Nigeria struggling to harness AfCFTA potential over poor infrastructure

In this piece, ANOZIE EGOLE looks at how poor infrastructure, including logistics, may hinder Nigeria from fully benefitting from the African Continental Free Trade Agreement

The African Continental Free Trade Agreement, which Nigeria is a signatory to, promises to be a transformative step for intra-African trade, aiming to create a single market for goods and services across 54 African countries.

As the continent’s largest economy, Nigeria’s participation in AfCFTA is critical not only for its growth but also for the initiative’s overall success. However, despite its potential benefits, Nigeria faces significant challenges in fully capitalising on AfCFTA. From infrastructural deficits to regulatory bottlenecks and inadequate trade facilitation mechanisms, the country’s ability to maximise the opportunities of the free trade agreement is threatened unless urgent reforms are made.

One of the primary barriers to Nigeria’s effective participation in AfCFTA is its poor infrastructure, particularly in key sectors such as transportation, logistics, and energy. According to the World Bank, Nigeria ranks 168th out of 190 countries in ease of trading across borders, a glaring indication of the hurdles businesses face in moving goods and services efficiently within the country.

In Nigeria, transportation networks are fragmented, and inadequate road, rail, and port facilities contribute to delays and higher business costs.

According to a 2020 report by the Nigerian Ports Authority, more than 50 per cent of containers in the country experience significant delays due to logistical inefficiencies.

The lack of modern, well-maintained transport infrastructure not only raises the cost of trade within the country but also limits its connectivity to other African markets.

Intra-regional trade under AfCFTA requires smooth and efficient cross-border transportation routes, but Nigeria’s rail and road networks are largely insufficient. These deficiencies are compounded by the high costs of energy, another critical component for trade facilitation. Without urgent reforms in these areas, Nigeria risks losing out on the potential benefits of AfCFTA as other African countries improve their infrastructure.

At a recent event in Lagos, the President of the Nigerian Indigenous Shipowners Association, Mr Sola Adewunmi, disclosed that the countries do not have the needed facilities to benefit from the agreement.

“Because when you have those goods and there are no means of transporting them, then what is the essence of having them? And we shipowners keep on asking ourselves how prepared we are for this task are, because we realise that we didn’t have the facilities to harness AfCFTA benefits.

“I hope that we use the opportunity of this interaction to speak to the authority, to let them know that Nigeria as a nation if we wants to benefit from AfCFTA. We must get prepared in terms of acquisition of new vessels to suit those purposes,” he concluded.

Stakeholders have opined that another key challenge for Nigeria’s participation in AfCFTA was the complex and inefficient regulatory environment that businesses must navigate.

Challenges

The World Bank’s Doing Business Report for 2020 ranked Nigeria 171st globally for the ease of starting a business, reflecting the regulatory hurdles faced by entrepreneurs and traders. Despite the introduction of the National Single Window, reports indicate that businesses often experience significant delays due to inefficient data processing and human errors. These bottlenecks increase the cost of trade and reduce the country’s competitiveness on the continent.

Moreover, the lack of a unified regime within the Economic Community of West African States, to which Nigeria belongs, complicates the process of aligning with AfCFTA’s objectives. AfCFTA aims to harmonise trade tariffs and reduce non-tariff barriers. For Nigeria to align with these objectives, it must overhaul some of its processes and improve transparency.

Adewunmi complained that many investors in Nigeria were losing money daily due to poor government policies.

“Every day our fortunes keep on dwindling, dwindling in the sense that people are losing money due to bad policies, due to inadequate funding,” he said.

According to Adewunmi, shipping is a specialised trade and for indigenous shipowners to compete with the big shipping nations, there is a need to give some sort of incentives.

“I can’t imagine a Nigerian shipowner saying he wanted to compete with somebody that is getting a loan at a better rate,” he noted.

A former Vice President of the Association of Nigerian Licensed Customs Agents, Dr Kayode Farinto, stated that for AfCFTA to succeed, government agencies should prioritise trade facilitation even when there is pressure on revenue generation.

He added that in logistics management, the nation’s maritime industry had not fared well.

“This is because logistics entails the involvement of a multimodal transport system but our reliance on the road alone is a stumbling block and a barrier to the free flow of trade. The Ministry of Marine and Blue Economy needs to liaise with the Ministry of Trade either on private party agreement or take it as a core responsibility to ensure that our over-reliance on the road is stopped,” Farinto said.

While AfCFTA is designed to boost the trade of goods, the reality is that Nigeria’s industrial sector is not sufficiently developed to meet the demands of an open continental market.

A report by the National Bureau of Statistics showed that the contribution of the manufacturing sector declined by 20.95 per cent in Q2 2024 when compared to the same period in 2023. The NBS report also showed that the sector’s contribution declined from 16.04 per cent in December 2023 to 12.68 per cent in June 2024.

The country remains heavily dependent on oil exports, with petroleum accounting for over 80 per cent of total export revenue. Non-oil exports, such as agricultural products, textiles, and manufactured goods, are not competitive enough in terms of quality or volume to meet the demands of other African countries.

One of the major reasons for this low industrial capacity is the country’s reliance on outdated manufacturing techniques, which makes its products more expensive than those from other African countries.

According to the Manufacturers Association of Nigeria, the country’s industries are burdened with high production costs, driven by expensive energy, lack of infrastructure, and limited access to finance. Until these issues are addressed, Nigerian manufacturers will struggle to take advantage of AfCFTA’s opportunities for increased intra-African trade.

Nigeria’s trade policy has traditionally been protectionist, with high tariffs and import restrictions aimed at protecting local industries. However, such policies clash with the principles of AfCFTA, which seeks to reduce tariff and non-tariff barriers across the continent. The implementation of AfCFTA requires Nigeria to gradually dismantle some of its protectionist policies, which may face resistance from domestic industries that are not yet competitive enough to withstand free market competition.

The President of the Maritime Reporters Association of Nigeria, Mr Godfrey Bivbere, stated that AfCFTA represents a ground-breaking initiative by the African Union, designed to create a single market for goods and services, promote free movement across borders, and unlock the immense economic potential of our continent.

He, however, lamented that barriers, such as inadequate infrastructure, regulatory bottlenecks, and operational inefficiencies continued to hinder the seamless flow of goods across the continent.

The Chief Executive Officer of Le Look House of Bags and Shoes, Mrs Chinwe Ezenwa, opined that in Nigeria, there were core maritime/ logistics issues that should be addressed to make AfCFTA a success.

“Freight forwarding in Nigeria also must be rejigged and tailored towards modern innovations and transparent operations. The advanced port infrastructure supports intermodal transportation. This means cargo can seamlessly transition between ships, trucks, trains, and aircraft, enhancing supply chain efficiency,” Ezenwa advised.

Meanwhile, Nigeria’s overreliance on the import of finished goods, particularly from Europe and China, further undermines the benefits of the agreement. While AfCFTA promises to enhance Nigeria’s access to African markets, the country’s current trade balance heavily favours imports, especially for consumer goods, electronics, and machinery. Without significant changes in local manufacturing and agricultural productivity, this imbalance will persist.

The Nigerian government’s commitment to AfCFTA is another crucial factor in determining the success of the agreement. While Nigeria signed the AfCFTA protocol, the slow pace of implementation and lack of clear policy direction have raised concerns about the government’s commitment to the agreement.

According to a survey conducted by the Nigerian Economic Summit Group in 2021, 45 per cent of business leaders in Nigeria expressed doubts about the government’s ability to implement AfCFTA effectively due to political and institutional inefficiencies. The slow rollout of necessary reforms, such as the development of a National Trade Facilitation Committee and the updating of the National Trade Policy, further exacerbates these concerns.

Additionally, the lack of alignment between Federal and State Governments regarding the implementation of AfCFTA is a major issue. While the Federal Government is responsible for negotiating and implementing international agreements, states are the primary actors in infrastructure development, including roads, ports, and industrial zones. This disconnect complicates the country’s ability to establish a cohesive national strategy to maximise AfCFTA’s potential.

Conclusion

For Nigeria to overcome these challenges and fully benefit from AfCFTA, substantial reforms are needed across multiple sectors. The government must prioritise infrastructural development, particularly in transportation and energy, to facilitate the smooth movement of goods.

Public-private partnerships could play a crucial role in unlocking the necessary investments in these areas.

Regulatory reforms are equally essential. Streamlining border processes, reducing corruption, and implementing electronic systems across the entire supply chain would significantly improve the country’s competitiveness.

Nigeria must also invest in industrialisation and export diversification. Providing support for small and medium-sized enterprises which make up over 90 per cent of Nigerian businesses could enhance the country’s manufacturing output.

Additionally, investing in human capital, innovation, and technology would help local industries become more competitive in the African market.

Finally, the government must show greater political will to implement AfCFTA effectively. Strengthening institutions, ensuring cross-governmental collaboration, and building trust with the private sector will be key to overcoming the challenges Nigeria faces in implementing the agreement.

The MARAN president advised that as the country embarks on the journey, it was pertinent to remember the impact that the AfCFTA holds for our nation, and indeed, the continent at large.

“By breaking down barriers and fostering closer economic ties, we pave the way for unprecedented opportunities, growth, and prosperity,” he advised.

For Ezenwa, if Nigeria must fully benefit from AfCFTA, some key issues have to be addressed to enable the continent to effectively optimize this trade treaty.

“Logistics is a big concern which must be addressed to enable AfCFTA to deliver on the immense potentials, which we already know. New deep seaports in Nigeria will have to be ready to compete in terms of infrastructure, efficiency in operations, service-driven costs, modern technology, transparency, and ease of doing business. Freight forwarding in Nigeria also must be rejigged and tailored towards modern innovations and transparent operations,” she concluded.

While the AfCFTA presents significant opportunities for Nigeria, the country’s ability to harness these benefits will depend on overcoming its infrastructural, regulatory, and industrial challenges. By addressing these issues head-on through comprehensive policy reforms and investment in key sectors, the could could position itself as a major player in the African trade landscape. The time to act is now, as AfCFTA has the potential to transform not just Nigeria’s economy, but the entire continent.