complex relations in the West

Nigeria – Ghana trade tensions: Proof AfCFTA may not bring unity

By ‘Tofe Ayeni

Posted on October 29, 2020 16:53

Ghana’s President Nana Akufo-Addo has limited financial room for manoeuvre. REUTERS/Denis Balibouse

The African Continental Free Trade Area (AfCFTA), initially meant to rollout in July of this year, was created to solidify economic regional cooperation within the continent.

But looking to the complex trade relations already brewing in West Africa, many of the problems the AfCFTA is likely to face on the continent are already being highlighted.

West African governments, particularly the administration in Nigeria led by Muhammadu Buhari, have shown signs of leaning towards economic nationalism and protectionism – protecting people and property above all, with a fear of foreign competition. In addition, the path towards a singular currency in the region has not been without dispute.

Looking at the trade relations between Nigeria and Ghana – the two economic giants of West Africa – in recent years, it is clear that trade relations are strained, with the actions and reactions from both sides drawing them further away from cooperation.

Underlying problems

As Ikemesit Effiong, Head of Research, SBM Intelligence Lagos notes: “Many countries on the continent have preferential trade agreements with former colonial powers. The challenge for those at the vanguard of driving intra-African trade has been to topple some of these long-standing agreements.”

READ MORE Nigeria agrees to sign up to African free trade zone

He adds: “Nigeria was one of the last countries to sign up [to the AfCFTA], as it had reservations about the potential for exports from other African countries to crowd out local players.”

Ghana and Nigeria

Ghana and Nigeria have increasingly – though cautiously – traded with each other, and in recent years this has expanded to more than $2.6bn. However, much of this is in the informal sector, so accurate figures are rare.

But tensions have been high between the two countries since Nigeria partially closed its borders with Cameroon, Benin and Niger without warning in August 2019.

READ MORE Nigeria’s border closure bad omen for Africa’s economic integration

At the beginning of 2020, the Ghana Union of Traders Association (GUTA) instructed the closure of some Nigerian-owned shops.

Although the government intervened, Joseph Obeng, the president of GUTA, expressed disapproval, saying: “If Nigerian authorities are saying Nigeria first, Ghanaian authorities should also say Ghana first.”

The situation, Effiong says, was one whereby “Nigeria is 60/65% of West Africa’s GDP – a huge market for West African States. For economies like Cameroon, Niger and Republic of Benin, Nigeria constitutes a huge chunk of the economic activity that occurs within those countries.” He adds that the closure, “upended trade movements and longstanding contractual agreements.”

Since Nigeria and Ghana do not share any borders, but many Ghanaian traders who cannot afford to go abroad to places like China heavily rely on Nigeria for supplies.  Ghanaian traders and drivers depend on the Abidjan-Lagos Highway for overland access to markets across the region, and the border closure made passage impossible.

Since the border closure, there have been reports of mistreatment of Nigerians living in Ghana, but authorities deny that Nigerian traders were being specifically targeted.

Demolition of Nigerian High Commission building in Accra

However, on 19 June 2020, armed men entered the compound of the Nigeria High Commission in Ghana, and destroyed buildings under construction. Nigeria’s Foreign Minister Geoffrey Onyeama described the vandalism as “outrageous and criminal” and urged the Ghanaian authorities to ensure that they protect Nigerian diplomatic buildings.

Nigerian residents in Ghana held a demonstration calling for the local government to take action. The former president of Ghana, John Dramani Mahama, said: “It beats my imagination how such a violent and noisy destruction could occur without our security agents picking up the signals to avert the damage.”

Ghana’s President T apologised, and two individuals were charged with unlawful entry and causing unlawful damage. Although an article posted on the Nigerian High Commission website in Ghana places responsibility with a businessman who had previously claimed he owned the land where the building was being built, Nigerians living in Ghana still took to the streets to protest for their protection.

The Ghanaian foreign ministry also promised that security had been “beefed up” at the facility.

President Buhari – Economic nationalism versus ECOWAS

Nigeria has long felt taken advantage of by ECOWAS, and the current administration of President Buhari subscribes to policies of economic nationalism and protectionism.

READ MORE Nigeria takes drastic measures to ensure local rice production

The Nigerian government gave good reason for the border closures, as they spurred local production and reduced arms smuggling. The Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, even believes that if the closure is sustained for two years, it is capable of tackling various security challenges currently at play.

It is important to note that no clear date has been provided for the opening of the borders. However, Vice-President Yemi Osinbajo, told The Africa Report: “We are working with our neighbours to see on what terms we would reopen those borders. At the moment, we are undertaking joint border patrols to control smuggling along the borders and we think it is working and I’m sure that soon enough we should have the borders opened.”

READ MORE Nigeria’s Bouncing Back plan, with Vice President Yemi Osinbajo

The administration believes that the best way forward to help the economy is to develop locally-made products and services, in order to grow the economy.

These moves towards protectionism have been met with some backlash from ECOWAS and the African Union, institutions that push for regional cooperation, especially with regards to trade.

Is Ghana innocent?

While it’s easier to quickly point a finger at Nigeria as the aggressor, given it is the bigger country who opted to close its borders, therefore creating a ripple effect in the smaller economies, Ghana also has laws that clash with ECOWAS protocol, which ensures the free movement of the community’s citizens, as well as free and fair trade.

The 2013 Ghana Investment Promotion Centre Act (GIPC) is one such Act. It prioritises the interests of Ghanaian traders and business owners by designating certain enterprises be run only by its citizens, whereby foreigners wanting to set up shop in Ghana must have a minimum equity capital of $10,000. That alone limits the number of foreigners – particularly from the poorer surrounding West African countries – who can successfully work in Ghana.

Effiong believes that: “Our neighbours are increasingly willing to suffer economic hardship to make a point,” referring to Cameroon earlier this year banning “the exports of wheat and millet to Nigeria, even though the Nigeria-export trade was about half of all cereal sales over there in Cameroon.”

READ MORE Nigerians hungrier now, thanks to Buhari’s policy on food imports

Cameroon’s example proves that it too can impact Nigeria and ultimately, cooperation has to be a two-way street. Perhaps if more countries followed suit, Nigeria will be forced to reopen the borders.

What will happen

Few expect to see the types of tensions witnessed in the 1980s, when Nigeria expelled two million undocumented West African migrants, half of whom were from Ghana.

But it’s important to note that tensions are not only alive and kicking between Nigeria and Ghana. Nigeria and Côte d’Ivoire are also disputing over the proposed regional currency, the Eco. Anglophone West Africa feels blindsided by the Francophone countries, who have discussed the currency to length with France, and Ivorian President Alassane Ouattara seems determined to spearhead the switch to the Eco for the region.

READ MORE Replacing CFA with Eco ‘challenges the sovereignty’ of Nigerian naira

As Ghana prepares for its general elections set for 7 December, it will be worth watching incumbent President Akufo-Addo to see if he changes his campaign focus from inward policies, of health, education and rehabilitating the economy, to those that focus more on regional cooperation, thereby lifting Ghana out of the growing tensions.

READ MORE Ghana: Akufo-Addo and Mahama go head to head in December

COVID-19 has arguably pushed many countries towards concentrating on themselves, as many economies have been negatively affected in a shocking manner. Although the AfCFTA is still expected, it will be interesting to see how long it is postponed for, and if all countries retain the same level of willingness, or if they will prefer to ensure they can stand on their own, lest the world is shocked with another pandemic-like situation.

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.