Nigeria, like other countries, in order to bolster international trade, is a signatory to various trade agreements and is a member of intergovernmental organisations, with the WTO as one of such.
Nigeria has benefited from its commitments with the WTO by gaining foreign exchange, boosting its revenue and avoiding trade deficits. It increased variety for Nigerians, and Nigerian products compete with global products.
Furthermore, the WTO’s arbiter role through the WTO Dispute Settlement Body has impacted the settlement of international trade disputes with speedy resolution with appeals. Since formation, over 600 disputes have been brought before the WTO, and nearly 90% of disputes reach a mutually agreed solution before litigation. The WTO has also been the background for the birth of other regional trade documents.
On the other hand, WTO commitments limit the market and are a threat to economic autonomy through tariffs. While tariffs may raise government revenue and protect industries from foreign competition, they may also distort local pricing mechanisms, leading to market inefficiencies. These tariffs are paid by domestic consumers and not the exporting country and ultimately increase the prices of imported products in the developing country. Also, high tariffs are maintained on agriculture, which hurts developing economies that face tariff protection.
WTO commitments tend to threaten competition because developed countries with a larger impact on the market are excluded from international competition. Being the more powerful and developed countries, their say on these instruments may seem to favour them in the short term, but in the long term, it causes their own industries to be inefficient because they are heavily dependent on these international instruments, thus being unable to compete. Without competition, there will be low-quality goods, stifling innovation in developing economies.
In adherence to WTO commitments, member states are caught up between their own national interests and compliance with WTO agreements. A good example in this regard is HIV/AIDS treatments and the cost of patented medication. Poor countries are unable to buy patented drugs, and if they were to manufacture these drugs under less expensive labels and administer them to their ailing citizens, these member states would be in violation of intellectual property rights agreements under the WTO.
Regional Trade under the Africa Continental Free Trade Agreement (AfCFTA)
Regionally, Nigeria is a party to the AfCFTA, which boosts continental trade and promotes free circulation of locally made goods within signatories. Its purport is to ensure that locally produced goods move freely without tariffs between member states with the multiplier gains of improved wages and employment, increased productivity, and economic growth.
However, problems have plagued the effective actualization of AfCFTA’s ideals: Finished goods from non-ETLS signatories and substandard consumables flood Nigeria through porous land borders in Benin like Seme, Idi-Iroko, and Northern Nigeria border communities. Here, there is a prevalence of cross-border crimes, as officials and smugglers are involved in bribery and kidnappings, which have worsened the country’s already dwindling security. These problems, particularly smuggling, caused the Nigerian government, in 2019, to shut its land borders to the movement of goods.
Since the re-opening of the border by the Nigerian government, Nigeria has witnessed a significant surge in exports to neighboring countries. In particular, in the second quarter of 2024, exports to Niger Republic skyrocketed by 204%, climbing from N6.72 billion in Q1 2024 to N20.46 billion in Q2 2024. This increase is directly linked to the border reopening, which had previously been closed due to security concerns following the coup in Niger that led to regional instability. Additionally, trade with Benin Republic and Cameroon has picked up, with an estimated 35% rise in agricultural exports, particularly rice and palm oil, fueling cross-border commerce.
While border closure seemed to be Nigeria’s counter to this, it only presented a temporary solution and failed to acknowledge the cost side. Shut borders raised a continental issue as the country is bound by its obligations in international instruments under the principle of pacta sunt servanda as in Article 26 of the Vienna Convention. This then asks: can the ideals and purports of these international instruments be realized if Nigeria, Africa’s largest economy, and a key ECOWAS Member, chooses a protectionist and indiscriminate solution to its border problems? On the flipside, it also asks whether the reckless attitude of neighboring states should be condoned under the guise of “free trade” to undermine Nigeria’s economy. In fact, the border challenge should serve as a means to dominate the region’s trade by developing sound trade policies.
Closing the Trade Gap: Nigeria’s Next Moves
Whilst the WTO is a tool for global governance and a means to enhance global trade, its role in overseeing international trade must evolve to accommodate the economic realities of developing nations. Even as developing economies work towards boosting trade, international commitments should be an aid and not an indirect hindrance. In light of recent economic pressures, Nigeria must strengthen regional trade ties and enhance border security while leveraging international trade agreements to maximise benefits. Unless this is done, it would be difficult to realize the benefits of international trade in Nigeria, and ultimately Africa.
About the Author:
Kolapo Femi-Oyekola is a lawyer at Banwo & Ighodalo. He is a member of the International Bar Association’s Arb40 Committee, the Chartered Institute of Taxation of Nigeria, and the Business Recovery and Insolvency Practitioners Association of Nigeria.
