President Muhammadu Buhari nominated Dr Ngozi Okonjo-Iweala and, before her, Dr Yonov Frederick Agah as Nigeria’s candidate for the Director-General of the World Trade Organisation, WTO. But does Nigeria believe in the objectives of the WTO, and does President Buhari share the economic views of Dr Okonjo-Iweala and Dr Agah? Alas, the answer is no! While the WTO and both Drs Okonjo-Iweala and Agah espouse liberal economic ideas, Nigeria and President Buhari have entrenched protectionist worldview.
The preamble of the WTO Treaty says the organisation is committed to “the substantial reduction of tariffs and other barriers to trade.” The WTO is, thus, a trade liberalising organisation, and its members are expected to reduce, even eliminate, barriers to trade. However, for decades, Nigeria’s trade policy has run contrary to the objectives of the WTO. With excessively high tariffs and the impulse to prohibit imports, Nigeria’s trade regime is characterised by entrenched protectionism.
Under the WTO, Nigeria’s trade policy is reviewed every seven years. Since the WTO was created in 1994, it has reviewed Nigeria’s trade policy four times: first in 1998, then 2005, 2011 and 2017. After each review, Nigeria’s trade policy was found to be more protectionist than in the previous review. For instance, following Nigeria’s second trade policy review in 2005, the WTO noted: “Since its last Trade Policy Review (TPR) in 1998, Nigeria’s trade regime has become more protective”, with “a 10-fold increase in products covered by import bans”.
The fact that 270 written questions were sent to Nigeria ahead of its trade policy review shows how concerned other WTO members were about its trade policy regime
In 2017, Nigeria had its fourth and last trade policy review, to date. The subsequent WTO’s report confirmed Nigeria’s reputation for entrenched protectionism. According to the WTO, Nigeria, under President Buhari’s administration, maintains high tariffs rates and numerous additional duties and charges on imports; keeps longstanding import prohibition lists; maintains a list of 43 imports excluded by the Central Bank of Nigeria (CBN) from accessing foreign exchange from the official window; and imposes several non-tariff barriers.
Before the trade policy review was conducted in 2017, other WTO members sent 270 advance written questions to Nigeria. These questions related to the complexity, restrictiveness and opacity of Nigeria’s trade regime. The fact that 270 written questions were sent to Nigeria ahead of its trade policy review shows how concerned other WTO members were about its trade policy regime.
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But all this raises the question: Why did Nigeria want its citizen as the Director-General of the WTO when it doesn’t believe in what the WTO stands for progressive liberalisation of trade? This is not an irrelevant question, because Nigeria’s entrenched protectionism and resistance to reforms could cause Dr Okonjo-Iweala embarrassment as she tries to push for more reform and trade openness by WTO members.
Of course, Dr Okonjo-Iweala became the DG of the WTO in spite of, not because of, Nigeria. Truth is, although every candidate for the DG job must be nominated by his or her country, and although the influence of a candidate’s country matters, WTO members would, ultimately, select a candidate because of his or her qualities, not his or her country.
Surely, if it’s about a candidate’s country, the South Korean candidate would have been chosen. In 2019, South Korea self-designated itself as a developed country in the WTO, thereby dropping its developing-country status, so that it could accept higher obligations. By contrast, Nigeria is behaving like a least-developed country and doesn’t even meet its current WTO obligations, let alone accept higher ones. The Nigerian candidate got the DG job, not because of Nigeria but, rather, because of her global profile and perceived qualities, particularly in relation to international negotiations and policy and institutional reforms.
Yet, it’s ironic – isn’t it? – that President Buhari nominated Dr Agah and, later, Dr Okonjo-Iweala for the WTO DG job, but doesn’t share their economic views or believe in their advocacy of trade liberalisation and open markets.
Take Dr Agah. As Deputy Director-General of the WTO for nearly eight years, since 2013, he went round the world advocating trade openness. For instance, in one speech, he said: “Open and predictable markets are key to fostering economic recovery.” In another, he said: “Trade has a role to play in making the Covid-19 response more effective.” But does President Buhari believe in this? Does he believe in “open and predictable markets”? Does he believe that trade is key to reducing poverty and inequality? Surely, given his penchant for banning imports and closing borders, he doesn’t share Dr Agah’s economic views, yet he nominated him, initially at least, for the WTO top job, a decision devoid of conviction.
Then, take Dr Okonjo-Iweala. For a start, she is not a fan of President Buhari’s economic policies. She blamed him for the recession of 2016. In her book “Fighting Corruption is Dangerous”, she said: “As oil prices continued their downward trend in 2015 and 2016, economic policy responses were inadequate or outright wrong”. Adding that “a disjointed monetary and exchange rate policy damaged investor confidence, led to capital flight, and ultimately led to economic recession for the first time in two decades”. She also criticised the Buhari government for not heeding IMF’s constant call for structural economic reforms.
Unsurprisingly, Dr Okonjo-Iweala’s views on trade policy are pro-liberalisation. For instance, she argued in her other book “Reforming the Unreformable” that “a country’s trade policy and its degree of openness matter.” During her campaign for the WTO DG job, Dr Okonjo-Iweala made powerful statements, in articles and in videos, arguing strongly in favour of free trade. And, in a recent interview after assuming office at the WTO, she said one of her priorities was to promote trade as a tool to boost economic recovery, adding: “How can we liberalise trade to ensure supply chains stay open and work, and that countries can produce more and sell more so that we can have a freer flow of goods and intermediate products.”
But these are not President Buhari’s views on trade. Certainly, it’s not his views that there should be a “freer flow of goods and intermediate products”, otherwise the CBN wouldn’t have banned importers of 43 consumer and intermediate products from accessing foreign exchange through the official window.
Of course, the aim of Nigeria’s trade policy is to discourage imports and encourage local production so as to achieve its objective of self-sufficiency and import-substitution. But this undermines the objectives of the WTO, of the ECOWAS Trade Liberalisation Scheme and of the African Continental Free Trade Area, AFCFTA, all of which exist to reduce barriers to trade.
But banning imports does not mean that a country will have trade surpluses with other countries. For instance, as recent data from the Nigeria Bureau of Statistics (NBS) showed, despite all its import bans and trade restrictions, Nigeria had a trade deficit of N7.4trillion in 2020, representing a 436% decline relative to 2019. Broken down further, the figures showed that imports rose by 17.1% in 2020, while exports fell by 34.9%.
Thus, Nigeria’s trade-restrictive policy has not significantly reduced imports, its overall objective, but has significantly reduced exports, the same point that the WTO made following its review of Nigeria’s trade policy in 2017.
Yet, that’s not surprising. Protectionism creates anti-export bias within protected domestic industries. It also reduces the incentives for trade promotion because once a government opts for import-substitution, which requires protectionism, it can’t credibly pursue export-orientation, which requires trade liberalisation. Truth is, being an oil-dependent country, Nigeria is doing little to increase its productive and trade capacities for non-oil exports.
But the irony is striking. Despite its entrenched protectionism, Nigeria is a member of all the trade-liberalising organisations–ECOWAS TLS, AfCFTA and the WTO. Indeed, its citizen now heads the WTO. Nigeria’s Janus-faced approach to trade is damaging reputationally. It must stop paying lip service to open markets!
