TRALAC - Trade Law Centre

Nigeria: AGOA - an untapped opportunity

Wednesday, 07 October 2009

Source: Business Day (Nigeria)

When in the year 2000, under the presidency of Bill Clinton, the United States government promulgated the African Growth & Opportunity Act (AGOA) which was to enable some 41 selected African countries export about 6400 different goods into the United States of America under very relaxed and convenient trade conditions, it was seen as a wide escape route from the abject poverty that had continued to ravage the very existence of the African states.

However, almost a decade now, it is been realized that Nigeria has not optimally utilized this option due to the failure of government in providing certain the necessary enabling economic and infrastructural environment.

The coming to being of the Infrastructure Concession Regulatory Commission (ICRC), Abuja Infrastructure Investment Centre, the Lagos State Ministry of Waterfront Development & Infrastructure and the recent concession of the Lagos-Ibadan expressway between the Federal Government and Bi-Courtney Consortium may have been in good order, the long-standing and enormous decay of our infrastructure require more of these efforts.

The seemingly extending economic meltdown may have pushed companies and CEOs to look out for new markets especially in blue oceans, introducing new products into the market and optimizing product sales. At the 3rd Enterprise Development forum organized by an emerging consulting firm in Lagos, the Lagos State Commissioner of Waterfront Development & Infrastructure, Prince Adesegun Oniru presented the state government’s readiness to improve the standard and quantity of strategic infrastructure to support enterprise and even encourage foreign business participation in the state and by extension in the country. Nigeria’s business environment needs a thorough over-hauling as this would attract the much sought after foreign direct investments into the country.

Though according to the US International Trade Commission (USIT) index, Nigeria tops the list of AGOA-eligible countries in terms of exports to the United States with $32,525,048 in 2006, $38,236,166 in 2007, $25,360,072 in 2008 and for this year to date as at July was 8,578,059 (ie January-July, 2009), it is clearly believed that Nigeria should have a better showing save for the harsh business environment manufacturers are forced to operate in. Other top AGOA-member countries leading in terms of exports are Angola, South Africa, Chad, Gabon, Congo (ROC), Lesotho, Kenya, Madagascar and Congo (DROC) in that order of volume. It is feared that with the kind of environment we have especially starting from the total collapse of the energy and power sector and the inactivity that is clearly seen around the President Yar Adua’s Seven-Point Agenda, Nigeria’s lead may be short-lived.

Comments by a senior commercial specialist at the US embassy, Anayo Agu, revealed that Nigeria’s trade volume with the US is bolstered by imports rather than exports. Hillary Clinton, US Secretary of State, at the eighth AGOA forum in Nairobi, Kenya last month, said African countries should diversify the products they sell to the American market if they are to take advantage of the initiative. She admonished that “this should be done by enhancing the competitiveness of the products through added-value as this is the only way they can reap maximum benefits from the opportunity.” The AGOA Act was signed in 2000 to encourage trade relationship between the United States and 41 African countries. In a combined list, the agreement allows the AGOA-eligible countries to export up to 6,400 different products into the US. The contract expires in 2015.

Statistics from the US international trade commission indicates that in nearly about a decade after the launch of the initiative, the countries involved have exported less than 50 per cent of the quota. Amongst the sectors most affected in this initiative so far are Agricultural products, forest products, chemicals and related products, Energy-related products, Textiles and apparel, Footwear, Minerals and metals, machinery, transportation & equipment, electronics etc. Nigeria is expected to focus on the products that she has a comparative advantage in producing. The USIT data for January to June this year shows that looking at US imports of agricultural products from AGOA-eligible countries, Nigeria comes 8th queuing behind South Africa, Malawi, Swaziland, Ghana, Cameroon, Kenya and Ethiopia in that order.

The profile of textile & apparels exports to the US showed Nigeria coming 25th among forty-one countries. This is not surprising as almost all the textiles companies in Nigeria have shut down due to the relatively higher cost of producing textiles in Nigeria. According to the view of a report put together by the World Economic Forum, the African Development Bank (AfDB) and the World Bank, African businesses can become far more competitive, but African governments and their international partners will need to improve access to finance, resist pressure to erect trade barriers, upgrade infrastructure, improve healthcare and educational systems, and strengthen institutions. Today in Nigeria particularly, there is a credit freeze from banks to the manufacturers and this has even worsened since the recent eruption of unease in the banking sector.

The 2009-2010 World Competitiveness Report by the World Economic Forum released recently revealed that Nigeria came a distance 99th position in a ranking comprising 133 countries of the world. The sad effect of the disturbing problems that we have been talking about was reflected in Nigeria placing a backward ranking from 94th to 99th between last year and now. Limited access to financial services remains a major obstacle for African enterprises, but underdeveloped infrastructure, limited healthcare and educational services, and poor institutional frameworks also make African countries less competitive in the global marketplace.

In the short-term (for immediate actions), we recommend that Nigerian government increase access to finance through market-enabling policies while keeping our markets open to trade. As objects for long-term planning, infrastructure remains one of the top constraints to businesses in Africa.Inefficient basic education and healthcare systems impacts negatively on Africa’s productive potential. In April and July this year, BusinessDay sponsored executive interactive sessions whereby a world renowned professor of competitive strategy from the Harvard Business School, Michael Porter was invited to Nigeria to talk to people in government and leaders of corporate Nigeria on making the country more competitive on a global scale. It is sad that all that was said received no response from the government. Goods produced in Nigeria are not price-competitive because the relative cost of production in Nigeria ranks top even among neighboring African countries.

Though Michael Porter suggested that the private sector has a role to support government efforts at creating a more competitive and more business-friendly environment, yet these same participants in the private sector have been rendered even weaker by recent storms in the economy.



“ Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Nigeria's bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.