How ready are Nigerian manufacturers for CET?

On December 15, heads of states of the Economic Community of West African States (ECOWAS) converged in Abuja to formally launch the much -awaited Common External Tariff (CET).

Among other upsides, the regime, which will come into effect on January 1, 2015, is expected to usher in a common regional market and free trade zone, while maintaining uniform tariffs among 15 member states in the sub-region.

Proponents of CET believe the regime will create spike in turnover, due to a larger domestic market involving over 350 million consumers in the sub-region. They say it has the capacity to boost member states’ industrial sector through higher economics of scale, while leading to increased production and productivity.

Initiators of this scheme point to the European Union(EU), whose integration has resulted in member states’ higher economic and productivity growth, enhanced intra-regional exports, higher foreign direct investment and job creation, among others, saying that such amalgamation in West Africa can replicate the successes of the EU on the region.

Significant downsides of this tariff regime include loss of national trade policies and identities; low level of tariff which can lead to dumping and de-industrialisation; and loss of revenue accruing to the government from tariff.

But beyond the prons and cons of this regime lies a question: How ready are Nigerian manufacturers, who will be the real players in the regime?

Tunde Oyelola, chairman, Manufacturers Association of Nigeria Export Group (MANEG) and vice-chairman of PZ Cussons Nigeria plc, answered this question. Oyelola told Real Sector Watch that manufacturers, especially exporters, were well prepared to tap into the upcoming burgeoning market.

According to him, common tariff across the West African region would help to eliminate smuggling, which had affected local manufacturers negatively over the years.
“If you have the same tariff, why should you have a problem in Togo or Benin Republic?” he queried.

“Another good thing is that it is the first step towards a unified customs union. We have over 170 million people; we have the oil; we have manufacturing here, so we will stand to gain more. There are 360 million people in the region, meaning we have a very big market for our products. Nigeria is well-placed because between 60 and 70 percent of factories in the sub-region are here,” he said.

However, he was quick to point out that local manufacturers were still discussing with the Federal Government and ECOWAS on the need to clearly examine 241 items on the CET agreement to ensure that the regime did not erode few efforts made recently in the real sector. He said local manufacturers were very conscious of the (positive and negative) effects of the regime.

Findings have shown that Nigerian manufacturers are conscious that CET could usher in the Economic Partnership Agreement (EPA), involving the European Union and ECOWAS.

Manufacturers interviewed by Real Sector Watch believed that the EU had always wanted a common trade or tariff union that would make it easier for its member states to swoop on the West African market without many bottlenecks.

They are wary of EPA as it is an agreement between two unequal halves. Nigerian products cannot, by any means, compete with European products, they say, adding that signing the EPA agreement could lead to closure of many manufacturing firms, lay-offs and unnecessary exposure of Nigerian economy to international vagaries, at a time when the need to diversify the economy is most paramount due to dwindling oil prices.

It is worthy of note that while other ECOWAS countries have accepted and signed the EPA, Nigeria is yet to fully consent to it, due to protests and appeals by manufacturers.

Frank Jacobs, president, Manufacturers Association of Nigeria, said the implementation of CET and EPA could throw up fresh challenges that would further complicate the current lacklustre performance of the manufacturing sector.

“No doubt, the Nigerian economy, particularly the manufacturing sector, would be challenged, as our markets would be flooded with products produced under favourable business environment at a price that our products may not be able to compete,” he said, during the annual general meeting of MAN Apapa branch.

On its part, the Lagos Chamber of Commerce and Industry (LCCI) said it welcomed the policy as it would advance the cause of economic integration of the West African sub-region.

But the chamber has also pointed out that Nigerian manufacturers are not yet ready for it, owing to obvious bottlenecks.

“The implications of CET for the economy, particularly the manufacturing sector, will be profound,” said Muda Yusuf, LCCI’s director-general.

“Currently, the Nigerian manufacturing sector suffers significant competitiveness issues which include high energy and funds costs, high regulatory, ports and logistics charges,” he said.

He therefore suggested some immediate policy responses such as scrapping of import duty on raw materials, VAT, machineries and other vital input for manufacturing, as well as strong anti-dumping measures to protect local industries.

ODINAKA ANUDU