By Chris Echikwu
The African Continental Free Trade Agreement (AfCFTA) is a negotiated rules-based system to establish the rule of law in trade, deepen and expand intra-Africa trade from its very low base of 14% to an estimated 52.3%, covering a market of 1.2 billion Africans with a combined GDP of US$2.5 trillion.
Nigeria is the largest economy in the continent and thus is expected to benefit the most from the implementation of the trade agreement.
Presently, Nigeria’s main agro-commodities exports include cocoa ($621m), nuts and Cashew ($267, 258, 908), oil seeds ($261, 651, 472) and rough wood ($243, 549, 598), apart from other niche commodities like Hibiscus flower, animal leather and bone, etc.
NCX is the federal government platform established to facilitate efficient and transparent trading in agro-commodities and is well positioned to facilitate Nigerian commodity traders’ operations under AfCFTA in the export of the commercially viable commodities, some of which have been enumerated above. To achieve this mandate, the exchange has put in place the structures cataloged below:
Operational structure
Established a network of 20 licensed Delivery Warehouses across the major production areas located in the six geo-political zones in Nigeria for the purpose of efficient delivery, collection and storage of agro-commodities to be traded on the exchange. The states include Zamfara, Kano, Kaduna, Nassarawa, Benue, Bauchi, Sokoto, Plateau, Ebonyi, Ekiti and Kogi, while others in Adamawa, Gombe, Taraba, Jigawa, Edo, Cross River and Ondo, etc, will be rolled out by 2021. The combined capacity of the warehouses is about 50,000MT;
Established fully equipped Quality Assaying Laboratories in each of the Delivery Warehouses for the purpose of testing the quality parameters of commodities such as Paddy rice, Cocoa, Sesame seed, Soya beans, Maize, Sorghum, Cashew nut, etc, that are traded on the exchange;
Acquired a robust Trading Application System for seamless buying and selling of commodity contracts to ensure market integrity, price transparency and the facilitation of cross border trades;
Acquired a Warehouse Management System that assures an efficient management of warehouse inventories. The NCX Warehouse Management System is linked with the Central Securities Settlement System (CSCS) which provides depository functions that enables settlement of trades, both cash settlement and commodity delivery. The exchange has commenced the process of on-boarding on the Nigeria Inter-Bank Settlement System (NIBSS) platform for market integration and to enhance settlement of trade transactions;
Acquired a Mobile Application which is a hand-held device that is enabled by android and ios operating systems;
Established a Market Information System for the collection, collation and analyses of commodity price and market information/intelligence from the major commodity markets in Nigeria for the benefit of relevant stakeholders. NCX officers who are designated Market Information Officers (MIOs) have been posted to identified prominent production and consumption/market locations in each geo-political zone in the country; the Market Information Centers will evolve into Remote Access Centers where stakeholders could access full NCX services in terms of trading, sourcing relevant information on trading operations as well as interacting with market actors from within and outside Nigeria, etc;
Perfected Memoranda of Understanding (MoU) with relevant foreign and Nigerian Commodity Associations to trade selected agro-commodities, including CCFNA of China, Ethiopia Commodity Exchange and Export Merchants Association of Sudan.
Quality Standards
NCX Quality Control department is headed by professionals who are certified by the Institute of Public Analysts of Nigeria (IPAN), while the exchange main laboratory in the headquarters is being rigorously upgraded for ISO22000 certification that combines ISO 9001 to Food Safety Management and Hazard Analysis, including Critical Control Point System (HACCP) that identifies specific hazards and proffers measures for the control of identified impurities in the food processing sector.
In addition, NCX has deployed requisite state-of-the-art equipment for the Quality Assaying laboratories situated in each Delivery Warehouse of the exchange, while staff of the Quality Control department regularly participate in requisite professional courses and programmes that would ensure that they are updated on latest developments in the industry both within and outside the country.
Benefits of AfCFTA operations
Notwithstanding the dearth of reliable data on volumes of intra-continental trade in commodity-specific terms, is it estimated the AfCFTA will impact the continent in the following ways:
Ø Stakeholders in the commodity trading sector (producers, merchants, logistics services, financial services, government agencies, etc) would be availed of an efficient and transparent platform for their operations under AfCFTA,
Ø Utilizing the NCX trading platform would assist in efficient capture of hither-to unreliable data on trade in agricultural and solid mineral commodities from Nigeria,
Ø Total commodity export from the continent would increase by about 29%,
Ø Intra-continental exports would increase by 81%, while exports to non-African countries would rise by about 19%,
Ø Export of manufactured goods would gain about 62% with intra African trade increasing by at least 110% and exports to the rest of the world is envisaged to grow by about 46%,
Ø Agriculture would record 49% intra-Africa trade and 10% extra-Africa trade,
Ø Services trade would record a modest 4% gain overall and 14% within Africa,
Ø Lift an estimated 30m people from extreme poverty and about 68m people out of moderate poverty,
Ø Achieve net increase in proportion of workers in energy-intensive manufacturing jobs, while
Ø Employment in the agricultural sector would increase by 60% in member countries, with wages for skilled and unskilled workers in same sector would increase by an estimated 9.8% and 10.3%, respectively.
Challenges for Nigerian manufacturers and farmers in the implementation of the agreement
- Nigerian farmers and manufacturers are likely to be faced with the challenges on the global competitiveness index as a result of high cost of production, poor yields, low capacity utilization and high prices, etc.
- The issue of tariff on agro-commodity exports from Nigeria should be addressed to increase efficiency of trade flows.
- There is also the need for Nigeria to improve its ranking on the World Bank Ease of Doing Business Ranking index from its current 131st position using focus indicators such as paying taxes, trading across borders, starting a business and connecting minority investors, in line with the goal of the Presidential Enabling Business Environment Council (PEBEC) to be among the top 70 among a total of 190 countries.
Conclusion
ACFTA is an important and strategic platform that would serve to enhance the economies of African countries, especially in view of the ongoing adverse effects of Covid-19 on the world, as it will boost intra-African trade, thereby also mitigating a rapid decline in the GDP of African countries; the establishment of the continental trade bloc will be beneficial to African countries, if properly managed.
Nigeria Commodity Exchange is well positioned to enable domestic commodity producers, merchants as well as local, state and federal government of Nigeria to effectively participate in the trade agreement for the benefit of the national economy.
Echikwu is the Head, Corporate Communications & Strategy of Nigeria Commodity Exchange