Manufacturers shift focus to cross-border issues
As the Common External Tariff (CET) and the Economic Partnership Agreement (EPA) regimes draw near, Nigerian manufacturers are increasingly drawn to cross-border issues as well as on-going modifications in trade rules happening across West African borders.
“Our attention is now diverted to how best we can gain from CET and what best can be done to ensure that we maximise gains, rather than incur costs, from EPA. We are constantly engaging the Federal Government to ensure that the rules do not discourage exports,” said a top official in a manufacturing export firm that deals in food and beverages.
CET is a trade agreement among the 15 member-states of the Economic Community of West African States (ECOWAS), aimed at liberalising trade, having a common market and entrenching uniform tariffs across the sub-region. When implementation eventually begins on January 1, 2015, tariffs charges will no longer be unilaterally undertaken by individual countries, unless they are approved by ECOWAS.
Information from the Manufacturers Association of Nigeria (MAN) shows that the regime will also eliminate Import and Export Prohibition Lists of individual countries.
The CET comes with five tariff bands. Essential goods are to attract 0 percent rate, while basic raw materials and capital goods will attract 5 percent rate. 10 percent rate is slated for intermediate goods; 20 percent for final consumer goods, and 35 percent for specific goods for economic development.
In the same vein, West African and European Commission (EC) negotiators reached a major breakthrough on trade facilitation on January 24, 2014. Details of the agreement show 75 percent of trade is to be liberalised over the next 20 years, while the EC will stop all export subsidies to West African countries.
The EC agreed to finance the development of the regime, under the EPA Development Programme (PAPED), with €6.5 billion for the period 2015-2019. While CET has been agreed and its implementation expected to sail through, EPA is yet to fully receive a nod from the Federal Government as key stakeholders are desirous of making their input to ensure that the business community is not boxed into a corner when it is finally adopted.
BusinessDay’s Real Sector Watch can confirm that MAN, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Federal Ministry of Trade and Investment and other key stakeholders are in constant deliberation over the details of the two key regimes, with the EPA constantly dominating the discussion floor.
Recently, Ngozi Okonjo-Iweala, minister of finance, promised local manufacturers that the government was looking into the details of EPA and would ensure no stone was left unturned before giving its assent.
The EPA is garnering the attention of manufacturers because most of them say it is an agreement between two unequal halves. For instance, most parts of Europe have strong manufacturing sectors that make high contributions to the Gross Domestic Product (GDP). Germany’s manufacturing sector, for instance, contributes 21 percent to the GDP (World Bank 2010), while Italy’s is 17 percent. Holland’s is 13 percent, while Spain’s is 13 percent. Many of these countries are also well-known automobile, electronics manufacturers and are have diversified economic base, driven by hi-tech. In contrast, Nigeria’s manufacturing sector’s contribution is 4 percent, while the country remains largely undiversified.
Recent report obtained from MAN Export Promotion Group (MANEG) on Cobalt’s January to June 2013 non-oil exports data showed that, of $1.52 billion non-oil exports within the period, manufacturing recorded only $0.285 billion, while other commodity exports reported a whopping $1.23 billion. By extension, manufacturing’s share was merely 19 percent of the total exports.
“Currently, the Nigerian manufacturing sector suffers significant competitiveness issues, which include high energy and funds costs, unreasonable regulatory and port related charges, amongst others,” said Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), in an e-mail to BusinessDay.
“These are issues to worry about especially at a time when unemployment has become a major problem for the economy and when CET is approaching speedily,” he added.
ODINAKA ANUDU