The political economy of enhancing trade facilitation in Nigeria

The phrase, ‘‘he who controls the trade, controls the world economy’’, has till this day remained true. The international trading position of every country determines to a large extent, the economic and political strength of every country. Political and economic strength is as such normally displayed in trading patterns. Countries therefore aspire to have positive balance of trade terms, as a measure of their development objectives. Achieving such noble economic and political objectives require trade facilitation- which means that interested countries plan and implement policies and measures that make it easier for trading activities; especially trade across borders, to be as effective and efficient as possible. The World Trade Organization (WTO) defines trade facilitation as “the simplification, modernization and harmonization of export and import processes”.

The WTO members, of which Nigeria is a part, concluded negotiations at the 2013 Bali Ministerial Conference on a landmark Trade Facilitation Agreement (TFA), which entered into force on 22nd February 2017 following its ratification by two-thirds of the WTO membership. The TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. The agreement also sets out procedures that enable cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. Provisions for technical assistance and capacity building in this area, as also contained in the TFA.

Nigeria ratified the TFA on the 16th of January 2017, as a Category A country. Despite this ambitious effort, Nigeria has been unable to successfully implement the provisions of the TFA, even as the country can gain up to US$170 billion in 20 years from new trade flows, if trade facilitation is promoted and implemented. The National Single Window, which represents the key trade facilitation project has been stalled, and Nigeria ranks 179 out of 191 countries on the ‘trading across borders’ sub-index of the World Bank Ease of Doing Business Index, which is the main index for measuring trade facilitation. It takes an average of 128 hours to export in Nigeria when measured for border compliance hours, as against 83 hours in Rwanda and 45 hours in neighbouring landlocked Niger Republic. The 179 out of 191 countries ranking, when compared to the 131 out of 191 countries rank on the general Ease of Doing Business Index, demonstrates the heightened challenges with cross border trade in Nigeria.

Nigeria’s socioeconomic indices show that the country urgently requires all the economic leverage it can access. Unemployment stands at 33.3 percent, while inflation rate is 18.17 percent. The country has a public debt ofUS$75.6billion, and external debt has risen from US$10.316 billion in May 2015 to US$33.3billion in December 2020. Nigeria has a poverty rate of 40 percent and is also the third most terrorized country in the world.

Trade Facilitation by informed estimates, holds enormous potential for Nigeria. They include US$170billion in 20 years from new trade flows, maximization of the US$3.4 trillion single market potentials that come with the African Continental Free Trade Agreement (AfCFTA); the US$100 billion expected earnings from 22 major non-oil products over the next 10 years, and 500,000 additional jobs annually as part of the Zero Oil Plan(ZOP) by the Nigeria Export Promotion Council; and also the harnessing of the Special Economic Zones and Export Processing Zones designed to boost the country’s industrial activities. Other benefits to be derived by Nigeria from trade facilitation include preferential access to the US market under the African Growth and Opportunity Act (AGOA) of which the cotton-textile-apparel segment alone is worth US$100 billion; and enhanced economic complexity and the attendant economic stability for the country. As the economic situation of a country correlates with its political stability, trade facilitation can therefore provide a lot of panacea to some of Nigeria’s pressing political and social problems.

Given these benefits that can accrue to her, what then can be done to improve trade facilitation in Nigeria? To answer this question, an attempt will be made to review current efforts geared towards trade facilitation in Nigeria.

Nigeria established an inter-ministerial committee on domestic trade and multilateral trade matters in 2002, named the Enlarged National Focal Point (ENFP). The ENFP was designed to evaluate and monitor the performance of Nigeria’s trade policy. Within the ENFP, a sub-committee on Trade Facilitation was formed, with the responsibility of coordinating activities for the WTO Trade Facilitation Negotiations and issues of encumbrances in domestic trade. During the meetings of the WTO Negotiating Group on Trade Facilitation (NGTF) in 2009,a proposal for the legal text for what today constitutes Article 23.2of the WTO Trade Facilitation Agreement (TFA), called for the establishment of a National Committee on Trade Facilitation to be established by Members. The ENFP Sub-Committee on Trade Facilitation as a result, sought for approval of the Minister of Trade to form such a committee. Hence the formation of the National Task Force Committee on Trade Facilitation, with the objective of facilitating both domestic coordination and implementation of the provisions of the WTO’s TFA, once adopted by Members of the WTO.

In 2010, the National Task Force Committee on TF was established and is chaired by the Federal Ministry of Industry, Trade and Investment (FMITI), while the Nigeria Customs Service is the Vice-chair. The FMITI serves as the Secretariat and the Committee reports to the Minister of Trade through the Permanent Secretary. In March 2014, after the conclusion of the TFA in 2013, the Minister of Trade decided to re-inaugurate the Task Force Committee on Trade Facilitation and gave it a 100 days mandate to look into its activities, vis-à-vis the TFA, evaluate achievements, harvest the low hanging fruits and plan further implementation of the TFA. The membership of the Committee was reviewed down from 26 to 21, with the removal of agencies whose functions were similar to others on the Committee. After the 100 days ultimatum for feedback to the Minister, the Committee was able to determine the Category A commitments under the TFA to be notified to the WTO. The Task Force is now known as the National Committee on Trade Facilitation (NCTF).

The NCTF is made up of FMITI (Chair), Nigeria Customs Service (NCS) (Vice-Chair), Ministry of Finance, Ministry of Transport, Central Bank of Nigeria, Nigerian Ports Authority (NPA), Federal Airports Authority of Nigeria, Nigeria Shippers Council (NSC) and Nigeria Maritime Administration& Safety Agency (NIMASA). Others are National Agency for Food, Drugs, Administration &Control (NAFDAC), Standards Organization of Nigeria (SON), Nigeria Export Promotion Council, Nigeria Export Import Bank, Nigeria Agricultural Quarantine Service, Nigeria Immigration Service, Nigeria Police Force and Federal Roads Safety Commission. From the private sector are Manufacturers Association of Nigeria, Association of Chambers of Commerce, Industry, Mines & Agriculture, National Association of Nigerian Traders and National Association of Clearing & Forwarding Agents.

It is fair to say the activities of the NCTF have not translated into better trade facilitation. Many participants do not have decision making abilities, which defeat the aims of committee meetings.

The establishment of the Presidential Enabling Business Environment Council (PEBEC) in 2016, has led to some increase in the ease of Nigeria’s business environment, improving from 169 out of 190 in 2016 to 131 out of 191 in 2020. The trading across borders sub-index earlier mentioned shows that the trade facilitation part of the business environment remains largely unresolved.

There is also the introduction of the ‘ETO’ software application by the NPA in collaboration with the Lagos state government to improve ease of international trade, especially at the Lagos ports. This has not yielded the desired results, and the complaints by NPA suggest it is the lack of cooperation by another leading government agency, that is responsible for the inefficient state of international trade at the Lagos ports.

The Nigeria Port Process Manual (NPPM) launched in December 2020 by Vice President Yemi Osinbajo, is among the latest government efforts to improve trade facilitation in Nigeria. With NSC as lead, the NPPM requires collaboration with NPA, NIMASA and NCS. Curiously, there is no primary role given to the FMITI.

There is also theUS$3.1 billion Nigeria Customs Automation Project (e-Customs project), which is different from a proper National Single Window (NSW) and aims to enhance trade facilitation, but does not involve FMITI. Despite government efforts, as well as support from development partners such as World Bank with the Trade Facilitation Support Program (TFSP),WTO, Foreign and Commonwealth Development Office (FCDO), and Deutsche Gesellschaft fürInternationale Zusammenarbeit (GIZ) with Promoting Trade in West Africa II (WATIP II) for Nigeria and ECOWAS, what may therefore have been lacking, is the political economy or ‘power grid’ perspective to trade facilitation in Nigeria. Political economy may then be defined as an examination of how political forces influence policies and decision making.

This political economy perspective becomes more obvious when assessing some of the previous significant efforts that largely improved cross border trade in Nigeria. In 2011, the then Minister of Finance who had ‘coordinating powers’ as Coordinating Minster of the Economy, was able to reduce the number of agencies at the ports from 14 to 6. Despite push backs and protests by different interests, the decision remained, due in large parts to the political will and coordinating responsibility. The decision may also account for Nigeria becoming the leading investment destination in Africa within the period of that administration, according to the United Nations Conference on Trade and Development(UNCTAD).It can therefore be strongly argued that statutorily providing FMITI with the political will and stronger coordinating capacities for all relevant agencies, are key for achieving enhanced trade facilitation in Nigeria.

For those who may question the possibility of such political changes, given established and entrenched interests, the fact remains that political will can make it succeed. The NCS was once an agency of FMITI, before being moved to the Federal Ministry of Finance. In contemporary times, the Nigeria Identity Management Commission (NIMC) has been moved from The Presidency to Federal Ministry of Communications and Digital Economy, under the current administration, for effectiveness in delivery of digital economy objectives. Prior to that in September2019, the Niger Delta Development Commission (NDDC) was redeployed from the Office of the Secretary to the Government of the Federation, to the Ministry of Niger Delta Affairs. In the same year, a new Federal Ministry of Humanitarian Affairs, Disaster Management and Social Development was created, and established agencies such as Nigeria Emergency Management Agency (NEMA), as well as Social Intervention Programmes previously under the Office of the Vice President, were redeployed to the new ministry.

As 21 out of the 36 states of Nigeria have either land or sea borders, or both, this political economy approach will also be more sustainable if cascaded to the sub-national level. The National Economic Council (NEC) that is chaired by the Vice President and comprises the 36 state governors, and the Nigeria Governors Forum, can adopt an approach to improving infrastructure investment in rural areas, where land borders are usually located. The political and media pressures that come with liberal democracy means that infrastructure is usually concentrated at state capitals and major towns where they are more visible, at the expense of rural areas where borders are located and cross border trade takes place. The State commissioners and ministries of commerce or trade under this approach become the trade facilitation anchor agencies and leads, at the sub-national level.

This approach will enable states less known for international trade such as Kwara, Benue and Oyo to derive better and inclusive economic development. With this, these states in Nigeria can export processed food and other products to other parts of the continent as a means of valuable non-oil income. It also makes it easier for more states to join league of Foreign Direct Investment earners, as businesses interested in export to Benin Republic (US$14.39 billion GDP), Cameroon (US$39.01 billion GDP), Niger Republic (US$12.91 billion GDP) and Chad (US$11.31 billion GDP), can have these states as manufacturing and operating locations.

There is always a role for technology in such propositions, for effectiveness and efficiency. A portal and information system will be developed, where registered businesses involved in cross border trade can digitally log their complaints. These complaints are then received and addressed by help desks and officials comprising relevant agencies as well as compliance officials across the states, in real time. This portal will also support FMITI in real time management and implementation of trade facilitation across the country.

These proposed sub-national trade facilitation efforts can be periodically assessed by the National Bureau of Statistics, which will conduct and publish surveys on border trade across states, using a methodology that allows for lessons to be learnt and improvements made. Gender will be one of the components of the methodology, as a means of enhancing inclusive growth.

Better understanding of the political economy of trade facilitation, and providing the Federal Ministry of Industry, Trade & Investment with statutory coordination powers for all trade facilitation agencies, with cascading elements at sub-national levels, are required for sustainably enhancing trade facilitation in Nigeria.

Uwanaka writes through [email protected]