When the 54 African Union (AU) Heads of State and Government gathered in Ethiopia in January 2012 for the 18th Ordinary Session of the Assembly, it was not just to discuss African integration, climate change issues, contributions to budget, or the celebration of the 50th anniversary of the Organization of Africa Unity (OAU), they also adopted a decision to establish an African Continental Free Trade Area (CFTA) by an indicative date of 2017. Governments around the world have begun revealing their budgets for 2018, businesses are wrapping up the business year while investors already have an in depth plan for their next investment moves. 2017 will be over in about thirty-seven (37) days from now but the nudging question is, where is our CFTA agenda?
The CFTA amongst other benefits is projected to create a single continental market for goods and services, with free movement of business persons and investments; expand intra African trade; expedite the regional and continental integration processes; and enhance competitiveness at the industry and enterprise level. Its achievement is expected to double intra-African trade from 12% (2012) to 25% (in 2022) and result into a US$16 billion total welfare gains (+0.97% GDP and +1.17% employment). The CFTA therefore offers the continent an important tool for achieving sustainable trade and reach the continent’s poverty reduction objectives contained in the Agenda 2063 and the Global Agenda of Sustainable Development in 2030.
At the 25th Ordinary summit of the Heads of State and government on June 15, 2015, negotiations towards the CFTA was launched, commitment to fast track it was made at the 27th summit in 2016 whilst as at the 28th summit in January 2017, a decision to undertake a nationwide stakeholder sensitisation was made. It was also reported that various planning studies and discussions have begun, capacity building for negotiators started, a presidential champion has been appointed and technical working groups instituted. All seems set for the launch of the CFTA.
Nonetheless, making commitments, raising awareness and instituting planning bodies are not sufficient to birth an effective free trade zone. As emphasised at the 2017 African Prosperity Conference on September 12, 2017, fundamental drivers to trade are the development of productive capacity and industrial sophistication. Moreover, varying priorities of the different nations making up the continent, differing trade commitments together with imbalances in institutional, organizational, and productive capacities are some of the challenges that can jeopardise the free trade dream. Most importantly, no country can trade effectively unless it is able to sufficiently produce goods from an abundance of raw material endowments, fuelled by its industrial capacity.
The African free trade trajectory is a rather intriguing one. Africa is the world second largest and second most populous continent with about 1.2 Billion people and 70% under age 30. Controlling approximately 30% of the earth’s mineral resources and 60% of the world’s uncultivated arable land, the continent is endowed with indispensable raw material resources for economic leadership and sustainable development. Ironically, the region is the world’s poorest and most underdeveloped continent with a continental GDP that accounts for just 2.4% of global figure and a contribution of only 4% to global Trade. The contribution of the manufacturing sector to the continent’s GDP remains at 11% (African Economic Outlook, 2017). Meanwhile, Africa provides only about 4% of the global value added in manufacturing, and African countries are largely excluded from global value chains.
Mozambique, for instance, has not used the potential of mega projects in steel and aluminium to maximise local industrial production. Nigeria has had ample opportunities to industrialise, but it has more to do to co-ordinate actors to become competitive and outward oriented. Tanzania recently developed laudable industrial strategies, but the government acknowledges that progress in the implementation of development strategies over the last five years has been less effective (OECD development matters 2017).
The indispensability of Africa’s development to global development and the impossibility of a CFTA without industrialisation thus initiated the proclamation of 2017 Africa Industrialization Day, a year to raise awareness on the importance of African industrial development in implementing a successful Continental Free Trade Area, enhance market competitiveness and grow the economy; thereby supporting the eradication of poverty.
Nigeria – The Giant of Africa
Up until Nigeria slipped into a period of recession that rocked her economy between 2016 and 2017, the country depended on oil for about 70% of government revenue with minimal focus on the development of the diverse oil and gas, agricultural, and mineral resources. In spite of a huge natural capacity to produce in large quantities several products from thirteen major manufacturing activities (oil refining, food, textile, wood, paper, chemical, plastic, non-metallic, electronic, metal iron and steel and motor products), and over fifty (50) agricultural inputs; crude oil still dominates over 90% of Nigeria’s exports whilst industries contribute only about 22.56 to real GDP (Q3 2017, NBS). It is therefore no surprise that trade contributed only 15.90% to real GDP in the third quarter of the year as the country still imports over 50% of finished produce including oil. If one of Africa’s two largest and most developed economies still struggles with industrializing and trade of finished products, then, to achieve the CFTA agenda requires a more strategic pursuit considering that there are less developed countries on the continent such as Congo, Chad and a host of others.
Although there have been several efforts to industrialise Nigeria; from the first national development plan (1962 – 1968) which focused mainly on import substitution as a means of strengthening the manufacturing sector, the Nigeria industrial revolution plan 2014-2019, to the present administration’s agenda of replacing concentration on oil and gas with Manufacturing and Agribusiness, industries such as the steel and Iron mining firms in Ajaokuta, Delta, Itakpe Iron Ore, Oshogbo Steel rolling mill, which would have transformed our industrial base have rotted away. There is still more to be done by all the country’s stakeholders, to strengthen industrial capacity, improve trade and set the pace for the CTFA.
Technological and infrastructural development: Unarguably, one of the most important steps to trail-blazing industrialisation in Nigeria is the development of new technologies and infrastructures. Although Nigeria is referred to as a developing nation together with Asian and American nations of China, Indonesia, Malaysia and Brazil, these nations have attained higher levels of technological advancements, occasioning their industrialised status. They have developed technologies in railway, power, car plants, manufacturing, engineering, ICT, space, agriculture, and aviation which have aided the success of their industrial value chain and maximised the potential of their natural resource capacities. China for instance began industrialising with huge investments in technologies and human development and has now become one of the most industrialised nations and a leader in trade. Similarly, history has it that Malaysia at the early stage of its development procured oil palm and rubber seeds from Nigeria but with the development of its industries became the world’s largest palm-oil producer/exporter and a major exporter of rubber. Nigeria currently lacks facilities like good roads, functional water/rail transport system, or advanced ICT facilities. Moreover, the nation’s most needed infrastructure to facilitate industrialisation is electricity. The lack of new technologies and infrastructural dearth not only hinders the progress of the industrial sector, it also discourages potential industrialists. It is necessary both the public and private sectors urgently embark upon some major strategic reform programs with infrastructure and technological development before the thrust of the current administration towards diversifying the economy to agriculture and manufacturing can be achieved. More so, the leadership of Nigeria in industrialisation will facilitate the industrial growth of other African nations through industrial and experience transfer.
Research, innovation and education: There is no doubt that technology and indirectly; industrialisation is a product of research, development, skills and innovation. Education is unarguably the key driver for knowledge and innovation, which is required to develop any nation’s local production capacities. China, one of the world’s leading countries in local products production recognises this necessity. The nation has not only developed its education system with adequate funding (about 80.54% education funding comes from the government – China’s National Bureau of Statistics reports 2014), the education curriculum upholds practical activities that collectively account for the country’s leadership in the manufacturing sector. Undoubtedly, Nigeria’s education system is due for more investment, both from the government, private and non-governmental sectors, as well as in quality of teaching and research. Industrialised nations have moved from theoretical teaching to practical and Nigeria can borrow a cue from this by ensuring that more practical education is passed to the present generation and those after.
In addition, there are already a number of technologies that can fast-track industrialisation and translate to products; which have been developed by Nigerians and Nigerian institutions. These can be effectively deployed for the socio-economic development of the country as more funding on innovation for industrialisation.
Other measures to translate Nigeria’s industrial potential to reality are by creating adequate access to industrial funding, getting knowledgeable to take advantage of available funding, providing robust incentives and more importantly, fully implementing the Nigeria industrial revolution plan.
As industrialisation is top on the African agenda, it is also one of the high five (5) priority areas of the African Development Bank (AfDB) and one of the United Nations Sustainable Development Goals (UN-SDGs). Moreover, the United Nations General Assembly (UNGA) proclaimed 2016-25 as the Third Industrial Development Decade for Africa. Africa can indeed achieve CFTA, energise its slowing GDP growth as well as attain sustainable development when it translates its industrial potential to sustainable trade and this can be led by Nigeria – the continent’s giant.