policies are crucial in Nigeria. In fact, a leading factor behind Nigeria’s delay in signing the AfCFTA were private sector concerns that they may not be able to compete under a liberalized African market due to an unfavourable domestic business environment. Subsequently, the organized private sector was part and parcel of the process that steered the President to finally sign the Agreement, and tabled clear demands for government to prioritize policies aimed at overcoming existing supply-side constraints in Nigeria.
The UN, therefore, welcomes and commends the Government’s recent establishment of the National Action Committee for AfCFTA implementation comprising of representatives of relevant ministries and agencies, private sector and civil society to coordinate the implementation of AfCFTA readiness interventions focused on enhancing productivity, competitiveness and facilitate trade. This is in line with government’s broader goals to improve Nigeria’s World Bank Doing Business ranking to a top 70 position by 2023.
I hope that this Forum will provide a comfortable platform to deliberate on some of the lingering challenges to cross-border trade in the ECOWAS region and devise a joint work programme for coordinating implementation of the AfCFTA.
The ECA forecasts that the AfCFTA could boost intra Africa trade by 52 percent, with the industrial sector forecast to gain the most. GDP and exports would increase by US$ 44 Billion and US$ 56 respectively and AfCFTA could potentially increase jobs and move informal traders into the formal sector. Digitalization is transforming the way we do business in Africa. In 2011, digitalization impacted the GDP of Africa by US$ 8.3 billion, in addition to creating over 600,000 jobs on the continent
Once again, I commend my colleagues from ECA for organising this Forum, together with the AU, ECOWAS Commission and the Federal Government of Nigeria. As I always say, Nigeria is too big to fail. I believe that with concerted efforts of all of us to achieve both Agenda 2063 and Agenda 2030, Nigeria will become that great country we all want to see.
I thank you for your kind attention