Repositioning Nigerian MSMEs for AfCFTA
By Rukayat Moisemhe
The Africa Continental Free Trade Area (AfCFTA), officially came into force on Jan 1, 2021 to deepen economic integration on the continent.
This followed Africa’s low intra-regional trade volume in relation to other continents like America, Europe, and Asia.
The agreement also seeks to eliminate tariffs on 90 per cent of goods while also enabling micro, small, medium, and large businesses to penetrate new markets and establish strong cross-border supply chains with trade partners on the continent.
Recent reports by the World Bank indicate that the agreement would boost regional income by seven per cent, increase wages for women and lift 30 million people out of extreme poverty by 2035.
The National Action Committee of AfCFTA, in the first quarter of the year, flagged off a sensitisation drive to enlighten Nigerians on the benefits the trade agreement and the need for full participation.
Six months into the take-off of the AfCFTA, however, some believe many Nigerian Micro, Small and Medium Enterprises (MSMEs) can do better with more awareness on its intricacies and the technical know-how, to maximally exploit its benefits.
MSMEs, relevant to the Gross Domestic Product (GDP) growth as well as employment generation, are believed to be the major drivers of development in any economy as they form the bulk of business activities.
Notable are the various interventions of the Federal Government and the Central Bank of Nigeria (CBN), such as the reduction in interest rates on CBN’s facilities from nine per cent to five per cent, and creation of N50billion intervention fund for households and MSMEs.
Others include the creation of N1.1 trillion intervention fund for manufacturing sector (drug sub-sector inclusive), and temporary and time-limited restructuring of tenor and loan terms for businesses affected by the pandemic.
The need to reposition MSMEs with context-specific awareness mechanisms and education can, however, not be overemphasised.
Dr Muda Yusuf, Director-General, Lagos Chamber of Commerce and Industry, (LCCI) noted the nationwide sensitisation by the federal government Action Committee on AFCFTA.
He, however, said that a great deal of work was still required to create the desired level of awareness.
This, according to him, is due to the size of the country and investors’ population.
Yusuf said that there was the need for better targeting for desired outcomes to be realised, with emphasis on international trading and investing community.
He said that the percentage of MSMEs that undertook international trade was possibly less than 10 per cent.
“The truth is that most MSMEs are domestic market focused and most exporters are not necessarily the producers.
“The language of dissemination of the AFCFTA message should be accessible, especially to the MSMEs through the simplification of terms and terminologies.
“There is also need to ensure a balance in the use of the traditional media platforms and the digital platforms.
“Government needs to commit more resources to the AFCFTA sensitisation campaign,” he said.
Mr Segun Ajayi-Kadir, Director-General, Manufacturers Association of Nigeria (MAN), however, said that more than 50 per cent of manufacturers, most of which were MSMEs, were knowledgeable about the workings of the agreement.
This, he said, was because the association, for close to two years, had engaged members on the subject through consultations, zonal sensitisation workshops, sectoral meetings and series of webinars.
He said that there had been high level interactions with top echelons of the AfCFTA Secretariat, African Union, Africa Export- Import Bank, and other relevant national Ministries, Departments and Agencies.
These, according to him, brought to fore the need for a number of steps member-companies must take to benefit maximally from the agreement.
He cited the need to begin to accelerate export diversification by targeting products which are largely demanded on the continent but were mostly sourced from outside as one of such steps.
The MAN DG also called for the re-alignment of production processes with agreed rules of origin for product lines, to ensure qualification for the preferential tariff that AfCFTA seeks to build.
Ajayi-Kadir stressed the need to continue to develop capacity in the understanding of AfCFTA Rules of Origin and the trade remedy mechanisms and skills required to effectively participate in the continental value chain.
”We must also begin to embark on capacity building on export trade logistics and modalities for shipment amidst huge infrastructure deficit prevalent on the continent, and adopt market entry strategy that best suits their products, giving adequate attention to culture of the people in the target market.
“We need to improve on product packaging to engender increased market penetration, with MSMEs ensuring quality assurance before products are shipped to final destination.
“Although price competitiveness of Nigerian manufactured goods remain a challenge, stakeholders in the MSMEs group must adopt the best pricing strategies by ensuring efficiency in their production and logistics processes.
“There is also the need for capacity building in the area of paperwork because there is tendency for a failed transaction and ultimately losses when the documentation is faulty, hence, the need for pre-export and post-export documentation.
“Appropriate familiarisation with payment systems like Letter of Credit, bill for collection, Open Account and Advance Payment is also required as there will be need for sourcing of funds to pay local suppliers and getting payment from the buyer after shipment,” he said.
Mr Eke Ubiji, Executive Secretary, Nigerian Association of Small and Medium Enterprises (NASME), on his part, stressed the need for inclusion of MSME stakeholders in government’s enlightenment and sensitisation advocacy, to engender grassroot participation.
Ubiji urged governments of countries that had already ratified the agreement to build an intra-African rail transport system to holistically address transportation infrastructure gaps acting as barrier to trade for MSMEs.
He also advocated the use of non-formal, and highly simplified means of information transmission to players in the MSME space.
“The onus is on government and relevant organisations to have a way of passing these relevant information to the players, even at the grassroots.
“Countries must also holistically address basic infrastructure, especially transportation, through the creation of an intra-African rail network system just as Kenya has built to Uganda.
“As it stands, we are landlocked and cannot move anywhere.
“Many MSMEs may not be able to fly their products, but with connecting railing system to link the whole of Africa to one another, trade barriers would be addressed.
“If we can develop the continent economically, the rush to move out to all these European countries would be greatly diminished,” he said.
No doubt, all hands need to be on deck to ensure that MSMEs are well placed to make the best out of the estimated 1.3 billion people market and economic benefits that the AfCFTA provides.