All Africa | 4 January 2016
West Africa: EPA - U.S. $8.94 billion development package tears Ecowas apart
By Jimoh Babatunde & Franklin Alli
The Economic Community of West African States (ECOWAS) has been divided over the $8.94 billion European Union’s Economic Partnership Agreement (EPA). EPA is a Free Trade Agreement (FTA) designed to create free trade area between the EU and African Caribbean and Pacific (ACP) countries in which duties on goods imported and exported between the parties are reduced and eventually removed.
Investigation conducted by Financial Vanguard, revealed that the EU has offered 6.5billion Euro (about $8.94 billion) Development Package to ECOWAS countries to develop necessary infrastructures in order to meet exports requirements to the EU, over the next five years (2015-2020). FV learned that out of this figure, the amount that came to Nigeria through United Nations Industrial Development Organisation, UNIDO, the project implementer, is 12 million Euro (about N3 billion).
It was further learned that though, some of the beneficiary agencies in Nigeria’s public and private sector, namely Consumer Protection Council, Standards Organisation of Nigeria; the Organised Private Sector-MAN, NACCIMA, NASME; NASSI and NECA; have started accessing the fund for capacity building, ministers of trade in 12 countries out of the sixteen ECOWAS countries are yet to sign the agreement with the exception of Nigeria, Liberia, Sierra Leone, and the Gambia.
Ken Ukaoha, President of the National Association of Nigerian Traders (NANTS) and member of the Nigerian negotiating team on Economic Partnership Agreement (EPA), told FV that these countries have hastily signed the agreement through the ’back door’, not minding "The real dangers of the EPA, if implemented in its current form.
He stated that the negative effects of opening up 75 percent of ECOWAS markets, with its 300 million consumers, to Europe over a 20-year period, are legion and cut across all facets of the economic life of Africa.
He cited the recent case involving Dominion Farms, an American company—with Canadian interest, with backing of United Kingdom—whose proposed 30,000 hectares rice project, has reportedly displaced 4,000 people at Gassol community in Taraba state, north eastern Nigeria.
He said EPA will give the highly subsidized farmers from the EU, the license to grab huge portion of land in Africa, thereby putting local small holder farmers at a disadvantage. He also expressed concerns that foreign farmers are only interested in producing crops that would be converted to biofuels to service their factories, with a view to increasing their productivity an export, and not food crops that add value to the local people.
Elaborating on Nigeria’s position, he stated that the final ratification may not happen soon as Nigeria, which has consistently opposed the implementation of the Agreement, has neither signed nor shifted its stance. "There are indications that other West African countries such as Liberia, Sierra Leone, and the Gambia, will not ratify the Agreement if Nigeria rejects it.
The way forward, Ukaoha said, is for African leaders to do what is right and protect the interest and concerns of their citizens first. Speaking in the same vein, Mr. Frank Jacobs, President of Manufacturers Association of Nigeria (MAN), noted that EPA may appear like a good course in the document proposal, but will not be appropriate in Nigeria as plans of industry players are constantly distorted by the interplay of macroeconomic variables such as inflation, exchange rate and interest rate variations.
According to him, MAN has consistently opposed the endorsement of the EU-ECOWAS Economic Partnership Agreement as such cooperation is on unequal basis, hence the need for caution. He said, "The EPA between Europe and Africa, Caribbean and Pacific (ACP) countries is an offshoot of the Cotonou Partnership Agreement (CPA) and is essentially designed as an instrument of economic and trade cooperation between the EU and the ACP countries.
The purported goals of EPA are to promote economic growth and development, reduce poverty in the partner countries, expand and diversify trade and increase domestic and foreign investment. "However, the process, structure and perceived contents of the EPA negotiations have raised serious concerns about the impact that EPA would eventually have on ACP countries and their efforts towards poverty eradication, regional integration and economic growth.
Nigeria as a mainly commodity-goods-producer country trading in an EPA free trade arrangement would be disadvantaged. "It has very limited capability to produce and export industrial goods. Most of the industries in the country are undeveloped and are plagued by lack of supportive infrastructure. This will therefore lead to untold hardship to the country as the unemployment situation and the standard of living of the people will worsen," he said.
The MAN boss said EPA will also confine the Nigerian economy to a mere market extension of the EU since it cannot compete with Europe on all grounds. "It is on these grounds that we believe that Nigeria does not need EPA now until it has been adequately industrialised and able to trade industrial goods competitively.
Moreover, after 30 years of preferential market access, the ACP countries still export just a few basic commodities to the EU. At the same time, the ACP share of the EU market is steadily declining. The existing trade preferences have not had the intended effect of helping the ACP countries diversify their economies into higher value products," he said.
Jacobs harped that ACP countries presently attract only a small portion of the world’s foreign direct investment, stressing that Nigerian manufacturers are not aversed to free trade cooperation provided such is done on equal economic development. He warned that any attempt to coerce the country into a free trade arrangement would only succeed in killing the fledgling manufacturing sector, which has just started to recover from a long period of comatose.
He lamented that Nigeria is a high-cost production environment with challenges cutting across infrastructure, inadequate and unstable power supply, poor road network, inadequate rail services, as well as poor and expensive port services. He likewise listed cost challenges as high interest rate on borrowed funds, dearth of long-term loans, multiplicity of taxes, high cost of self-generated energy and high cost of local inputs.
On the environmental challenges, the MAN President, among others, mentioned inconsistent government policies, increased trade malpractices such as smuggling, dumping and faking of made-in-Nigeria products, over-lapping functions of regulatory agencies leading to duplication and high cost, while social challenges include insecurity (insurgency, militancy, kidnapping, area boys, etc.) and dearth of skilled manpower.
He maintained that the challenges no doubt would make Nigerian products uncompetitive not only in European countries but globally. He added: "It is also clear that Nigeria, as a commodity-goods-producer country, can only export agricultural products to Europe while Europe will export industrial goods such as machinery and so on, which Nigeria lacks the capacity and capability to produce.
"It is important to emphasise the following: EPA will stifle existing manufacturing industries as they will be uncompetitive as cheaper finished products from European countries will flood Nigerian markets. The ECOWAS region, especially Nigeria, which is more industrialised, will witness unbridled importation which will lead to accelerated shut down of the few surviving industries in the region.
This will further de-industrialise the region and would have catastrophic implications on employment generation thereby worsening the poverty situation in the region." He, however, said that instead of free trade agreement that requires reciprocity, especially at this stage of the nation’s development, the EU and Nigeria should rather continue with the existing tariff-based trading relationship.