The Nation | 3 December 2015
EPA deal: Why manufacturers are kicking
by Chikodi Okereocha and Okwy Iroegbu-Chikezie
If pushed through, the Economic Partnership Agreement (EPA) will eliminate barriers to free movement of goods, services and investment between the European Union (EU) and Nigeria. The EU is promoting the deal to boost its trade and expand its investment in the country. But, manufacturers are opposed to the deal’s endorsement. They fear it would hurt the manufacturing sector and the economy, report CHIKODI OKEREOCHA and OKWY IROEGBU-CHIKEZIE.
As at 2014, the trade volume between Nigeria and the European Union (EU) stood at 40 billion Euros. The size of EU’s Foreign Direct Investment (FDI) in the country also grew from 25 billion Euros in 2011 to 30 billion Euros in 2013, underscoring the robust economic relations between Nigeria – arguably Africa’s largest economy – and the 28-member EU.
But, a recent push by EU to further expand the frontiers of its economic relations with Nigeria through the implementation of the Economic Partnership Agreement (EPA) is being resisted by real sector operators, particularly manufacturers.
EPA is an EU-sponsored Free Trade Agreement (FTA) designed to create a free trade zone between Europe and Africa, Caribbean and Pacific (ACP) countries. Under the new deal, duties on goods imported and exported between the parties are reduced and eventually removed. It seeks to promote economic growth and development, reduce poverty in the participating countries, diversify trade and increase domestic and foreign investment.
Under the deal, EU would immediately offer the 15-member Economic Community of West African States (ECOWAS) and non-member state, Mauritania, full access to its market of 500 million people. In return, Nigeria and other ECOWAS members would gradually open up 75 per cent of their markets – with their 300 million consumers – to Europe over a 20-year period.
But, manufacturers would have none of the terms. To them, the deal is a pill too bitter to swallow and any attempt to do so, would hurt the economy, especially and the manufacturing sector. Citing Nigeria’s weak manufacturing base, caused by infrastructural deficit and inclement operating environment, manufacturers insist that the deal would leave the country holding the short end of the stick. They argue that Nigeria, and indeed, most ECOWAS members have little finished goods to successfully make an inroad to the European market.
The manufacturers have also hinged their opposition on the fact that from all parameters, West African states, including Nigeria, are not on the same economic page with any European country in terms of development to warrant the conclusion of a reciprocal trade relationship as espoused in the trade agreement with EU.
They have, therefore, dug their heels in, insisting that the agreement must not be endorsed. According to them, signing the agreement amounts to economic suicide, as many industries will close down, while locally-made products would not compete with goods from Europe and other developed economies. The manufacturers, who are now literarily up in arms, at different fora, express fears that the agreement would lead to de-industrialisation in West Africa, with economic and employment consequences for Nigeria which control 60 per cent share of the regional market and Gross Domestic Product (GDP).
President of the Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs, articulated his members’ position on the controversial deal when he said: “The EPA will confine the Nigerian economy to a mere market extension of the EU since we cannot compete with Europe on all grounds. It is on this ground that we believe that Nigeria does not need EPA now until we have been adequately industrialised and able to trade industrial goods competitively.”
One of the provisions of the agreement that raised the blood pressure of real sector operators, The Nation learnt, was the 75 per cent market access offer over a 20-year period. To them, such provision endangers local production and exports. Former Industry, Trade & Investment Minister Olusegun Aganga, is one of those who have raised eyebrow over this provision.
He said the provision where the EU wants Nigeria to open its market by 75 per cent over a 20-year period would not be in the overall interest of the local economy on the long run. Aganga pointed out that although, the deal appears harmless, because over the first five years, there will be no major impact because they – EU-member countries – will open all their doors for Nigeria export to Europe. However, the problem here, he observed, is that “currently, we are not exporting much to Europe and so the benefit will not be significant.”
Besides, the offer, observers insist, liberalises tariff lines in which the country is not competitive. Some of the items include bottled water, agricultural products including palm oil, vehicles, oil derivatives and chemical products such as fertilisers, worked wood, paper products and light industrial products.
Some of these concerns must have prompted manufacturers’ insistence that there is need for more studies to determine the potential impacts of EPA on West African economy in the light of current realities.
Noting that Nigerian and other West African countries stand to lose more from the deal, they argue that the gains are at best speculative.
Rather than the EPA, the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said real sector operators have been concentrating on promoting competitiveness on a sustainable basis.
He spoke of the need to put in place the right policies and infrastructure either in the context of EPA or ECOWAS to achieve this.
Former South African President Thabo Mbeki had at the 43rd Annual General Meeting (AGM) of MAN in October set the tone for the sustained agitation against the EPA. Echoing the fears and apprehensions of real sector operators, especially manufacturers over the deal, he drew the attention to the fact that “…..the EPA will allow Europe to achieve its single-minded objective of leaving a weaker, more disadvantaged and more exploited continent in its wake….”
He urged the Federal Government to apply caution in signing international agreements. According to him, such protocols and agreements should be screened to ensure that they are not in any way detrimental to the nation’s growth and economic well-being.
Mbeki stressed that no foreigner can develop another country conscientiously but the owners to their benefit. His position may have opened a floodgate of criticism and opposition against the deal as many industrialists and members of the organised private sector have been advocating its jettisoning or modification.
Apparently aligning with Mbeki, the Apapa chapter Chairman of MAN, Mr. Babatunde Odunayo, expressed optimism that MAN leadership will succeed in ensuring “the Federal Government, in association with other West African Heads of State, find a way to have the agreement modified, cancelled or at the least, made politically inoperable.”
Odunayo, who spoke at the 44th AGM of Apapa branch of MAN in Lagos penultimate week, with the theme: “The Nigerian manufacturing sector: What future for capacity utilisation and growth under a new economic situation?” said manufacturers will keep their advocacy task very strong with regards to EPA.
To some experts and analysts, the groundswell of opposition by manufacturers against the endorsement of the EPA deal raises a number of pertinent questions. They include:
– Where was Nigeria when negotiations for the deal were made?
– Why did Nigeria wait till now when the deal is supposed to be ratified before raising objections?
– To what extent can Nigeria push its argument for protectionism at a time globalisation can no longer be wished away?
Emeritus professor of Economics, University of Ibadan, Ademola Oyejide, brought these questions to the front burner at the AGM. Prof. Oyejide, who doubles as Chairman, Centre for Trade and Development Initiative (CTDI), Ibadan, Oyo State, queried Nigeria’s continued policy of protectionism, especially for infant industries.
His words: “You can’t have protection permanently; we must liberalise, but there has to be a transition period so that industries can adjust.”
The university don also described manufacturers’ opposition to the deal as belated. According to him, Nigeria shot itself in the foot when it failed to raise such objections during the EPA negotiations. Stating that the noise over perceived negative effects of the agreement is self-inflicted, Profe Oyejide said: “The negative impacts were known prior to negotiations, but there were gaps in Nigeria’s preparations for and actual negotiation of the EPA.”
Oyejide further said the negative effects of the EPA that manufacturers are complaining about were well known prior to the EPA negotiations in 2004. He also added that despite the fact that several studies commissioned by the EU showed the negative effects of the partnership agreement, Nigeria never raised any issues regarding them until Ghana and Cote d’Ivoire ratified the deal.
The EPA negotiations between EU and ECOWAS took off in August 2004, but the most important milestone was the adoption by ECOWAS of a Common External Tariff (CET) on October 25, 2013. After only one round of post-CET discussions, negotiations were concluded in February 2014 in Ghana.
All 28 EU member states and 13 of the 16 ECOWAS member states signed the EPA in December 2014. The Gambia, Mauritania and Nigeria have not yet signed. All countries must sign before ratification can begin. EPA can only come into force only after ratification (not signature).