Export-focused companies and small businesses in Nigeria are expected to gain from the imminent African Continental Free Trade Area (AfCFTA).
Companies that are likely to take a large chunk of the AfCFTA include: Flour Mills of Nigeria, De-United Foods, British American Tobacco, Indorama Eleme Fertilizer and Chemicals, and Dangote Group.
The Nigerian National Petroleum Corporation (NNPC)/Petroleum Investment Management Company (PPMC) will equally benefit as it has the opportunity to expand export of naphthalene, a chemical product obtained from petroleum distillation. This was Nigeria’s biggest export product in the second half of 2017, said the Nigerian Export Promotion Council (NEPC).
Export-led SMEs, which form at least 80 percent of the lot, can tap into regional export destinations and use them as stepping stones for expanding into overseas markets, experts say.
“Mostly multinationals and large enterprises are in a better position to gain from AfCFTA because their economies of scale will improve. They have the big market and the capacity,” Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), said in a telephone interview.
“The continental trade is more about economies of scale and the amount of what you produce. The higher you produce, the lower the unit cost, which is why small companies will benefit but not as much as large firms,” Yusuf said.
British American Tobacco Nigeria Limited has dominated the tobacco space in Africa, earning $145.48 million in 2017 from exporting tobacco products to Liberia, Guinea, Ghana, Cameroon, Cote D’Ivoire and Niger, according to the CBN Annual Report.
The AfCFTA seeks to liberalise trade among African countries. It is targeted at a ‘borderless’ Africa, with an eye on a single market for goods and services on the continent.
De-United Foods Industries Limited exports noodles to Ghana and Cameroon. In 2017, it earned $30.568 million from exporting to these countries, including the United States. Analysts say the AfCFTA provides an opportunity for companies like De-United to double or triple their earnings with free trade across the continent.
Guinness Nigeria Plc will be a big beneficiary with some of its products selling like cakes in some African countries. The brewer earned $15.06 million just for exporting Malta Guinness and Guinness FES to Ghana and Cameroon, including the United Kingdom.
Dangote Agrosacks Limited sells printed cement sacks (S50 X 69 X 11cm), printed laminated cement sacks to Djibouti, Ethiopia, Ghana, Sierra Leone. It earned $15.5 million in 2017 exporting to these markets.
Beta Glass shipped out bottles estimated at $14.134 million to Sierra Leone, Ghana, Liberia and Cape Verde.
On the flip side, however, the Manufacturers Association of Nigeria (MAN), in its recent assessment of the impact of the AfCFTA, said the AfCFTA would lead to total collapse of output, investment and employment in the sector.
The industry association estimates that import of manufactured products will rise within the 15-year period.
The increase in foreign goods, which would compete with domestic products, would weigh on Nigeria’s output and as firms scale down, employment, income and investment would decline in the country.
