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Although Nigeria is already a signatory to the African Continental Free Trade Area (AfCTFA) agreement, it is not yet fully committed itself to the trade agreement due to apprehension over increased importation of goods and services that may cause an upset to existing and flourishing Nigerian companies and interest, LEADERSHIP findings reveal.
There are fears that some manufacturing companies, leveraging on the agreement, can turn Nigeria into a dumping site by producing outside Nigeria and importing their products into the country to sell without necessarily setting up an office here in Nigeria.
Already, the country is battling massive importation of goods of which some of them have questionable qualities and currently mounting pressure on the existence of the local companies, even as stakeholders fear, this might be more pronounced when the country subscribes 100 per cent to the Africa free Trade agreement.
With penchant for foreign items by Nigerians, there were apprehension that, this may work against the interest of the country as local producers face more tougher operating environment than its counterpart who may produce under a comfortable operating environment, hence, able to sell cheaper than Nigerian producers who will have to factor the challenges into their pricing, thereby, making them, unmarketable in the local market.
In the financial service sector, there were fear that influx of foreign entities from other African countries will further heat up the competition in this space, thereby, putting local service providers at disadvantage against foreign ones who will have less cost of operation to incur as they may not set up offices in Nigeria but rather import products and services from their country of origin.
Similarly, there was an initial fear that, even if Nigeria decided to open up, others may not be receptive like Nigeria, hence putting the country at disadvantage in this trade agreement. However, Nigeria may only be holding its hard stance for a while, as its commitment to trade agreements of the World Trade Organisation (WTO) as far back as 1995, put the country at disadvantage in pushing its interest on the African continent, having opened it up 100 per cent, at the global stage.
Nigeria was earlier relying on the principle of Reciprocity to negotiate its way through but this principle only applies to those countries who are not yet signatories to the WTO trade agreements, hence, Nigeria would either cascade its global agreements to the African level or improve on it but it can’t go any lower. LEADERSHIP learnt, over the weekend, that the country will explore regulations to tighten some of the loose bolts to ensure Nigeria is not put at disadvantage in these arrangements.
Speaking during a ‘Fireplace Chat’ at a workshop themed: ‘Unlocking Opportunities: AfCFTA and the Nigerian Insurance Industry.,’ organised by Nigerian Insurance Industry Committee On AfCFTA for insurance companies in Ikeja, Lagos, at the weekend, the secretary general of AfCFTA,, Dr. Wamkele Mene, who was ably represented by the director, Trade in Services, Investment, IPR and Digital Trade, Emily Mburu-Ndoria, noted that, 24 countries have made full commitment to AfCFTA while countries from East Africa have gone ahead to document their commitments, saying, national treatment is highly essential for the workability of the trade agreements.
According to her, ‘Nigeria is still yet to give full commitment although it is in the process because we already have an offer from Nigeria, but it is not yet a commitment. The concern is, will Nigeria and its ECOWAS counterparts want to go alone? However, we are looking forward to a commitment from Nigeria as the country has more to gain from this agreement.”
On capital requirements and regulation, she assured there will be uniform regulation through the framework on national treatment for the financial service sector as there will be prudential requirements for the insurance industry on the continent.
Addressing Nigeria and Nigerian companies, especially, underwriters, she said: “ there is no need to be scared of competition that will come with AfCFTA. No need to be scared, especially, in the financial service sector where Nigerian entities are dominating on the continent and more competitive. So, its an added advantage.”
On apprehension and consequence of Nigeria fully committing to AfCFTA, she said, Nigeria already opened up its investment and Trade spaces at the global level with World Trade Organisation (WTO) in 1995, hence, it can only replicate what it has at the global level or improve on it when it comes to AfCFTA.
On whether Nigeria can take advantage of the principle of reciprocity to fine-tune the trade agreement to its advantage, she said: “The principle of reciprocity only applies to those countries who have not committed to WTO. AfCFTA is not there to replace the ECOWAS agreement, it is to ensure that Nigeria and its ECOWAS counterparts can penetrate other markets where they were not having or recording low inroad.”
On his part, the commissioner for Insurance/CEO, National Insurance Commission (NAICOM), Olusegun Ayo Omosehin, AfCFTA presents a transformative opportunity for Nigeria and our insurance industry to expand into new markets, drive growth, and create prosperity.
Saying AfCFTA is expected to create the largest free trade area in the world, boosting economic growth, trade, investment, and economic integration, he added that, this is an opportunity for insurers to expand their horizons, continually innovate, and position themselves for successful maximisation of the benefits.
Omosehin, who was represented by the deputy commissioner for insurance, Technical, Dr. Usman Jankara said, to leverage on opportunities provided by the trade agreement, “we must focus on the Schedule of Specific Commitments, particularly Cross Border Services Trade, Consumption Abroad, Commercial Presence, and Presence of Natural Persons. By removing trade barriers, we can develop cross-border insurance products, attract foreign investment, and promote economic development.”
While expressing concerns, he asked, “there is no fear of opening up, the concern is that, what then happens if you open up your space and other countries are not reciprocating this gesture? If we are to open up, there must be a reciprocal gesture from the other side.”
He disclosed that there would be a harmonised regulation on insurance services across Africa to take advantage of the trade agreement. With the removal of trade barriers, he assured that insurance companies can develop and offer cross- border insurance products, including coverage for businesses operating in multiple African countries, which can enhance the attractiveness of Nigerian insurers to multinational clients.
This, he added, will also bring about increased investment as it is likely to attract foreign direct investment as influx of capital can boost the insurance sector by providing the necessary funds for innovation, technology adoption, and capacity building in the industry.
“We are also not oblivious of different regulatory environments across various African countries, creating complexities in compliance and operational standards. In this regard, we are committed to bilateral negotiations underpinned by Mutual Recognition Agreement (based on principle of reciprocity) and Most Favoured Treatment (on National Treatment), among other considerations,” he pointed out.
Earlier, the chairperson of the Nigerian Insurance Industry Committee On AfCFTA(NII-AfCFTA), Ekeoma Ezeibe said, despite the WTO trade agreement that has somehow handicapped the country, domestic regulators are allowed an additional regulation ‘to what we have at the WTO level’ urging regulators to address the challenges of AfCFTA through regulations.
AfCFTA member-states, she said, envision an eventual single-market for goods, services, capital, and to enable the intra-regional free movement of persons.
On the consequence of the trade agreement for the insurance sector, she said, AfCFTA aims to promote industrialisation and diversification of economies by encouraging the development of regional value chains and manufacturing sectors, anticipating a diversified economic activity and sectors which would lead to increased demand for insurance.
For this reason, she said, NAICOM, on 10th May, 2022, set up the Nigerian Insurance Industry Committee on African Continental Free Trade Area (NII-AfCFTA Committee), to, among other things, coordinate the Nigerian insurance industry’s strategic response to AfCFTA as well as liaise with the AfCFTA Secretariat and other bodies in the implementation of the Agreement in the Nigerian insurance industry.
As AfCFTA eventually harmonises trade and investment regulations across member countries, she noted that, it is critical that the insurance sector of Nigeria, begins to contemplate harmonisation of insurance regulations among state parties in order to achieve market confidence and growth and a regulatory balance that protects consumers, multilateralism and reciprocity, standardisation of practice, cross-border opportunities and risks, Trade in Services without barrier, Intra-continental movement of Personnel and the creation of a single big market as against a near stagnant market.
The African Continental Free Trade Area(AfCFTA) is a free trade area in goods and services encompassing most of Africa. About 54 of 55 African Union member states have signed the framework agreement establishing the world’s largest free trade area to foster greater intra-continental trade and investment, as a means of spurring economic integration and growth in our continent.
By creating a single, unified market of over 1.3 billion people and a combined GDP of about $3trillion, AfCFTA is determined to boost economic growth occasioned by increase in trade and foreign investment, among others.
