President Buhari’s go-slow approach on African Continental Free Trade Area (ACFTA) appears to be the right approach. President Buhari have so far refused to sign ACFTA and instead inaugurated a committee to access the impact of Nigerian membership in the free trade pact. More study and discussion of the Free trade agreement is very important in order to ascertain if it will be good for Nigeria in the long term.
There have been instances of nations joining multi-lateral and multi-national trade agreement with much fanfare and emotion only to realize that it is a bad idea for their country. There is consensus among Nigerians from all works of life in recent years that Nigeria over reliance on oil revenue must come to an end because it will not be sustainable in the long run especially when 40 to 50 percent of the federal revenue is allocated to domestic and international debt servicing. Nigeria cannot develop without diversification of the economy.
The only viable way to diversify Nigerian economy is for Nigerian businesses to go into manufacturing and agriculture. Government should only encourage and create conducive environment for businesses to go into the two sectors, but they should not own any share in the corporation because government owned corporations have failed Nigerians in the past, due to inefficiency, corruption and neglect. Federal government owned four refineries is operating at 20 to 30 percent capacity. Nigerian government owned Steel complex at Abeokuta where billions of dollars was squandered never got off the ground. National Electricity Power Authority (NEPA) was run into the ground by the management and employees. Government owned textile mills scattered around the country have all gone bankrupt. Government owned banks were all sold and some liquidated. So, government should not own any share in any of the businesses.
Nigerian businesses have realized that manufacturing is the way to go and are moving very fast in establishing manufacturing businesses. Today in Nigeria, we have Innoson Car Manufacturing company, various car Assembly companies, thanks to stiff tariff imposed by Nigerian government on foreign made cars. The tariffs are too stiff, but it has protected local car manufacturers. Dangote companies is now building massive oil refinery along with smaller modular refineries that are been constructed by other companies which will provide enough refined petroleum for domestic need, so Nigeria government will not have to spend scarce foreign currency on importation of refined petroleum. Nigerian government will save billions of dollars when goods are manufactured in Nigeria.
How will ACFTA affect young Nigerian manufacturing companies? The impact of ACFTA on Nigerian nascent manufacturing companies could be devastating. What will prevent foreign owned manufacturing companies from setting up manufacturing plants in neighboring countries and then ship fully manufactured products into Nigeria which the federal government would not have allowed them to import under the current tariff regime. We could see a situation where Nigeria owned nascent manufacturing companies could go out of business in droves and some could shut down completely since they are not in the position now to compete with foreign manufacturers especially western European manufacturers.
The impact of ACFTA on Nigerian manufacturers should be thoroughly studied before President Buhari will consider signing the trade pact if it is in Nigerian interest. Nigeria government could demand amendment of certain parts of the agreement they deem detrimental before they could sign. Nigerian government should work away if areas they request amendment to be made are not done. It is not surprising that Manufacturing Association of Nigeria are against the AFCTA.