Study Shows Nigeria May Be Major Loser – Oyejide
A professor of Economics at the University of Ibadan and the Chairman, Centre for Trade and Development Initiatives, Bodija, Ibadan, Ademola Oyejide, has conducted a study on an analytical comparison between two major countries in Africa yet to sign the African Continental Free Trade Area Agreement – Nigeria and South Africa – and concluded that Nigeria would be a bigger loser in the free trade agreement than South Africa.
Oyejide stated this during the Annual General Meeting of the Manufacturers Association of Nigeria, Lagos Branch on Thursday,.
While presenting a paper as the guest speaker at the event tagged, “African Continental Free Trade Area Agreement: Impact on the Nigerian Manufacturing Sector, Oyejide drew a comparison between the results of the AfCFTA-induced changes in the real income, tariff, revenues and terms of trade in South Africa and Nigeria.
The professor said that while the changes in real income of South Africa would be 0.7 per cent, Nigeria would be -0.4 per cent; for tariff on revenues, South Africa would have 5.9 per cent while Nigeria would have -16.7 per cent; in terms of trade, South Africa would record 1.2 per cent while Nigeria would see a change of -0.2 per cent.
He also analysed the result of AfCFTA-induced changes in real wages, stating that in unskilled real wages in Agriculture, South Africa would have 0.93 per cent; Nigeria, – 0.54 per cent; unskilled real wages in non-agriculture, South Africa, 0.56, Nigeria, 0.12; skilled real wages, South Africa, 0.80 per cent, Nigeria, 0.42 per cent.
Oyejide linked the results to the differences in the features of the two economies. For instance, he said Nigeria was more protectionist in its trade policy than South Africa. And in order to achieve the post-AfCFTA target, the country would have to reduce its tariff and this in turn would put a downward pressure on the economy.
He said that Nigeria’s import-export exposure structure was not the same as that of South Africa, adding that South Africa’s import and export structure was better diversified than that of Nigeria that was heavily dependent on imported food products, in spite of its heavy protection of the agricultural sector.
Import bans and tariffs were routinely used by Nigeria to manage this external dependency and any AfCFTA-induced tariff change could destabilise this delicate management process, the don concluded.
He added, “South Africa does not face this difficult challenge. Nigeria’s export structure is dominated in a near absolute sense, by the oil and gas sector. The periodic swings in crude oil prices have constituted major triggers for the oscillating growth and decline of the Nigerian economy.
“By comparison, South Africa’s trade in industrial products is dominated by intra-industry trade in similar products, which tends to exhibit much less swings in price changes. As a result, AfCFTA-induced changes are much less likely to challenge the growth trajectory of the economy of South Africa.”
Oyejide recommended that the negotiation mandate should include phasing the liberalisation process, offensive agenda, defensive agenda and balance of concessions.
He advised Nigeria to argue for the implementation of the trade liberalisation in the AfCFTA through linear tariff cuts in the context of three phases, adding, “Each of these phases should cover 30 per cent of tariff lines that are subject to liberalisation and last five years. In other words, tariff rates in phase 1 should be reduced by 20 per cent each year over the first five year period to zero at the end of the first five years.
“Phase 2 tariff should follow this liberalisation schedule to reach zero at the end of 10 years; and phase 3 tariffs, following a similar schedule, should reach zero at the end of 15 years. Thus, the goal would have been achieved on time following this staggered sequence.”
