Implementation of African Growth and Opportunity Act in Nigeria and Its Implication to the Economy.

  Nigeria is yet to take full advantage of African Growth And Opportunity Act since it was enacted in May 18, 2000. Issues of political instability, inadequate infrastructure and poor macroeconomic management retarded the rate at which the country access the African Growth And Opportunity Act benefits. The failure to diversify the country’s economy away from its over dependence on the capital intensive oil sector, which provides 95% of foreign exchange earnings and about 80% of its budgetary revenues, has greatly affected the agricultural sector.

Despite this lopsided development, Agricultural exports could still play an important role in Nigeria-US trade if properly harnessed and if efforts are made to diversify into higher value agricultural products. The US suppliers on the other hand could increase their scope by providing inputs like fertilizer and light machinery to Nigerian farmers. Presently, Nigeria-US trade is dominated by energy and energy related products (oil and gas) while other sectors contribution remained insignificant. However, agricultural products exports to the US continued to increase over the years. Exports of agricultural products to US in 2012 were valued at $80.83 million an increase of about 20% when compared with$58.78 million recorded in 2010. Other products that featured in Nigeria’s bilateral trade with US include forest products, chemicals and related products, textiles and apparel, minerals and metals machinery, transportation equipment, electronic products etc. (See Table on Bilateral Trade by Sector: US-Nigeria). The bilateral trade profile offers immense opportunities for both countries to intensify dialogue towards increasing their trade relations. The U.S. have realized that the balance of trade is not in their favor (as a result of high importation of Crude Oil from Nigeria) and is therefore moving towards jacking up her investment in the Information Communication Technology,

telecommunications and other economic activities.

Nigeria on the other hand is envisaging sharp reduction in US purchase of its oil and is working assiduously to diversify into other areas. The U.S. Foreign Direct Investment  flow

into Nigeria has increased from $5.2 million in 2000 to $8 billion in 2012. US is moving towards the diversification of its investments in Nigeria from oil and gas sector to other key

non-oil sectors such as Power, Energy, Agriculture, Hospitality, Housing and Health Care among others.

     Energy African Growth And Opportunity Act

 Imports Into US And The Role Of These Imports In Poverty Alleviation And Economic Development.

In 2011, 11 years after African Growth And Opportunity Act

 was enacted, the number of countries exporting non-petroleum products to US had expanded to 22, more than half of those eligible. South Africa has remained a major exporter. Mauritius, Lesotho, Swaziland and Kenya exported the largest percentage of apparel and textiles to the U.S.   Nigeria, whose main non-oil export products are agricultural failed to record any significant export to the US. Generally speaking, Agriculture has not played a central role in the accomplishments of African Growth And Opportunity Act. Agriculture provides 70 per cent of employment in Sub-Saharan Africa and 30 per cent of the regions gross domestic product. Agricultural products on the other hand, are less than 1 per cent of African Growth And Opportunity Act exports.  Apart from the fact that, the U.S. is not the most suitable destination for some agricultural goods from Africa (such as cut flowers) especially when compared with the European Union’s closer proximity, most African agricultural products lack sufficient value addition and some of them have been excluded from African Growth And Opportunity Act.

Sanitary and phyto-sanitary standards, though important for maintaining food quality and protecting human, plant and animal

health, has imposed additional demands for Nigerian exporters as well as their counterparts in Sub-Saharan Africa. This is seen as a major limitation to export of agricultural products to US

under African Growth And Opportunity Act. Other achievements of African Growth And Opportunity Act include job creation, increase in foreign direct investments, and efforts towards regional integration through the creation of regional value chains and corresponding increases in intra-African partnerships. Unfortunately, most of these chains have been concentrated in the apparel sector where Nigeria, for now, is not a principal player.

 Government’s Promotional Strategy for African Growth And Opportunity Act

    1. Establishment of National Supplementation and Advisory

Committee; Developed export plan for the Nigerian economy.

Worked with US based Consultant, Manchester Trade Limited

to evolve a comprehensive strategic export plan in Nigeria for

the purpose of benefiting from African Growth And Opportunity Act;

   2. Conducted Market Surveys to develop product profiles from

African Growth And Opportunity Act. ;

3. Sensitization Workshops/Seminars to create awareness of African Growth And Opportunity Act. opportunities;

4. Capacity Building workshop in collaboration with the USTR in

Nigeria;

5. Establishment of TIFA Council as well as Nigeria-US Joint

Economic Partnership Committee (JEPU) Created a direct air link and seaport connection for Nigeria to freight goods to and from Miami, the gateway to the Americas.

6. Trade missions to several countries to promote active private sector participation.

7. Product adaptations Programme for several agricultural products such as Shea butter, frozen shrimps, footwear, garments, dried fish, cashew nuts, etc.

8. Additional Measures to improve the standards and quality of

made-in-Nigeria products through the efforts of NAFDAC, SON

 and FIIRO. The introduction of mandatory Conformity

assessment and 1509000 management system has improved

made-in Nigeria products quality for the export market.

 9. Production of an export manual by the NCS to ensure compliance and increase African Growth And Opportunity Act

 benefits.

 10. Collaboration with WTO to introduce standards and Trade

Development Facility (STDF) for some selected products such as

Shea Butter and Sesame.

 11. The design of a new Trade Policy as part of efforts to clearly map out strategies to address various trade impediments in the

country. The review will enable Nigeria to realize its objectives of

growing the economy and attracting substantial local and foreign

investment as well as increasing its share of the African Growth And Opportunity Act trade as well as global trade.

 12. The design of a new industrial master plan for Nigeria to increase the sector’s contribution to GDP. The policy will

promote backward integration and industrial growth along value chains.

REVIEW OF THE 11^TH AFRICAN GROWTH AND OPPORTUNITY ACT

 FORUM HELD IN WASHINGTON, DC – 2012

 The 2012 African Growth And Opportunity Act Forum focused on how to overcome barriers to both US trade with Sub-Saharan Africa and intraregional trade within Africa. The Forum identified that a very key component to facilitating trade and to improving Africa’s trade competitiveness in the global economy, is developing and improving infrastructure. This could be centered on building sustainable supply chain infrastructure or through improving access to market for women. The importance of infrastructure to Africa was further emphasized by the

US Secretary of State when he stated that “for Africa to realize its full potential, it will need to focus on developing its physical infrastructure, such as roads, ports and modern electrical grids.

Financing power projects in Africa the Forum will play a particularly significant role, as power is key to enabling the construction of a new and better infrastructure across the continent. Presently, fewer than 25% of households in Africa have access to electricity. Improving the situation of energy in Africa will have the potential to ignite economic growth by creating all sorts of opportunities for small businesses, for

cooperatives, for agriculture across the sectors.  

Equally critical to investing in physical infrastructure across the continent of Africa will be improvements in regulatory infrastructure that make it easier to do things like registration of new businesses or obtaining a construction permit.

Other areas considered as key to stimulating rapid economic growth in Africa include:

 •Creating a regulatory environment to attract renewable energy,

investment and improving regulatory measures to encourage

investment in broadband infrastructure;

 •Concentrated effort to support the youth in terms of employment,

empowerment and skill acquisition;

 •Support for women entrepreneurs to gain from the expected multiplier effects to the rest of the economy;

 •Improving health infrastructure to support citizens and enhancing

infrastructure to promote women’s economic success. The 2012 African Growth And Opportunity Act Forum concluded deliberations with a call for US Government and African Countries to continue to advance their shared commitment and common goal using trade as an engine for economic growth  on both sides, and to explore ways towards maximizing the potentials of the countries, businesses and people.

INSTITUTIONAL REFORMS

 1. Development Of Infrastructure:

The Nigerian Sovereign Investment Authority  and the International Finance Cooperation – a member of the World Bank Group have signed an Memorandum of Understanding for a strong partnership that will help mobilize public and private resources for investments in sectors such as housing, healthcare, transport, power and gas. The partnership will bring

development to the broader infrastructure sector and foster sustainable economic growth for Nigeria.

 2. National Integrated Infrastructure Master Plan

For Nigeria to address its inadequacies in infrastructure and to integrate all infrastructure plans and projects of the Federal Government into one, a National Infrastructure Master Plan  was formulated. The plan is a 30- year plan (2014-2043) which will require an estimated $2.9trillion to close

Nigeria’s huge infrastructure gap in the next 30 years, 52 per cent to be generated by Government while the balance of 48 percent is expected to be covered by the Private Sector. The master plan will also put in place enablers that will attract private sector investments to the infrastructure sector.

INFRA-REGIONAL COOPERATION

The Urban Development Bank of Nigeria  has recently signed a cooperation agreement with the Development Bank of

South Africa  to promote business, technology and knowledge exchange between two regional economic blocs by enhancing the capacities of both public and private sector

to deliver infrastructure. The development of infrastructure is considered as the catalyst needed for sustained economic development.

 HUMAN CAPITAL DEVELOPMENT

Nigeria will continue to focus on formulating policies aimed at reducing poverty and unemployment through concrete measures, policies and the involvement of all stakeholders. The Country will pay particular attention to strategic approaches to employment generation using both sector specific and macro-based strategies.

BANKING AND FINANCE

The Central Bank of Nigeria  is to establish the Nigerian International Financial Centre  in an attempt at making the

country Africa’s financial hub and a powerhouse in the global financial system. The arrangement would eventually attract top rated international financial services firms to invest in the center and participate in the development of the African continent.

AFRICAN GROWTH AND OPPORTUNITY ACT 

COUNTRY ADVOCACY

 It is generally agreed that though aggregate trade between sub-Sahara Africa and the United State has been declining, African Growth And Opportunity Act forum is an opportunity to stimulate broader access to the U.S Market through stronger partnership. equally important is the need to make African Growth And Opportunity Act work for Africa and the United States, since Africa is considered a strategic partner to the United States.

It is also pertinent to appreciate the contribution of African Growth And Opportunity Act to Africa’s development particularly in promoting non-traditional exports such as textiles and apparels, leather products, aggro-processing products etc. African Growth And Opportunity Act has also contributed to job creation and flow of investments in some African Countries. It should be noted that despite the positive contribution of African Growth And Opportunity Act to African countries, there remain some challenges that are hindering the realization of its full potential benefits. These challenges include:

i. Sanitary and phyto-sanitary  requirements;

ii. Restrictive rules of origin;

iii. Product Specific Standards

iv. Expiration of third-country fabric rule in 2012;

v. Weak productive capacity of most African Countries;

vi. Lack of regional value chain

vii. Weak competitiveness as well as a result of weak infrastructure development.

viii. Uncertainty about the future of African Growth And Opportunity Act having identified the above challenges, African leaders are expected to;

i.   Urge U.S to extend African Growth And Opportunity Act beyond 2015;

ii. Urge U.S to align the third-country fabric provision alongside the term of African Growth And Opportunity Act;

iii. Urge U.S to consider the concept of accumulation as a way of dealing with stringent rules of origin;

iv. Urge Government to relax the rules of origin on fish and fish products to allow effective market access;

v. Urge U.S to provide support for building productive

capacities as well as for diversifying and expanding the production base in Africa;

vi. Urge U.S to be engaged more in infrastructure developments in Africa; on the role of Private Sector and Civil Society Groups from African Growth And Opportunity Act Beneficiary African Countries, African leaders are expected to recommend measures on the following key areas:

i.   The role of Civil Societies in trade promotion;

2. Empowering women through trade capacity building;

3. The role of trade-related technical assistance;

4. The next generation;

5. Creating economies of scale for small and rural producers; and

6. Effective corporate responsibility programming.

7. Improving the implementation of African Growth And Opportunity Act;

8. Financing Africa’s industrial development;

9. Value-additions’ role in expanding agricultural markets;

10. Stimulating intra-Africa trade;

11. Energizing the competitiveness of African Agriculture.

 Way Forward:

As a way forward for Africa, it is recommended that;

i.   African Growth And Opportunity Act beneficiary states are urged to shift focus towards a US Africa productive capacity development agenda which could set the basis for more profitable trade.

ii. UNECA and AUC, in collaboration with other organizations, are

requested to continue to support member states in assessing various scenarios of African Growth And Opportunity Act after 2015;

iii.African Growth And Opportunity Act beneficiary States and the USG are urged to establish a joint monitoring and evaluation mechanism to assess progress on the implementation of decisions taken at AGOA Forums; and

iv. The AUC is urged to strengthen its Office in Washington DC to better coordinate the activities of African Growth And Opportunity Act.

CONCLUSION:

Hilary Clinton in 2010 while reviewing the implementation of African Growth And Opportunity Act for decade, remarked that “despite the best of intentions, African Growth And Opportunity Act

 has achieved only modest results” thus highlighting the limitation of generating growth through market access only in the absence of support to improve on Africa’s infrastructure and other supply-side constraints. Nigeria will continue to address its infrastructural challenges and supply side constraints to usher in a vibrant manufacturing sector that will increase its market share in the US trade as well as global international trade.