David Ibidapo, an economic and financial analyst, says for Nigeria to reap benefits of the African Continental Free Trade Area agreement, structural issues in the economy must be addressed.
He said this in an interview with the News Agency of Nigeria on Tuesday in Abuja, adding that signing the agreement was a good move.
Ibidapo said that for an economy to enjoy the benefits of the AfCFTA, it had to have comparative cost advantages, which currently was not the case with Nigeria.
He said: “We do not have that compared to some other African countries because the cost of production of goods in Nigeria is actually high given the structural issues that we have in the economy.
“So the fear is that Nigeria may end up being a dumping ground for goods because if you look at it in terms of export competition with other countries, we may not be able to do that.
“For domestic manufacturers, cost of production is very high and that makes prices very high but these other countries have lesser cost of production which makes us be at a disadvantage compared to them.”
According to him, Nigeria may see a situation where there will be more importation than exportation.
Ibidapo also said that if the Federal Government does not put necessary measures in place to solve the structural challenges in the economy, it may threaten the inflow of Foreign Direct Investments.
He said: “Looking at the Ease of Doing Business, Nigeria is currently underperforming some other African countries in that area as we are 146 compared to South Africa that is 82 and Ghana that is about 114.
“So since AfCFTA means that we will be able to trade among countries, a foreign investor will naturally want to establish his business in those other countries than come to Nigeria where there are lots of structural challenges.
“By locating their businesses in these other countries, they will be able to import their goods into Nigeria since there is a ready market and we know that investors are attracted to Nigeria because of our population.”
Ibidapo said that the effect of this was that Nigeria may see its trade balance being affected so exports would continually thin out.
He said that for the local manufacturers to be able to compete in the market, the government needs to create an enabling environment that would help them drastically reduce their cost of production.
The analyst, however, said that for Nigeria to benefit from the trade agreement there was the need for the government to begin to put in place infrastructure.
Ibidapo also said that issues in the power sector need to be addressed while road network should be improved.
He said: “So while it is a good move for the Nigerian economy, there is the need for us to put our efforts in solving structural issues in the economy or we will not be able to unlock the benefits that this agreement offers.”
NAN reports that President Muhammadu Buhari signed the historic agreement during the opening session of the 12th extraordinary session of the African Union on the AfCFTA on Sunday in Niamey, Niger.
Benin Republic also signed the agreement, making it 54 out of the 55 African countries to sign on, leaving Eritrea as the only one yet to sign on.