AfCFTA In Danger Over Rules Of Origin

AfCFTA In Danger Over Rules Of Origin

·  Nigeria’s preparation is inadequate – LCCI

·  Customs await update from National Action Committee

By Kenneth Jukpor

Three years after the signing of the African Continental Free Trade Area (AfCFTA), the region and top countries like Nigeria have shown little signs of making the $3.4billion trade market a reality as the rules of origin remain a mystery.

Despite being the largest free trade area in the world since the World Trade Organization (WTO) was established in 1995, AfCFTA has only recorded minimal trade with several nations yet outline the template for the implementation across frontiers.

While Ghana made its first export under the regional framework, setting the pace for other countries, the nation is one of the few countries with a ready border and custom facilities that meet the AfCFTA’s trade terms.

Four months after the commencement of the free trade area, AfCFTA is yet to clarify the rules of origin which is a major determinant in deciding what governs the trade and several nations including Nigeria may not have concluded action plans by the end of the year.

Although the Presidency set up a National Action Committee on AfCFTA which was further broken down to various sectors such as transportation, no clear position has been developed by the committees despite the numerous meetings, seminars and most recently dinners for the AfCFTA champions in Nigeria.

There are signs that the realization of the regional trade framework may go down the lane as similar failed projects such as the Economic Community of West African States, ECOWAS, Trade Liberalization Scheme (ETLS), African Growth and Opportunity Act (AGOA) a United States Trade Act; beyond the continent, another failed platform was the Free Trade Area of the Americas (FTAA).

Speaking at a summit organized by Zenith Bank with the theme: “Nigeria’s Economic Prosperity: The Role of Intra-Regional Trade and Non-Oil Export Business” last week, the Secretary General of AfCFTA, Wamkele Mene, expressed as much uncertainties as his assurances.

Mene stressed that the AfCFTA Secretariat will ensure that the trade agreement doesn’t make any nation a dumping ground for goods subsidized or traded under the platform, but would only explain that these rules are still being developed when the framework took off January 1, 2021.

Creditably, Mene stressed that AfCFTA was not only targeting an improvement in volume of regional trade but also the quality of traded products with emphasis on industrialization, protecting African intellectual property, removal of undue competition, among others, however, the tool to execute this is still in the offin.

His words: “We must tackle Africa’s industrial deficits. If we learnt anything from COVID-19, it should be not to be over reliant on the export of primary commodities. Africa needs to adapt to industrialization to create jobs for the youth because 42% of the continent’s youth live on less than $2 per day. Only 12% of African youths are in paid employment earning wages. Although most African youths have become entrepreneurs, many lack capabilities to sustain their businesses. This is another opportunity to reflect on intra-African trade and non-oil exports as we explore ways to improve the quality and quantity of such goods in Nigeria.”

 “Trading started under the AfCFTA on the 1st of January, 2021. AfCFTA is the world’s largest bloc by the number of participants and the aim is to boost 97% of trade over the next 14 years at zero duties. Today, 81% of products are currently traded under preferential terms since January 1st but the remaining 19% will be concluded by June 2021.”

Speaking on behalf of Nigeria Customs Service (NCS) at the online summit, the Deputy Controller, Administration, Ogun 1 Command, DC Dera Nnadi stressed that the major impediment to AfCFTA was the undefined concept of the rule of origin.

Nnadi noted that the Trade Facilitation Agreement (TFA) already signed by Nigeria gives the nation a platform to carry out AfCFTA trade, adding that “the only thing that needs to be added is to streamline the rule of origin.”

“What are those items that are made in Africa to be traded under AfCFTA? What percentage of local content on a product qualifies it for such privilege? Under ECOWAS ETLS, this percentage is pegged at 40 percent. AfCFTA has to specify what percentage will be adopted for the regional trade. If the only input in a certain product from an African country is just the packaging, should that qualify as made in Africa? These are issues that should be addressed under the rules of origin. If we say apples are coming from South Africa, were they grown in South Africa? If a chair was imported from Spain or China to Morocco and later exported to Nigeria; should such a commodity enjoy free trade under the agreement?”

He, however, charged traders and importers to adopt proper documentation, while he encouraged more industry players such as freight forwarding groups to brainstorm and develop answers to the uncertainties posed by AfCFTA.

According to him, it isn’t appropriate for stakeholders to only condemn the federal government for numerous challenges without making efforts to proffer solutions.

When contacted, the Director General of Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf lamented that Nigeria’s preparation is inadequate compared to Ghana and South Africa that have made their submissions to AU and the AfCFTA Secretariat.

His words: “The preparation is on in Nigeria, but most of this information is not available whereas some other countries have concluded theirs. Every nation ought to file some documents at the African Union (AU) and African Continental Free Trade Area (AfCFTA) as to what goods will be on the sensitive list and what goods will be on the tradable list. Some countries like Ghana and South Africa have concluded this process. Our preparation for AfCFTA is not adequate, we’re still struggling with a lot of preparatory arrangements. There are still several unanswered questions as to the classes of goods to enjoy AfCFTA trade or be prioritized under the regional trade area.”

Meanwhile, the Co-Chairman, National Action Committee on AfCFTA for Transportation, Mrs. Funmi Folorunsho told MMS Plus that the Committee recently concluded the AfCFTA Implementation Engagement Series for the Road and Rail sub sectors.

AfCFTA, which has a N19million budgetary provision for its implementation in the Ministry of Transportation budget, has become a tool for numerous seminars, courtesy visits and state government calls without corresponding actions on the burning issues.

Although the Ministry of Trade’s budgetary provision for AfCFTA remains unknown, trade experts have expressed worry at the slow pace of engagement with producing states and regions that could be accessed via States chambers of commerce and regional shippers’ associations.

Nigerian Government, however, has initiated efforts to establish a Trade Remedies Authority to enforce rules of origin and tighten borders against fraudulent invoicing for AfCFTA trade.

The Minister of Industry, Trade and Investment, Otunba Adeniyi Adebayo, made the disclosure at a recent dinner organized by the Secretariat of the AfCFTA National Action Committee in Lagos.

According to the Minister, the proposed agency will also automate the process for managing exporters and product registration.

Meanwhile, Nigeria Customs Service (NCS) says it is still awaiting information from the National Action Committee on the list of duties and charges waived for liberalized goods under the regional trade agreement.

Customs Public Relations Officer, Joseph Attah, reiterated this during a chat with our correspondent last week, stating that; “it pertinent to inform the public about steps which must be taken to enable the smooth and full implementation of AfCFTA”.

Attah noted that instead of proceeding in a chaotic manner, Customs as policy implementer understands the importance of spelling out the roles and responsibilities of all parties in the agreement and the conditions attendant on its implementation.

His words, “NCS acknowledges the transformational impact this agreement portends for businesses within the continent in general and Nigeria in particular and are fully committed to its success. However, the Service recommends that each member country should have a representative in the continental chamber of commerce to ensure transparency within the body thereby generating confidence in the system.”

“This, in our view, should be complementary to the activities of the various chambers of commerce of each country in the region. While awaiting clear directives concerning tariffs for all goods covered by this agreement, we want to assure the public of our preparedness to fully deploy our services at the shortest notice. Our desire is to imbue trust in the system while guaranteeing the economic safety and wellbeing of businesses within the country.”

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