Thursday, December 14,
2017 / 9:49AM /FBNQuest Research
The FGN will not accept an Economic Partnership Agreement (EPA) with the EU but has this week signed a joint declaration on economic cooperation with the European Free Trade Association.
It would be a mistake to over-egg the extent of the FGN’s commitment. The association has four members, the largest of which is Switzerland, and might under some circumstances be joined by the UK. Also, the FGN has signed a declaration, and not a binding treaty with the association.
The EPA has been on the table since August 2014. The FGN has therefore had plenty of time to scrutinise the agreement including the attached €6.5bn package available from the EU as a sweetener for members of the Economic Community of West African States (ECOWAS). The finance minister under the previous administration, Olusegun Aganga, was opposed to the deal on offer.
The EPA would open EU markets with full access from day one while ECOWAS/Nigeria would open 75% of their/its markets in stages over 20 years. It may look attractive, particularly when we include the sweetener.
The opposition in Nigeria is led by the Manufacturers Association of Nigeria (MAN). It argues that China and India have prospered by nurturing their manufacturing sectors, and that Nigeria should go down the same route until it can live with the competition. The World Bank Group’s Doing Business 2018 has Nigeria climbing by 24 places (Good Morning Nigeria, 02 November 2017) but still falling short in some important areas such as power supplies.
Smaller economies without large domestic markets are more amenable to EPA-type arrangements in our view because realistically they will not develop large and diverse manufacturing sectors.
The MAN calls for further incentives to attract FDI. We feel that existing policies such as pioneer status incentives and special economic zones, if well managed, could make Nigerian manufacturing able to withstand global competition.
In contrast to the EPA, the FGN does support the AU’s proposed Continental Free Trade Area. Ethiopia is one of seven countries to have stated its opposition to the area at a meeting in Addis in July, insisting that it would open its doors to the area in stages. This stance is not very different to the MAN’s on the EPA. Perhaps the FGN feels that the manufacturing sector can live with competition from the rest of Africa.
We might conclude, therefore, that the FGN is taking a “softly, softly” position on international trade agreements, and is biding its time.