potential impact of the afcfta and the strategic

NACCIMA-Deloitte Dialogue Series on African Continental Free Trade Area (AfCFTA) and the Private Sector

July 30, 2019

Potential impact of the AfCFTA and the strategic responsibility of the Nigerian Private Sector in the

implementation

Presented byFrancis Anatogu

Senior Special Assistant to the President on Public Sector Matters (OCOS)

Presidential Committee on Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement

Presentation Outline

2

1 AfCFTA - Background and strategic intent

2 Potential impact - Benefits and Threats

3 AfCFTA Implementation

- Readiness requirements

- Implementation approach

- The role of the private sector


AfCFTA – Background & strategic intent

3

The AfCFTA is in furtherance of the Abuja Treaty (1991) which aims to:… strengthen Africa’s regional economic communities…establish a free trade area, common external tariff and common market and…gradually remove obstacles to free movement of persons, goods, service and capital

The AfCFTA is one of the pillars

through which Africa intends to

achieve its Economic

Integration ambition



4

DriversAfrica

Trade in goods $930.65bn

% of global trade volume 2.63%

Import Volume $504.17bn

Export Volume $426.48bn

Extractive Goods 26%

Manufactured Goods 42%

Trade

Balance

-$77.69bn

Africa

Trade in services $263.61bn

% of global trade in services 2.70%

Services import volume $162.9 bn

Services export volume $100.7 bn

Trade

Balance

-$62.2bn

1. Fragmented market – high barriers to trade• Multiple jurisdictions

• High tariffs

• high transaction costs

• Restricted movement of labour and capital

2. Low production capacity…Africa is not self

sufficient in both goods and services

3. High transaction costs – poor infrastructure,

bureaucratic trade environment

Regional trade pattern

Intra-Africa 15%

Intra-Europe 70%

Intra-America 46%

Intra-Asia 60%


Objectives

• To expand intra-African trade

through better harmonization and

coordination of trade liberalization

and facilitation across Africa’s

Regional Economic Communities

(RECs).

• To enhance competitiveness at

the industry and enterprise level

through optimization of

opportunities for scale production,

continental market access and

better reallocation of resources

The African Union (AU) intends to improve intra-African trade with the establishment of a continental free trade area

5

Architecture

Agreement establishing

AfCFTA

Trade in Goods

Trade in Services

Rules and Procedures on the settlement of disputes

Competition Policy

Investment

Intellectual Property Rights

Annexes• Schedule of Tariff

Concessions• Rules of Origin• Customs Cooperation

and Mutual Administrative Assistance

• Trade Facilitation• Transit Trade and

Transit Facilitation• Technical Barriers to

Trade• Sanitary and

Phytosanitary Measures

• Non-Tariff Barriers• Trade Remedies

Protocols

Annexes• Schedules of Specific

Commitments• MFN Exemption• Annex on Air

Transport

Phase 1Annexes

AdoptedUnder Discussion

Phase 2

Future



AfCFTA – Impact and Readiness Assessment

The impact assessment covered:

• Impact on government revenue, fiscal and monetary policies;

• the implications of change in intra-Africa trade patterns on the economy;

• impact of legacy trade agreements and predatory trade practices on AfCFTA; and

• national security implications of the free movement of persons

• Foreign policy implications of AfCFTA

The readiness assessment scope covered:

• Trade capacity (production and service capacity; export capacity, quality infrastructure)

• Trade infrastructure (Power, trade logistics)

• Trade environment (Trade facilitation, fiscal and monetary policies, ease of doing business)

• Trade enforcement (border enforcement, movement of persons, trade remedies)

• Legal and institutional (AU/ECOWAS) transitional arrangements

Scope


AfCFTA Impact Assessment - Findings

7

Potential Impact

Context Benefits Risks

Alignment with the National

Development Plans

• AfCFTA complements the ERGP’s economic diversification and industrialization agenda

• Preferential access to Africa’s $504.17bn import market -mostly finished goods; and

• $162bn worth of imported services

• Private sector investment needed to grow production and service capacities

Preferential Market Access

Nigeria ranks 123rd out of 136 countries in terms of foreign market access

• AfCFTA will eliminate tariff on 90% of tariff lines

• National treatment clause provides level playing field in African markets

• eliminates existing unfair tariffs and non-tariff barriers on Nigerian products and services

• 92% of Nigeria’s trade is oil and with non-Africans so product and service diversification is a key requirement

• Preferential trade agreements with non-African trading partners is also required to achieve Nigeria’s economic diversification ambition


Pre-AfCFTA Market Access

8

Unlike Egypt, South

Africa and Kenya,

Nigeria currently does

not enjoy preferential

market access in its

bilateral trade

agreements

Mainly due to its

mono-export product

orientation



9

Potential Impact Context Benefits Risks

Impact on economic

performance

• Increase in demand and price of exports

• Made in Africa goods will displace non-African goods

• Increase in imports will lower prices for consumers which will lower inflation

• Lower production cost due to cheaper inputs and labourfrom Africa

• Reduction of government revenue by 1.5% (N131.6 bn) due to loss of import duties

• GDP and Savings decline by up to 0.14% and 4.8% respectively

(Above risks can be mitigated by broadening income tax base)

• Imports will grow faster than exports until new production capacities materialize –impact on foreign exchange

• Interest rates - likely to rise in the short term due to higher demand for credit to fund exports.

• But will decline in the long term as foreign investment rises to take advantage

Impact on productivity

• Competitive pressure will drive improvements in productivity

• Increased mobility of skills will encourage specialization and create jobs

• Dependent on realization of readiness projects



10

Potential Impact Context Benefits Risks

Impact on local

industries

• Growth and investment opportunities for some manufacturing sectors e.g. Petrochemicals, refined petroleum products, iron/steel, cement, leather

• AfCFTA provides for Sensitive and Exclusive lists

• In the long-term, export to both African and non-African countries will grow

• Competition from finished goods from other African countries

• Without protection, import surge will lead to drop in output, investment and jobs in some manufacturing sectors, e.g. Auto, Chemical, Pharma and Electronics

• Increase in smuggling of products in the sensitive and exclusive lists

Impact on predatory

trade practices and legacy

trade agreements

• Import quotas to be negotiated into the Phase I Agreement to check predatory trade

• AfCFTA includes protocol on dispute resolution

• Smuggling, under-declaration of imports and abuse of trade of origin is likely to rise as African countries lack will and capacity to enforce borders

• Increased complexity in enforcing rules of origin (55 countries)

• Legacy issues at ECOWAS if not tackled will impact success of AfCFTA


11

Trade EnvironmentKey Findings (Trade Enforcement)

Smuggling activities are conducted through manned and unmanned entry points.

* - This does not include smuggling through unmanned borders

0.13

0.15

0.34

0.57

0.66

0.75

1.54

6.79

Netherlands

France

U.K

Hong Kong

India

Niger

Korea Rep.

China

Underreported Mirror Trade, 2017 ($’ billion)

Sources:


Impact Assessment - Manufacturing

12

Legend

Import Surge

0-50%

50% -150%

150% - 200%

>200%

Investment

Employment,

Output

>0%

-30% - 0%

< -30%

<-60%

• Import surge will be significant across most segments of the manufacturing sector especially for products currently at 20% and 10% tariff rates.

• Employment, investments and output will grow in five different sub-sectors, decline in three while two sectors will witness minimal change due to AfCFTA;

• Wood and Wood Products and Motor Vehicle and Assembly sub-sectors will be most threatened as it will lose output, investment and jobs. Pulp, paper, printing and publishing subsector will be the most favoured as it will gain in all three areas;

• Food, beverage and tobacco will witness negligible changes in output, investment and employment in spite of the surge in imports

Tariff Rate

Phase Food, Beverages and Tobacco (%)

Chemical & Pharma

Products (%)

Plastic or Rubber

Products (%)

Wood and Wood

Products (%)

Textile, Apparel and

Footwear (%)Non-Metallic

(%)

Electrical & Electronics

(%)

Motor Vehicles and Assembly (%)

Basic Metal, Iron and Steel

(%)

Pulp, Paper, Printing & publishing

(%)

Po

ten

tial

Imp

ort

Su

rge

5%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 45.5 90.4 55.8 48.1 27.6 33.6 0.0 0.0 38.0 93.9

3.0 91.0 180.8 111.7 96.2 55.2 67.2 0.0 0.0 76.0 187.8

10%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 120.8 63.8 52.0 50.5 96.2 34.0 100.1 1.1 23.7 29.6

3.0 241.7 127.7 105.1 101.0 192.4 68.0 200.1 2.2 47.5 59.2

20%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 152.3 26.5 35.6 66.0 226.9 216.7 80.6 194.7 141.2 160.1

3.0 304.7 53.0 71.3 132.0 113.4 108.3 161.2 389.4 70.6 320.2

Investm

en

t

5%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 -0.4 -1.2 -42.4 -0.6 15.0 -1.3 0.0 0.0 -2.5 5.0

3.0 -0.4 -2.4 -84.8 -1.3 30.0 -2.5 0.0 0.0 -5.0 10.0

10%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

3.0 -3.1 -25.0 -87.5 -25.0 12.5 -37.5 62.5 0.0 -37.5 6.3

20%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 -1.2 -62.5 -25.0 -18.8 62.5 -62.5 18.8 -1.2 -59.4 6.3

3.0 -2.3 -9.4 -59.4 -43.8 118.8 -9.4 43.8 -2.3 -9.4 12.5

Ou

tpu

t

5%

1.0 0.0 8.0 0.0 -2.0 0.0 0.0 0.0 0.0 -2.0 2.0

2.0 0.0 62.5 0.0 -24.0 -28.0 -34.0 0.0 0.0 16.0 8.0

3.0 0.0 12.0 0.0 -48.0 -50.0 -72.0 0.0 0.0 32.0 14.0

10%

1.0 0.0 6.7 0.0 -2.0 0.0 0.0 0.0 0.0 -2.0 2.0

2.0 2.0 46.7 0.0 -26.7 -90.0 -36.7 -36.7 -2.0 10.0 4.0

3.0 4.0 86.7 0.0 -46.7 -16.7 -70.0 -70.0 -2.0 20.0 6.0

20%

1.0 -2.0 10.0 -2.0 -2.0 -2.0 -2.0 -2.0 -2.0 -2.0 0.0

2.0 0.0 24.0 -2.0 -30.0 -10.0 -10.0 -30.0 -14.0 30.0 10.0

3.0 2.0 38.0 -2.0 -64.0 -240.0 -240.0 -56.0 -26.0 64.0 10.0

Em

plo

ym

en

t

5%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 -2.1 125.0 -2.1 -45.8 33.3 8.3 0.0 0.0 16.7 100.0

3.0 -2.1 25.0 -2.1 -91.7 62.5 20.8 0.0 0.0 33.3 75.0

10%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

3.0 -2.0 20.0 -2.0 -100.0 24.0 24.0 -72.0 -2.0 24.0 64.0

20%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4.0 4.0

2.0 0.0 40.0 0.0 -68.0 12.0 32.0 -18.0 -6.0 32.0 16.0

3.0 0.0 84.0 0.0 -12.0 28.0 72.0 -40.0 -12.0 68.0 32.0


Impact Assessment - Manufacturing

13

Legend

Investment

Employment,

Output

>0%

-30% - 0%

< -30%

<-60%

• There will be no import surge in scenario 2

• Investment losses will be seen across the 3 phases, albeit at a decreasing rate. The worst hit sector will be the plastics or rubber products

• Output loss will be experienced across most sectors, although at a decreasing rate from each phase. Food & beverages will experience no output losses, while electronics will be worst hit

• Employment will generally experience growth, except in electrical & electronics and motor vehicles &assembly subsector. This 2 sectors will experience the worst job losses in the 2nd phase

Tariff Rate

PhaseFood,

Beverages and

Tobacco (%)

Chemical & Pharma Products

(%)

Plastic or Rubber

Products (%)

Wood and Wood

Products (%)

Textile, Apparel

and Footwear

(%)

Non-Metallic

(%)

Electrical & Electronics

(%)

Motor Vehicles

and Assembly

(%)

Basic Metal,

Iron and Steel (%)

Pulp, Paper, Printing & publishing

(%)

Inv

estm

en

t

5%

1.0 -5.0 -43.8 -81.3 -31.3 25.0 -37.5 62.5 -5.0 -62.5 12.5

2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

10%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 -2.0 -32.0 -76.0 -32.0 10.0 -40.0 56.0 -16.0 -40.0 4.0

3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

20%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

3.0 -40.0 -12.0 -72.0 0.0 12.0 -12.0 28.0 -40.0 -2.0 16.0

Ou

tpu

t

5%

1.0 0.0 -66.7 -5.0 -41.7 -58.3 -83.3 -83.3 -15.0 33.3 16.7

2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

10%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 5.0 87.5 0.0 -43.8 -18.8 -75.0 -68.8 -18.8 25.0 6.3

3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

20%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

3.0 0.0 72.2 0.0 0.0 25.0 66.7 -22.2 -16.7 66.7 38.9

Em

plo

ym

en

t

5%

1.0 27.8 0.0 -12.5 33.3 13.3 8.9 -24.0 -4.0 4.0 25.0

2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

10%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 0.0 20.0 0.0 -100.0 24.0 24.0 -72.0 -76.0 24.0 64.0

3.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

20%

1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

3.0 0.0 72.2 0.0 0.0 25.0 66.7 -22.2 -16.7 66.7 38.9

Sources: MAN Econometric Model


AfCFTA Impact Assessment – Findings (Comparative Advantages)

14

2010 2011 2012 2013 2014 2015 2016 2017 Average

Mineral fuels, lubricants and related materials

87.9 61.9 48.1 49.4 47.1 153.2 102.1 87.9 79.7

Agricultural Products (Food and live animals)

66.0 35.8 37.4 100.1 28.7 45.2 23.3 16.4 44.1

Manufactured Products (Beverages and tobacco)

2.9 6.6 7.7 6.9 5.3 5.8 13.3 14.5 7.9

Crude materials, inedible, except fuels

17.9 3.5 8.9 1.7 0.3 7.1 1.1 1.0 5.2

Miscellaneous manufactured articles

3.5 3.2 4.9 9.6 2.7 5.6 0.3 0.4 3.8

Manufactured goods classified chiefly by material

14.4 1.5 1.7 1.7 1.0 2.4 2.2 2.5 3.4

Manufactured products (Machinery and transport equipment)

0.8 3.0 2.1 3.0 2.6 2.7 0.0 2.1 2.0

Manufactured goods (Chemicals and related products)

1.1 2.2 1.0 3.1 1.4 1.9 1.5 2.1 1.8

Our study showed that Nigeria has comparative advantages within Africa on the following products


AfCFTA Impact Assessment – Findings (Products)

15

Key Findings (African Trade)

ProductNigeria’s

Total Export ($ mn)

Africa’s Import ($

mn)

Nigeria’s export as a % of Africa’s

import

Refined Petroleum

151 38174.2 0.40%

Iron/Steel 21.5 28000.2 0.08%

Plastics 85.2 17726.1 0.48%

Crude Oil 36,057 10732.0 335.98%

Gas 5,687 7002.0 81.22%

Rubber 55.4 5651.6 0.98%

Fishery 49.6 4251.4 1.17%

Aluminum 33.3 3972.9 0.84%

Cement 58.4 2917.0 2.00%

Leather 73.9 1334.1 5.54%

Soya 26.8 1162.2 2.31%

Petrochemicals 165.7 802.1 20.66%

Cocoa 238.1 660.6 36.04%

Lead 27.4 93.6 29.28%

Sesame 135.7 88.1 153.97%

Cashew 32.5 46.3 70.15%

Ginger 8.3 16.6 50.11%

Flowers 8.2 19.6 41.75%

Products

Nigeria’s Total

Export ($ mn)

Africa’s Import ($ mn)

Nigeria’s export as a % of Africa’s import

Auto &parts

0.836,002.

50.00%

Textile 0.2 11,664.6 0.00%

Chemicals

1.8 10,697.0 0.02%

Sugar 0.06 6,866.0 0.00%

Rice 0 6,717.0 0.00%

Oil Palm 2.7 4751.2 0.06%

Fertilizer 0 3,731.9 0.00%

Cotton 5.5 3,170.7 0.17%

Beef 0.1 1,553.4 0.01%

Livestock 0 1,017.3 0.00%

Zinc 5.6 555.8 1.01%

Gold 0 578.5 0.00%

Nigeria has identified 35 priority products across its development plans (Zero Oil Plan, 7 Big Wins, Agricultural Promotion Policy, FMITI - Industrial Development Dept).

• 18 of the 35 products are exported by Nigeria and have a demand of $122.7 bn in Africa.

• Nigeria exports $42.9 bn of these products globally. Excluding crude oil and gas, the export value decreases to $1.2 bn.

12 of the 35 products have minimal export value from Nigeria (US$17 million) with a demand of $87.3 bn in Africa.

Priority Product

Auto/Auto parts Soya

Iron/Steel Livestock

Plastics Petrochemicals

Textile/Garment Cocoa

Chemicals Zinc

Crude Oil Gold

Gas Lead

Sugar Sesame

Rice Tin

Rubber Cashew

Oil Palm Ginger

Fishery Flowers

Aluminum Gum-arabic

Fertilizer Cowpeas

Cotton Cassava

Cement Yam

Beef Refined PetroleumLeather

Sources: ITC, NEPC, FMARD, FMITI, MPRFigures in red represent products for which Nigeria’s exports cannot sufficiently supply Africa’s demand


16

• 10 sectors have been chosen as priority sectors for liberalization. These sectors are aligned with the 5 priority sectors of the AfCFTA.

• Of the 36 subsectors under the 10 sectors listed above: 8 subsectors (22.2%) are fully liberalized, 27 subsectors (75%) are partially liberalized and 1 subsector is unbound.

• Nigeria is the 5th largest exporter of services (US$5 billion) and the largest importer of services (US$18.2 billion) in Africa.

• Nigeria’s service exports are only able to address 4% of Africa’s US$121 billion market.

• Nigeria’s trade in transport, travel and other business services account for 86% of total services imports and 76% of exports

• Nonetheless, other large African markets exist for players who seek to export these services. These countries include Egypt, South Africa, and Algeria etc.

-

5

10

15

20

25

US

$ B

illi

on

s Trade in Services (2017)

Export

Import

Nigeria’s Priority Sectors Export ImportAfCFTA Priority

Business Services $0.05bn $5.394bn P

Communication Services $0.28bn $0.43bn P

Distribution Services O

Educational Services O

Financial Services (incl Insurance) $0.36bn $1.35bn P

Health Related and Social Services O

Tourism and Travel-Related Services

$2.54bn $5.79bn P

Transport Services $1.3bn $4.64bn P

Construction and Related Engineering Services

$1.1bn O

Others: Energy-Related and Digital Services

O

AfCFTA Impact Assessment – Findings (Services)Key Findings (Trade in Services)

Sources: ITC, Nigeria’s Schedule of Service Offering for AfCFTA, AfCFTA


The assessment of Nigeria readiness for the AfCFTA highlights challenges within its ability to trade, a dearth in infrastructure and a marginally favourable operating environment

17

Legend

Score (%) Interpretation

0-35 Significant action required (Critical)

36 – 64 Marginal action required

65 and above Ready

Thematic Areas Readiness Area Definition Score %

Trade CapacityProducts, Services and Export Trade

Product and Service Homogeneity 0.73 27

Human Capacity 51.06 51.06

Foreign Market Access 2.4 34.29

Trade Infrastructure

Power Quality of electric supply 1.42 20.29

Road Quality of roads in Nigeria 3.8 54.29

Rail Quality of railroad infrastructure 1.5 21.43

Aviation Quality of air transport infrastructure 3.2 45.71

Ports Quality of port infrastructure 2.8 40.00

Communication Communication 45.91 45.91

Trade Environment

Trade Facilitation Overall Trade Facilitation Index Score 0.82 41.00

Ease of Doing Business Overall Ease of Doing Business Score 0.52 52.89

Cost of Money Access to finance 3 42.86

Enforcement CapacityPhysical Security 3.1 44.29

Internal and External border cooperation 0.83 41.50

Legal Domestic Market Access 3.7 52.86

Computation:▪ Score:

Provided Index Score

▪ %: (Nigeria’s Index Score ÷Maximum Index Score) ×100%

▪ Readiness Score: Average Thematic Area Score

Nigeria’s current state within the thematic areas require certain levels of actions.

Sources: Enabling Trade Index, Global Competitiveness Index, Herfindal Hirschmann Index

AfCFTA Readiness Assessment


S/

NKey Gaps

Impact to

TradeRecommendations

1Low productive capacity to

harness intra-Africa trade

• Develop productive capacity to harness intra-African trade

• Improve capacity utilisation of existing producers

• Develop logistics, power and communication infrastructure in and

around the industrial and service clusters

• Facilitate the completion of the 167 ERGP project

• Expedite the Made-in-Nigeria for Export (MINE) project

which seeks to create Special Economic Zones to attract

global manufacturers to Nigeria

• Conduct further studies to ascertain how much additional capacity

will come on-stream upon completion of the ERGP projects and the

current production capacity of products and services with market

potential across all the states

2Misalignment of products with

Africa’s top demand

• Realign products to match Africa’s top demanded products

• Streamline priorities to a smaller group of high value products such

as, refined petroleum, auto & auto parts, steel, and plastics

3

Reduced preferential market

access for Nigerian products in

Africa

• Achieving preferential market access and most favoured nation

status is critical to realizing the export oriented economic

diversification

4

Low quality infrastructure

capacity

• Expedite the approval National Quality Policy (NQP)

currently at FMITI

• Develop and pass the National Quality Bill

• Fund the NQIP implementation budget (NGN 4.6 billion

over 5 years) and leverage the funding to attract more

donor funding to extend the project

5 Credibility

• Define and execute a strategy to improve its financial credit ratings,

provide low cost financing for the services sector, tackle the scourge

of piracy and promote its image in the international community

Trade CapacityKey Actions for Trade

HighMediu

mLow

Sources: TWG Analysis, UNIDO, NiNAS


Trade InfrastructureKey Findings (Energy)

Nigeria’s power sector lags behind its peers using Access to electricity and Quality of Electricity Supply as measures.

Nigerians and their businesses spend almost $14B USD annually on alternative means generation that is expensive ($0.40/kWh or more), noisy, and polluting.

As at Q3 2018:

• Average power generated in represented 58.7% of the total installed generation capacity

• Actual power transmitted in represented 55.7% of total installed capacity

• Actual power distributed in represented 51.2% of installed capacity

• Inefficient gas supply and limited distribution infrastructure were identified as the biggest constraints across the value chain.Sources: NERC, TCN,

13300

7000 6288

11800

5300 5200

7804

3900 3222

15255

Generation Transmission Distribution Estimated 2025 Demand

Power Supply and Projected Demand

Installed Capacity Available Capacity

Ongoing Projects

Generation Transmission

72 generation

projects with

supply capacity

of ~20,000 MW

56 Transmission

projects split 19

330kv and 37

132kv


Trade Infrastructure (Roads)

Nigeria ranks 93rd out of 136 countries (score of 3.8/7) in terms of availability and quality of road infrastructure on the Enabling Trade Index. Nigeria’s ranking is striking considering that it is heavily reliant on its road infrastructure for trade, due to the limited capacity of other modes of transportation.

The Zero Oil Plan identified two main routes, as the

most important roads for trade as they connect the

raw material locations and the industrial and service

clusters to the ports for export. These are:

• Lakaji corridor (Lagos to Mokwa (A1), Diko (A124), Kano (A2), Jibiya (A9) and

• Port Harcourt to Ngala (A3); and3 connecting routes, namely:

• Road A237 connecting Kano (A2) to Potiskum (A3)• Road A234 connecting Diko (A2) to Akwanga (A3)• Road A121 connecting Shagamu (A1) to Benin (A2)

and Road A232 connecting Benin (A2) to Enugu (A3)

Key Findings (Road)

Sources: National Association of Road Transport Owners, NEPC, Ministry of Power, Works & Housing

• Port

Harcour

t

Calaba

r PortPH

Po

rt

Lag

os

Port

Badagr

y Port

(planne

d)

Key

Export

Roads

Key

Sea

Ports

LEGEND

Red Transport

Corridor

Blue

Transport

CorridorInter

Corrid

or

Linkag

es

Corridor

Infrastructure

Readiness for AfCFTA involves connecting the agricultural centres, industrial and

commercial centres to these major highways


Lack of a centralized source for end-to-end trade information• Various trade information portals exists, but provide information in segments, making

it difficult to determine requirements of trade processes from a singular source.• Countries such as Benin, Cote d’Ivoire, Ghana and Togo, which share same corridor

with Nigeria have implemented single windows.

High turn around of time and cost to import and export• It is easier for Nigerian manufacturers and smugglers to import and export from

Nigeria’s neighboring countries as average costs and time are 58% and 64% above the African average. This is due to:

• practice of physical inspection• wrongly filled forms• Absence of Authorised Operator criteria• Prevalence of irregular payments and bribes at borders, with a score of 1.9 out of 7

(132nd) in the enabling trade index

Low level of Customs cooperation with neighbouring countries• The absence of a harmonized data requirements, computer language and common

facilities between Nigeria and its neighbouring countries reduces its capacity to facilitate trade. This is further compounded with the poor implementation of joint border controls.

Nigeria’s key issues with trade facilitation centre on the availability of trade information, export/import time and cost and reduced cross-border cooperation.

Country TFI Score*

Nigeria 0.82

Co

mp

ar

ato

r

Co

un

trie

s

Egypt 1.19

Morocco 1.41

Kenya 1.21

South Africa 1.50

Ghana 0.90

Cote d’Ivoire 0.70

Ne

igh

bo

ur

ing

Co

un

trie

s

Benin 0.62

Cameroon 0.96

Chad 0.32

Niger 0.37

* - Maximum score is 2

Trade Environment

21

Key Findings (Trade Facilitation)

Sources:


Trade Environment

22

Indicator Nigeria Egypt KenyaCote d’

IvoireGhana Morocco S/Africa

Access to finance

(Average of A-C)3 4.1 4.1 3.3 3.5 3.7 5.3

A. Financial services

meeting business

needs (1-7)

3.7 4.5 4.5 3.7 4.0 3.9 6.0

B. Affordability of

financial services (1-

7)

2.5 3.8 3.5 3.5 3.2 3.6 4.6

C. Ease of access to

loans (1-7)2.6 - 4.3 3.7 4.0 3.6 5.2

Key Findings (Cost of Money, Monetary and Fiscal Policies)

• The AfCFTA does not involve a unified regional currency arrangement and as such Nigeria’s domestic monetary policy is not significantly impacted.

• The independence of monetary and fiscal policy, external reserves and exchange rate makes it more likely for Nigeria to adjust its policies in response to any possible risk in joining the AFCFTA.

• In the event of exchange rate volatility which can be a constraint to realization of the broad objectives of the AfCFTA, both traditional and non-tradition instruments can be deployed to achieved desired macroeconomic balance.

• Nigeria’s existing monetary policy results in one of the highest rates amongst comparator countries. This impacts access to finance and by inference the cost of money.

• Nigeria lags behind comparator countries in terms of access to finance (cost of money) on the Enabling Trade Index. To compete more favourably, Nigeria needs to target single digit interest rate.

14

96.75

17.75

2.254.5

22.5

5.252.5

14

5

0

17.8

13.7

10.4

18.2

5.8 5.3

Nigeria Kenya SouthAfrica

Egypt Morocco Cote d’Ivoire

Comparative rates as at 30 November, 2018

Monetary Policy Rate Cash Reverse Ratio

Sources: TWG Analysis, Enabling Trade Index, CBN


Implementation Approach

23

Economic Diplomacy

• Enforce treaties and trade agreements

• Enforce trade rules

• Drive foreign investment

• Gather trade intelligence

• Drive trade support

Quality Infrastructure

• Approve and operationalise

the National Quality Plan

Governance & Policy Coordination

• Develop and implement national trade policy

• Operationalize trade policy governance council

• Manage trade policy performance

Growing Intra

African Trade with

AfCFTA

Trade Facilitation and Ease

of Doing Business

• Align with ongoing

programmes

Policies, Laws &

Regulations Update

• Progress all critical

AfCFTA related bills,

policies and

regulations

Border Enforcement

• Progress short medium

and long-term border

enhancement initiatives

Trade Logistics Infrastructure

• Deliver critical trade infrastructure

projects and facilitate the resolution of

issues and challenges

Production, Services and Trade

Capacity Growth

• Facilitate new investment

• Fast track development agenda

provisions (e.g. food security,

priority products and services)


Role of the private sector

Private sector – major engine for

sustainable economic growth and

poverty alleviation

• employs 90% of working age

population

• accounts for 80% of production

• contributes 66% of investment

• provides 75% of total credit(Source: Tralac)

Private players

• Multinational and large companies

(5%)

• SMEs (95%)(Source: Tralac)

Private sector companies objectives

• Maximize shareholders value

• Maximize customer value

• Maintain social license to operate

1. Leverage AfCFTA to drive value

• Invest in production and service capacity to trade in

Africa

• Grow cross border trade capacity

• Grow forward and backward linkages

• Leverage national, regional and continental

partnerships (for economics of scale, labour, capital)

2. Drive advocacy and stakeholder engagements to

galvanise the business ecosystem

• Engage all sectors nationwide

• Engage counterparts across the continent

(Afrochampion initiative)

3. Grow research and intelligence capabilities

4. Grow strong partnership with government

• Trade mission

• Match making business

• Progress and outcome monitoring

• Transactions (e.g. M&As)

• Implement the agreement (e.g. tackle NTBs, test

trade remedy rules, flag obsolete regulations/laws)

Private sector profile Role on AfCFTA Implementation


Thank You

potential impact of the afcfta and the strategic

Documents