In a newspaper report titled “Nigeria rejects EPA over $1.3tn Revenue Loss” (Daily Independent of 15/8/2014, Pg. 30), the Director General of Manufacturers’ Association (MAN), Mr. Remi Ogunmefun commended the Minister of Trade and Industry, Mr. Olusegun Aganga for “reiterating government’s commitment to pursue the implementation of the Nigerian Industrial Revolution Plan” which accommodates “local content policies and transformation in the agricultural sector among others.” The MAN DG happily noted that the Minister was categorical, in affirming that, “based on the mission of Government in these areas, it is inconceivable that government will ignore national interest, particularly, the genuine concerns expressed by stakeholders in the country and go ahead to sign the Economic Partnership Agreement (EPA).”
Under the terms of the EPA, “the European Union will immediately offer the 15 member Economic Community of West African States, full access to it markets. In return, ECOWAS will gradually open up 75 percent of its markets, with its 300 million consumers, (including Nigeria’s 170m) to the European Union (EU) over a 20-year period. In addition, the EU would also offer a package valued at about EU6.5bn ($8.94bn) over the next five years to help ECOWAS cushion the effects and costs of integrating into the global economy (see “F.G. seeks review of economic partnership agreements” – Punch Newspaper of 1/9/14, Pg. 36).
Nonetheless, the Manufacturers’ Association sees the EU’s appetising carrot as a dagger directed to the heart of Nigeria’s industrial sector. The Association therefore warned that signing the agreement in its present form would impact negatively on local manufacturing and result in shutdown of industries with heavy job losses, as a result of unfair competition. The immediate past President of MAN, Chief Kola Jamodu also noted that “no country can develop without protecting its industries”, and further cautioned that “Nigeria stands the risk of having its market flooded by European goods with resultant negative effect on local industries and the economy, if the EPA is approved in its present form.”
The Minister of State for Finance, Ambassador Bashir Yuguda also echoed above concerns at a recent interaction with MAN, when he stated that “government is actively encouraging the African Union and ECOWAS to reconsider endorsing the EPA in its current state.” Yuguda declared that “the government is critically assessing options that will improve competitiveness and ensure that local manufacturers are adequately protected; consequently, the Federal government was in the process of negotiating a strong Common External Tariff agreement with its ECOWAS partners to protect strategic industries”.
Nonetheless, the proponents of the EPA argue that the object of the ECOWAS Common External Tariff (CET) is to “build bridges of development, investment and trade cooperation between members of the Community and also between ECOWAS as a trade block and other such regional or third party trade and economic union; furthermore, the Pro-EPA lobby are also optimistic that the operation of the Common External Tariff regime would create a level playing field for imports into our sub-region and thereby significantly reduce the spectre of smuggling and re-export of third party imports into Nigeria as a result of the more favourable duty differentials of our neighbours. It is also speculated that the product of CET will be reflected in reduction of import duty leakages and contraction of opportunities for bribery and corruption at our ports.”
Despite these potential benefits, the Manufacturers’ Association is however, uncomfortable with the adopted categories of customs duties under the CET; for example, according to the classifications, essential social commodities including pharmaceuticals, books, newspapers, etc attract zero percent duty; basic goods and raw materials attract 5 percent, while intermediate goods attract 10 per cent; furthermore; finished consumer goods attract 20 percent duty, while an additional tariff band of 35 percent was created on the insistence of Nigeria for those goods currently under our Absolute Import Prohibition List.
Nonetheless, the representatives of Nigeria’s real sector recognize that it will be difficult to properly evaluate how appropriate these categorizations are because of the fairly loose class definitions adopted. For example, “Nigeria has a growing pharmaceutical sub-sector which could become uncompetitive with zero percent tariff for drugs and medicaments imports from those countries with lower cost of funds and supportive infrastructure.”
Furthermore, MAN is equally concerned that “food and agricultural imports from developed countries may also restrain our attempts to be self-sufficient, for example, in rice and maize production.”
Additionally, the manufacturing community noted that although the tariff rate for raw materials and production machinery has been set at 5 percent, it would probably be more appropriate for such imports, for which there are no potential local substitutes, to also attract zero percent duty, as this would further reduce production cost and cushion the adverse impact of high cost of funds and power on made in Nigeria products.”
Similarly, manufacturers expect that “it will be challenging to appropriately, finely compartmentalize imports under the 10 percent and 20 percent tariff classifications, as what may appear, for example, as an intermediate product could well be a finished product;” for example, an automobile tyre maybe considered as an intermediate good by a vehicle assembly plant, but for the car owner, it is clearly a finished product and vice versa. Presumably, the goods under Nigeria’s current import prohibition list may form the bulk of items under the maximum duty category of 35 percent, since the 45 currently listed items under prohibition comprise sectors in which Nigerian manufacturers already have a foothold with possibility of further growth that would impact positively on employment and ultimately on public finance.
The manufacturers are also obviously unimpressed by the promised EU package of about $9bn to the 15 members of ECOWAS over a 5 year period, as MAN estimates that the Nigerian Treasury could lose over $1.3tn revenue from a significant reduction in import duties if the EPA is endorsed in its present state.
Furthermore, MAN’s opposition to EPA is also premised on the reality that our different levels of economic strength and industrialisation would put Nigeria and other ECOWAS members at a trade disadvantage, in a manner that is sadly reminiscent of the one sided terms of the slave trade era.
The above, notwithstanding, MAN is also aware that it is hard to find countries within the African continent that have achieved unusual industrial transformation just by virtue of its membership of a regional trade group such as ECOWAS. In reality, Economic and industrial growth according to the Association are the products of appropriate monetary and fiscal frameworks that accommodate lower single digit interest rates, low inflationary rate, appropriately priced, stable and sustainable exchange rate regime with supportive social and industrial infrastructure.
Regrettably, MAN noted that these features have remained alien to the Nigerian economy and may negate the expected benefits of the ECOWAS Common External Tariff.
Besides, we may be forgiven to ask why the EU is actively promoting free trade with industrially weaker nations in ECOWAS, while it actively denies free movement of labour within the same partnership.
Source : Independent