Before ratifying the African Continental Free Trade Area (AfCFTA) membership in November 2020, Nigeria had signed and operated through various trade agreements spanning different timelines and economic reach.
On November 11th, 2020, the Federal Executive Council finally ratified Nigeria’s membership in the African Continental Free Trade Area – the world’s largest free trade area by the number of participating countries since the World Trade Organisation (WTO). It signalled the end of a waiting period for the rest of the continent, awaiting the position of Africa’s largest economy on the agreement. In doing so, Nigeria became the 34th member state to homologate the deal.
Trading under the agreement was initially slated to begin on July 1st, 2020, but postponed to January 1st, 2021, because of COVID-19. However, it has galvanised support across the continent. Aimed to commit to the principles of the agreement, the Nigerian government announced the re-opening of its closed borders to facilitate trade with neighbouring countries.
However, it’s worth knowing that before the conceptualisation of the AfCFTA, Nigeria had been involved in other trade agreements and arrangements over the years to diversify and grow the economy across all sectors. The other trade agreements have spanned bilateral, regional, and international scope, each unique in its concept and reach.
This article examines the major trade agreements that contributed to Nigeria’s growth and development before the latest AfCFTA.
Bilateral Trade Agreements
According to the United States’s International Trade Administration, Nigeria has bilateral investment agreements with 31 countries, of which only 13 are in force. The 13 deals in force are with France, the United Kingdom, Taiwan Province of China, Korea, Romania, Germany, South Africa, Italy, Switzerland, China, Sweden, Spain, and Finland. These agreements enable direct trade and commerce between Nigeria and the 31 countries.
One of Nigeria’s prominent bilateral trade agreements is the Trade and Investment Framework Agreement (TIFA), signed on December 16th, 2000, in Washington between Nigeria and the United States of America.
“Trade and Investment Framework Agreements (TIFAs) provide strategic frameworks and principles for dialogue on trade and investment issues between the United States and the other parties to the TIFA,” reads a statement on the United States Trade Representative website. The primary aim of the agreement was to “enhance the friendship and spirit of cooperation and develop further both countries’ international trade and economic interrelationship, fostering an open and predictable environment for international trade and investment.”
Regional Trade Agreements
As a founding member of the African Union and the Economic Community of West African States (ECOWAS), Nigeria signed the ECOWAS Trade Liberalisation Scheme (ETLS), established under the regional free trade agreement in 1990. The plan opened a trade area within 15 ECOWAS member states and promoted economic relations. The ELTS ensures the free movement of commodities from originating countries to other ECOWAS states without paying customs duties and taxes. Originally designed to cover agricultural produce and handmade craft in 1979, member states have since amended its scope to extend to industrial products.
Nigeria remains its largest beneficiary, with over 2,400 companies and 6,000 products admitted into the scheme, and accounting for 60-70 per cent of products under the scheme, as confirmed by the Former Minister of State for Foreign Affairs, Zubairu Dada. However, the ETLS is still relatively unknown because of bottlenecks around bureaucracy in obtaining the Certificate of Origin (CoO) and honouring the CoO by custom agencies of the member states.
International Trade Agreements
On November 18th, 1960, Nigeria became a member of the General Agreement on Tariff and Trade (GATT), an international trade agreement initially signed by 23 countries in 1947 to minimise barriers to international trade through the elimination/reduction of tariffs and quotas. The deal, eventually absorbed and integrated into the World Trade Organisation – of which Nigeria became a member in January 1995 – has grown into over 125 member states and accounts for over 90 per cent of world trade.
The African Growth and Opportunity Act (AGOA), a United States legislation signed in May 2000 and most recently extended to run through 2025, offers special market access and provides a framework of US support to qualifying Sub-Saharan African countries. The AGOA presents an opportunity for Nigeria to export approximately 6,500 products to the United States duty-free. However, Nigeria is yet to maximise the option aside from exporting crude oil, leaving a vast gap in revenue sources from other sectors.
To fully harness the opportunities of this act, Nigeria must diversify its economy to other sectors like agriculture, manufacturing, and mining captured in the agreement.
Another international trade agreement effective in Nigeria is the WTO Trade Facilitation Agreement, effective on February 22nd 2017, which “contains provisions for expediting the movement, release, and clearance of goods, including goods in transit.” The agreement set to remove bureaucratic red tapes around moving products across borders. If fully executed, TFA will reduce trade costs by 14% and boost global trade by $1 trillion annually. The structure of TFA provides developed and least developed countries the facility to reap the full benefits of the agreement.
On December 12th, 2017, Nigeria signed a Joint Declaration on Cooperation with the Governments of Iceland, Liechtenstein, Norway, and the Swiss referred to as the “EFTA States” of the European Free Trade Association. Through the joint EFTA-Nigeria committee, both sides committed to enhancing economic relationships for mutual benefits amidst other vital objectives.
How have the trade agreements fared so far?
The Nigerian government, under different administrations, has taken steps to address trade integration between Nigeria and other countries/bodies. However, the various agreements have not translated into sufficient economic growth and human capital development in the country. Trade volumes do not justify the country’s participation in different trade agreements. For instance, Nigeria’s export to the United States under the AGOA has reduced considerably, from $9.7b in 2000 to a mere $1.51b in 2020- a whopping 83% decrease.
Alongside the AfCFTA, a significant trade agreement in the history of Africa, the government must take measures to maximise the uniqueness of each trade agreement to improve the economy and create prosperity for the people.