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Does the Kenya-US free trade deal signal Nigeria’s fall from grace?

By Oluwatosin Adeshokan
Posted on Thursday, 20 February 2020 15:13

Nigeria's President Muhammadu Buhari is seen at the opening of the 33rd Ordinary Session of the Assembly of the Heads of State and the Government of the African Union (AU) in Addis Ababa
Nigeria's President Muhammadu Buhari is seen at the opening of the 33rd Ordinary Session of the Assembly of the Heads of State and the Government of the African Union (AU) in Addis Ababa, Ethiopia, February 9, 2020. REUTERS/Tiksa Negeri

Nigeria has not managed to convince international investors - including those in the US - that it should be first in line for a post-AGOA deal.

The government of Kenya and the United States of America plan to sign a free trade agreement (FTA), continuing the duty-free access Kenya has to the US market.

It’s a first in sub-Saharan Africa, and patriots in Nigeria were surprised that the East African nation with a GDP of $100bn was chosen over the West African nation with a GDP of $450bn.

While some see the FTA with Kenya as a way for Washington to counter Chinese influence in East Africa, others say Nigeria was excluded because it is not exactly a good trade partner.

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Why it matters

After enjoying recognition as the giant of Africa and the biggest economy in sub-Saharan Africa, Nigeria may have reached the end of its run.

There have been a string of foreign policy losses:

  • France taking over the conversation about the West African eco, ignoring the agreements of ECOWAS heads in Abuja,
  • The delaying signing the AfCFTA agreement, instead of spearheading the agreement,
  • Losses against the so-called Islamic State,
  • Strained relations with its neighbours especially in Ecowas – such as Benin

Recently, Nigeria landed on Donald Trump’s infamous Travel Ban 2.0, a testament to the declining fortunes of the once most important African country.

Background

Following the impending expiration of the African Growth and Opportunity Act in 2025, which allows many African countries to export goods to the USA without quotas or tariffs, African nations need to negotiate new deals with the USA. After a successful 15-year agreement period, the Act was renewed for another ten years in 2015.

It does not seem like the act will be renewed.

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Nigeria seemed like the prime candidate for a free trade agreement with the United States based on the agreements of the African Growth and Opportunity Act. However, the current policies of the country seem not to indicate it’s not good enough as a trade partner for many of its partners.

Adedayo Bakare, an economist and investment researcher at Afrinvest stated the bulk of the trade policies the federal government and Central bank are taking are textbook protectionist and will long term discourage investors from coming to the country.

“Nigeria’s import substitution policy and shutting the land borders are sending negative signals to investors and countries saying Nigeria is not open to trade,” said Bakare.

Doing business in Nigeria is a challenging task and as other countries are presenting themselves as better investment destinations, Nigeria’s global appeal as a big market continues to dwindle.

“The foreign policy and diplomacy wins of the Obasanjo administration have gone down the drain. The reactionary stance this current government takes to everything makes it difficult for trade inside and outside the country,” trader Emeka Onyekachi told The Africa Report.

For Onyekachi, losing access to the ECOWAS market where he usually trades, will mean there would be no reason for any country to respect or want to do business with Nigeria.

Perhaps the greatest indicator that Nigeria is not excited about trade deals and trading with neighbours was its delay in signing the AfCFTA. The AfCFTA has still not been ratified by the Nigerian parliament.

But all is not lost. According to Bakare, the country is still prime for several investments.

Despite the banning of commercial motorcycles that jeopardises investments worth over $100 million (93 million euro) in Lagos, there are still several avenues for investment in the country.

“Oil has and will always be lucrative for Nigeria, but perhaps the tech sector is one of Nigeria’s hidden gems. Fintech, in particular, has proven to be a good market for the country with innovation and investment finding homes in Nigeria,” said Bakara.

READ: 3 Myths about Nigeria’s FinTech Sector

The lack of regulation in the renewable energy space, also mean there is enough room for that market to grow.

Fintech in Africa has attracted investment worth over $679 million (629 million euro) in 2019 with the bulk of it coming to Nigeria. Getting the country on to the internet is a big venture that is certain to bring in investments in 2020.

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