Breaking the Impossible code: Excelling in the mist of inhibition. The African Growth and Opportunity Act (AGOA) - Developing an African Growth and Opportunity Act (AGOA) Country Strategy for West Africa’s Leading Giant (summary)
The African Growth and Opportunity Act (AGOA) is a non-reciprocal preference programme that gives duty-free and quota-free access to the United States of America (USA)’s market for eligible sub-Saharan Africa (SSA) countries. It was enacted 18th May 2000. AGOA was extended for 10 years to 2025 by the immediate past United States (U.S.) President Barack Obama in June 2015 when he signed the Trade Preferences Extension Act (TPEA) of 2015 into law. Fortunately, Nigeria has been one of the eligible SSA countries since the inception of AGOA. The eligible AGOA products include agricultural products, forest products, chemicals and related products, energy-related products, textiles and apparel, footwear, minerals and metals, machinery, transportation equipment, electronic products and miscellaneous manufactures. However, given Nigeria’s weak export base, her benefits have not been impressive.
Stemming from the above background, this write up examines the status of AGOA implementation in Nigeria, evaluates the performance using some macroeconomic indicators, and provides recommendations on how the country can fully harness the latent opportunities in AGOA. In achieving the general objective, the following research questions are posed: (a) How has Nigeria benefited from AGOA compared to other West African countries? (b) How has AGOA impacted on Nigeria’s trade outcomes? In what ways have the sectors in Nigeria benefited from AGOA participation and what lessons can be learnt? © What are Nigeria’s major export products under AGOA and what strategies are put in place to enhance performance? (d) What are the capacities issues facing AGOA implementation in Nigeria? (e) What are the similarities and differences between AGOA and other Nigeria’s trade preferences?
Using the mixed method technique, the following, among others, are the key findings that emanated from the study.
i) Despite the privileged economic relation with the U.S. and her resource endowment in the area of trade, Nigeria is largely dependent on oil exports, with very little diversification, which severely limits the benefits derived from AGOA’s initiative.
ii) The issues relating to Nigeria’s economy centering on oil, and perceived lack of adherence to standards and product packaging methods as well as weak manufacturing base and infrastructural challenges, among others, can be said to have affected Nigeria’s opportunity of riding on the crest of AGOA with respect to trade competitiveness.
iii) In the years of AGOA implementation, Nigeria performed less than expected in the textiles & apparel, agricultural products and mineral & metals sectors, which are the sectors with huge potential to diversify her economy considerably from the dependence on oil.
iv) High cost of production, lack of adherence to contractual terms, and ignorance of local and USA customs regulations were identified as some of the hindrances to the export capacities of most Nigerian SMEs.
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Looking at Nigeria’s trade position before the commencement of AGOA (pre year 2000), during AGOA (2001–2015), and the extension period (2016–2017); it was observed that the highest positive trade balance of $32.4billion was recorded in 2008 compared to the value of $4.8billion in 1999 before the commencement of AGOA. Though, data for the extended period is limited, the trade balance for post-2015 was $3.17billion in 2017. Thus, the study submits that Nigeria has the ability to improve its export performance under AGOA given the considerable untapped potential in other AGOA product sectors.
Hence, the extension of AGOA to 2025 offers Nigeria another opportunity to develop her capacities, diversify her production and exports to fully utilise the opportunities that AGOA provides. To make the aforementioned a reality, all relevant stakeholders have roles to play. Thus, some recommendations are made, which are briefly surmised herein:
a) The Nigerian government should expedite sectoral diversification in order to diversify revenue, reduce import dependency, create jobs, assist poor households and develop the rural areas, which will boost agricultural value-chain and drive economic diversity.
b) In a bid to improve efficiency, the government should create regulations in reforming customs processes and invest in technology to lower costs.
c) SMEs’ advocacy initiatives should be designed and executed in Nigeria to address youth unemployment and increase Nigeria’s participation in the AGOA trade initiative.
d) The government should intensify its promotion of joint ventures and public private partnerships in industries to boost her production capacities.
e) On the issue of standardisation, the government should invest in workshops and forums with manufacturers of different scales to impress on them the need for product standardisation and, beyond the sensitisation, provide necessary infrastructure to facilitate their operations.
f) Institutional weakness should also be addressed by reducing the bureaucratic loops for the exporters and avoiding systemic frustrations.
g) Financial support programmes for the promotion of local investments in the identified sectors through mechanisms such as venture capital funds should be established, which requires concerted efforts from the government and the private sector.
h) The private sector should show more interest in participating in AGOA by adjusting product standards in consonance with global best practices and undertake self-AGOA export readiness assessments.
i) Firms should avail themselves international partnerships as well as the formation of strategic export clusters and alliances among Nigerian firms, which would enhance their capacities.
j) The U.S. government should actively engage and support Nigeria’s initiatives to boost her production capacities to fully benefit from AGOA by ensuring that U.S. buyers support the capability-building efforts of Nigerian suppliers as well as through facilitating USA-Nigerian private sector commercial dialogue to promote partnership in bankable AGOA projects.
k) Other stakeholders like the academia, civil society organisations, and development organisations should spur more awareness on timely market information and projections to enable strategic production by AGOA-based producers and exporters in Nigeria.
- Introduction — Background Issues
Nigeria is considered as the giant of the African continent, not only in size, as she is the country with the largest population in Africa, but also, due to the role the country occupies economically and politically, on the Continent. Evidence shows that, at least, two of ten persons in Africa are Nigerians.
Nigeria is located in West Africa with a population of approximately 186 million people (2016 estimates). It covers a land area of 923,768 square kilometres. It is bordered by the Gulf of Guinea to the South, Benin Republic to the West, Cameroon and Chad to the East, and Niger Republic to the North. It has Lagos as its major commercial centre, which is also known to be among the most populous cities in the World, and the Federal Capital Territory (FCT) Abuja as its administrative capital.
Despite the privileged economic ties with the United States of America (USA), Nigeria is still facing the major challenges of economic development and shared prosperity, among others. Moreover, even with its “seemingly unlimited” oil wealth, the country continues to house many poor people.
Nigeria recorded a remarkable US$52 billion in oil revenues for 2011 but is uncharacteristically ranked 152 out of 186 countries on the Human Development Index (HDI) with a score of 0.53 in 2015 . An estimated 70% of Nigerians live below the poverty line (World Bank, 2018).
In the area of trade, Nigeria is largely dependent on oil exports, with very little diversification. For instance, under the African Growth Opportunity Act (AGOA) which offers opportunity for beneficiary countries to export over 6,000 products to the U.S., 90% of Nigeria’s export under this trade promotion initiative is in oil. Relations with the U.S. has not yielded the expected impact, though there are immense opportunities for economic development and shared prosperity (Brenton & Hoppe, 2006). Notwithstanding the fact that Nigeria is recognised as one of the largest exporters of crude oil, the country imports approximately $10 billion in refined fuel annually (about 156,000 barrels per day according to Organisation of Petroleum Exporting Countries-OPEC data) for domestic usage. Furthermore, the country periodically suffers from severe fuel and electricity shortages.
The relatively satisfactory economic performance of African countries, the discovery of various natural resources, and the relative political stability have elicited interest of many countries in the world including the USA, the European Union (EU), China, Russia, India, Japan, Brazil, among others. The establishment of multilateral frameworks with Africa has become a major feature in international relations among major economic powers and various regional economic communities as they strive to deepen their economic cooperation and address the challenges faced in a globalised world (Osabuohien, Beecroft & Efobi, 2018). Multilateral arrangements are becoming important means for addressing development issues including trade, investment, infrastructure, science and technology, peace and security, agriculture, health, capacity building, information and communication technology. Some of the multilateral frameworks between Africa and other major powers and/or regional economic blocs include the Forum on China-Africa Cooperation (FOCAC), India-Africa Forum, Tokyo International Conference on African Development (TICAD), EU-Africa summit and Arab-Africa Summit (African Capacity Building Foundation-ACBF, 2017).
Signed into law on 18th May, 2000 as Title 1 of the USA Trade and Development Act 2000, AGOA is a non-reciprocal and unilateral preference programme that provides duty-free, quota-free access to the USA market for qualifying goods from eligible sub-Saharan Africa (SSA) countries not included for duty-free treatment under the Generalised System of Preferences (GSP). On 29th June, 2015, President Obama signed into law the Trade Preferences Extension Act (TPEA) of 2015, extending AGOA for 10 years through 2025 (Froman, 2016). Section 104 of AGOA sets requirements that a beneficiary country is expected to meet in order to qualify for AGOA. The key requirements to note include:
A market-based economy upholding the rule of law, political pluralism, and the right to due process;
a. The elimination of barriers to USA trade and investment; economic policies to reduce poverty;
b. A system to combat corruption and bribery; and
c. The protection of internationally recognized worker rights.
AGOA has been at the centre of USA’s trade and Investment policy towards sub-Saharan Africa (SSA). By providing duty free and quota free access for over 6,400 products from eligible countries in Africa, AGOA builds on the market access provided by the USA under the GSP and expands these preferences in favour of SSA. Information on trade volumes of Nigeria and other West African countries to USA under AGOA are …
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