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We will not agree to anything that will undermine local manufacturers and entrepreneurs, or that may lead to Nigeria becoming a dumping ground for finished goods”. Thus, President Buhari, on his official Twitter account, explains his administration’s decision to thumb its nose at the Continental Free Trade Area agreement (CFTA). Signed by 44 of the continent’s 55 states in Kigali last week, the CFTA aims to create a continent wide free trade zone (FTZ). The whole point of an African FTZ would be the doubling of intra-african trade by eliminating tariffs on 90 percent of the products of its 1.2 billion people and US$3 trillion economy. At present, corporations doing business on the continent face average tariffs on exports within the continent of around 8.7 percent. If they were to export the same goods out of Africa, these levies drop on average to 2.5 percent.
In other words, it is currently cheaper to export to Europe, North America, China, South America, etc. than to do so within Africa. Much of the impediment to intra-African trade is also the result of poor infrastructure ― bad roads, poor air routes, narrow bridges, and ports that don’t work. Add to this, adverse security conditions, and incompetent bureaucracies, and much of the continent’s poverty is readily explained.
President Buhari’s tweet, however, kicked off a different set of conversations. Lower tariffs, according to adherents of his government’s perspective threaten domestic industry. And no patriot should take that lying down (or standing up, for that matter). There is a big problem with seeing things this way, though. It too easily ignores a different level of the argument about what we must do on the continent to boost domestic productivity. Take the one example that most readily mirrors the conversation around the CFTA. Businesses that export out of Nigeria would tell you that it is far easier to send their produce from Kano to Germany, than from Kano to Lagos. At this level, you could think of the levies that subnational businesses impose on commerce in the country as some form of tariff (to raise internally generate revenues, in this case). But by causing delays in local transport routes, and raising costs, these activities actually reduce domestic output. This is essentially the point made by advocates of Nigeria signing the CFTA.
I doubt that any of those who showed up on the president’s side arguing against threats to domestic industry, would consider it okay that sub-national governments should impose barriers to domestic trade in order to protect their respective commercial spaces. Any such argument would be of the same cloth with one which insists that in order to protect the commercial security of households, each household head must produce the eggs, shoes, clothing, schooling, and clinical interventions consumed by his/her family.
There are clearly net welfare gains from trading at the interpersonal level. These gains are bigger by a significant magnitude, when commerce is conducted without restraint within an optimal currency area. One can only imagine that, by extension, anything that boosts trade between states that are as close to each other as the 55 on the continent would be such as to boost domestic output in that space.
So why did the Buhari administration opt to raise the laager? There is the possibility that a concern with ensuring that the search for market solutions does not leave the populace worse of was a primary consideration. Ahead of elections next year, a pro-people policy move has a pleasant ring to it. There is also the outside chance that some form of state capture has allowed business interests with blood in the water from the country’s current high tariff regime to persuade the government that employment will be at stake in the country were these businesses to lose their local monopoly to more competitive imports.
A more reflective response to these concerns would have shown how cheaper imports would lift living standards amongst the poor, who spend the bigger part of their incomes on consumables. And how a more competitive domestic economy would drive efficiencies across its main activity sectors. This is where the Buhari government has consistently dropped the ball. Since being elected into office, it has opted to “govern”, where its mandate was to “lead” Nigeria.
A “government” in this sense, often struggles to govern within extant rules, regulations, procedures, statutes, and thought patterns. A leader, on the other hand (think Margaret Thatcher in the U.K. from the early 1980s) either moves a people out of the rut they are in (the Bible reports Moses as doing this too for the Israelites), or takes them further than they would have on their own (Deng Xiaoping did just this from China from 1979).
Credit: Uddin Ifeanyi, Premium Times