By Franklin Alli
IN this review of happenings in the Nigerian Manufacturing sector in 2019 and Outlook for 2020, Nigeria Industrial Digest reports that the African Continental Free Trade Agreement (AfCFTA), closure of land borders, including hike in VAT to 7.5 percent, and bad roads, top manufacturers concern.
AFTER more than a year of reluctance to join the African Continental Free Trade Agreement (AfCFTA), Nigeria’s President Muhammadu Buhari, finally appended his signature to the agreement in July, 2019.
Engr. Mansur Ahmed, President of Manufacturers Association of Nigeria , noted that while Nigerian manufacturers are not totally against the country joining the over $4 trillion continental market, care must be taken to ensure that the grey areas in the protocols are addressed.
Also, during the year under review, Nigeria closed its land borders in August, barley two months after it signed the AfCFTA agreement.
As a result of the lingering borders closure, local manufacturers the like of Cadbury, Nestle, PZ Cussons, etc, cried out to the government through their apex body, MAN, for intervention as trucks carrying their products , are trapped at the borders till-date.
Another development that raised the blood pressures of manufacturing chief executive officers was the hike in Value Added Tax (VAT) from 5% to 7.5% by the federal government, in its bid for more money or revenues to run the economy.
Other “familiar problem” as a former President of MAN, Franks Jacobs, puts it, was the traffic gridlock on the roads to the Lagos sea ports in Apapa, which persisted through the year. And there is no solution in sight.
“Another development that raised the blood pressures of manufacturing chief executive officers was the hike in Value Added Tax (VAT) from 5% to 7.5% by the federal government, in its bid for more money or revenues to run the economy.”
Reopening of Borders
Genuine manufacturers are eagerly in anticipation of the reopening of Nigeria’s closed land borders by the Federal Government from January 31, 2020. But this can only happen if her neighbors comply with five conditions presented before them.
The affected countries have been frenetic since the borders were barricaded in August, just as there are local pressures on the federal government to end the action, triggered by unrelenting smuggling activities, which have damaged the country’s economy.
The Customs boss, Col Hammed Ali (rtd) maintained that the land borders will remain closed until Benin and other neigbouring countries stop taking Nigeria for smuggling destination. With the borders reopened, manufacturers will be able to export their products again to consumers in ECOWAS member markets.
Export versus import to Rise
Also, the implementations of the African one single market economy, AfCTA, can make it possible for local manufacturers to export their products to thirteen export destinations on the continent.
The liberalization of tariff bands under AfCFTA, it is expected, would bring about influx of imported goods from all corners of the continent into the country.
“The first impact of liberalization through tariff cuts is the surge in imports of manufactured goods into the country. In principle the import surge is expected to reduce sales/output; the magnitude would be higher for competing manufactured goods. This implies that full liberalization from the onset moving 90% of tariff lines to zero percent would have catastrophic implications for Nigeria,” said a report by Manufacturers Association of Nigeria.
“In the phased Liberalization, where the assumption was that 50% of the existing tariffs of 5%, 10% and 20% will be liberalized in three phases of 1st 5 years (2019-2023); 2nd 5 years (2024-2018); and final 5 years (2029-2033) leading to the 15 years specified in the AFCFTA Framework., it said
Prices to go up
Timothy Olawale, Director-General, Nigeria Employers Consultative Association, NECA, envisaged that the increment in VAT by 50% means that by implication Nigerian consumers are now to pay more for goods and services from 2020 when the bill takes effect.”
IMAGE top : Minister of Industry, Trade and Investment, Niyi Adebayo