Nigeria joins regional agreements to boost trade

Nigeria has prioritised improving its business climate in recent years, with an emphasis on developing its logistics and trade facilities. These efforts have paid off, with the country having the 10th-most improved ranking in the 2020 edition of the World Bank’s ease of doing business index. Improving 15 places from 2019, Nigeria’s overall score placed it 131st out of 190 countries in 2020 on the back of gains in six out of the 10 categories – including trading across borders. In this area, Nigeria’s ranking rose from 182nd in 2019 to 179th in 2020, with the most significant gains seen in compliance for exporting and importing, which improved from 119 to 74 hours, and 144 to 120 hours, respectively. Hours for border compliance showed smaller gains, and costs associated with both exporting and importing remained stable.

Challenges

While government efforts have improved the business climate, challenges remain. These include the cost of cargo clearance, duplicated tariffs, delays in scanning and physical examinations, cargo dwell times, congestion on port access roads, block stacking of containers, a shortage of holding bays and trailer parks, and lengthy procedures. The breakdown of scanners, for example, has led to physical examinations that result in delays on moving goods and high costs. According to Lucky Amiwero, president of the National Council of Managing Directors of Licensed Customs Agents, government agencies do not coordinate when it comes to pricing and procedures, adding to costs and delays. Nigeria is working to address such challenges through investment in its maritime infrastructure, such as the construction of the Lekki Port in Lagos, which is expected to ease congestion and help meet higher levels of expected container demand (see overview).

Trade Area

Challenges related to trade remain, but it is hoped that the African Continental Free Trade Area (AfCFTA) will enhance trade throughout the region. Indeed, it is projected that the removal of tariffs will boost intra-African trade by 15-25% between 2021 and 2040. The AfCFTA came into effect on January 1, 2021, and by February of that year all members of the African Union (AU) except for Eritrea had joined and 36 had ratified the agreement.

Ratified by Nigeria in December 2020, the AfCFTA allows for the free movement of business travellers and investment between members, and creates a unified Customs union to streamline trade on the continent. Public and private investment in Nigeria’s supply-chain infrastructure will be central to handling the expected increase in cross-border trade, as enhanced seaports, airports, railways and roads could help keep logistics costs down, as well as bolster the country’s position as a redistribution centre for cargo arriving from Europe or the Americas. Moreover, it will be necessary for all signatories to not only improve physical infrastructure, but also regulations and the business climate. These changes include harmonising dispute resolution procedures and intellectual property rights, boosting government transparency and streamlining trade procedures.

Air Transport

Another agreement expected to improve regional logistics is the Single African Air Transport Market (SAATM). Originally adopted in 2015 by 23 countries including Nigeria, SAATM was launched in January 2018 to harmonise regulatory framework, and boost trade and tourism. As of early 2021 there were 34 signatories, representing over 80% of the continent’s aviation market. SAATM is central to the AU’s Agenda 2063, a strategy adopted in 2013 to facilitate good governance, economic development and integration. According to a July 2014 report from the International Air Transport Association, if 12 key countries, including Nigeria, in four sub-regions liberalised their aviation sectors, passenger movements would increase by 81% from 2013 levels, from 6.1m to 11m passengers; 155,100 jobs would be created; and $1.3bn in tourism spending would be generated.