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How Africa’s free trade pact can boost regional economy

by with No Comment Business

Again, the need for inter-African trade has been stressed by the World Bank as it says the African Continental Free Trade Area (AfCFTA) could boost regional income by 7 percent or $450 billion, speed up wage growth for women, and lift 30 million people out of extreme poverty by 2035, if implemented fully.

The World Bank said in a new report on Monday.

In addition, experts say the trade pact will position Nigeria’s firm to compete better in the continental and global markets.

AfCFTA represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion.

The report suggests that achieving these gains will be particularly important given the economic damage caused by the COVID-19 (coronavirus) pandemic, which is expected to cause up to $79 billion in output losses in Africa in 2020. The pandemic has already caused major disruptions to trade across the continent, including in critical goods such as medical supplies and food.

Most of AfCFTA’s income gains are likely to come from measures that cut red tape and simplify customs procedures. Tariff liberalisation accompanied by a reduction in non-tariff barriers—such as quotas and rules of origin—would boost income by 2.4 percent, or about $153 billion.

The remainder—$292 billion—would come from trade-facilitation measures that reduce red tape, lower compliance costs for businesses engaged in trade, and make it easier for African businesses to integrate into global supply chains.

It could be recalled that initially, the Manufacturers Association of Nigeria (MAN) was the biggest opposition to the AfCFTA, arguing that ratifying the agreement could kill industries in Nigeria. MAN had said it was important for Nigeria to position local manufacturers for competitiveness first before ratifying the AfCFTA.

However, the association later made a U-turn, saying African nations needed to trade more with one another.

“MAN recognises the imperativeness of creating a beneficial free trade area for export of the products of members and has strongly worked assiduously to promote the articulation of evidence-based positions on AfCFTA,” Mansur Ahmed, president of MAN, said at a South-West sensitisation workshop in Lagos in February 2020.

The Lagos Chamber of Commerce and Industry (LCCI) is backing the trade deal, arguing that if smaller African countries are not afraid of it, Nigeria with 200 million people and humongous $430 billion GDP, must grab it with both hands.

Muda Yusuf, director-general, LCCI, told BusinessDay in 2019 that multinationals would be the biggest beneficiaries when the AfCFTA started.

“Mostly multinationals and large enterprises are in a better position to gain from AfCFTA because their economies of scale will improve. They have the big market and the capacity,” Yusuf had said.

“The continental trade is more about economies of scale and the amount of what you produce. The higher you produce, the lower the unit cost, which is why small companies will benefit but not as much as large firms,” he further said.

AfCFTA seeks to liberalise trade among African countries. It is targeted at a ‘borderless’ Africa, with an eye on a single market for goods and services on the continent. It was supposed to start in July 1, 2020, but has been postponed to January 2021 owing to COVID-19 pandemic.

Experts believe AfCFTA is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994 and a flagship project of Africa’s Agenda 2063, targeted at creating a single market for 1.2 billion people and exposing each country to a $3.4 trillion market opportunity on the continent.

The AfCFTA is expected to raise Africa’s nominal GDP to $6.7 trillion by 2030 if all the countries sign up.

The treaty liberalises 90 percent of products manufactured in Africa, meaning that a country can only protect 10 percent of its local industries.

Bismark Rewane, CEO, Financial Derivatives, said the AfCFTA would favour Nigeria, Kenya, Egypt and Ghana, among others, but warned that any government that was not effective would fail within the AfCFTA environment.

“Nigeria will benefit. But it will forced to be effective because if not, people can easily go to Cotonou to set up plants,” he told Channels TV in 2019, adding that government failures would be glaring under the trade arrangement.

by Hope Ashike and Odinaka Anudu 

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Mobilizing the workforce, fast-tracking the future – businesses across Emerging Africa are taking on flexible working

by with No Comment Opinions

The year 2020 has seen tremendous shifts and changes in the way we work. Technology and innovation are creating new opportunities as well as challenges. For more than a decade, we’ve built a culture around the idea that work is outcomes based, not anchored to a specific place or time. While every industry and business are different, a segment of employees have shifted to remote work and businesses have had to rethink their operating models and organisational structures. Flexible working has jumped from being a pipeline goal to being part of our daily grind in a matter of a few months. As we all head to the dining table or study for yet another day ‘in the office’, remote working technologies are being put to the test in a serious way – and all businesses are impacted.

Working from home is not new. The connected office has long been a critical enabler of the modern era’s distributed workforce, bringing productivity and experience boosters. In fact, in many countries in Emerging Africa, like Nigeria, Kenya, Tanzania etc., ICT has played a big role in driving the economy forward through the rapid growth of IT investment. Remote working has been one of the partial solutions to address connectivity challenges, address the needs of millennial workers, as well as encouraging women to be part of the workforce while having flexible careers.

Today, the ability to work remotely is business critical and presents certain challenges for organisations of all sizes. But adapting to the new normal is a collaborative effort, calling for unity between the c-suite, IT departments and third-party technology experts.

The question is: are organizations ready to handle and prepare for a long-term stint of remote working across the entire workforce – and will they rise to evolving needs when it comes to keeping their business successful?

Empowering productivity: While challenging, this is also a massive opportunity for businesses to demonstrate their agility – and for those lacking agility, to prioritise it. There is no doubt that this seismic shift will test both security and infrastructure, but flexible working can boost productivity too. As the workforce settles into their home office, there are considerations that need to be made in terms of security – keeping applications safe in the data centre and protecting end-point data – supporting network traffic and enabling increased flexibility. While each business will experience these to varying degrees, every business should be carefully thinking through their value chain. It’s therefore critical for organisations to support their employees with the right connectivity and tools that are essential to drive productivity and collaboration.

Data must be protected from the end point to the data centre: By increasing the number of devices connected to the network, the challenge will be managing and processing the additional data. To completely overhaul existing current networks is unrealistic for most medium businesses, as this not only takes time but is a drain on resources. Instead, edge computing can help to process data while limiting the impact on the enterprise cloud by only sending selected data. A recent study from the consulting firm, Deloitte, showed an alarming rise in the number of cyber and ransomware attacks against individuals and organisations and is only increasing, now that the home workforce is connecting remotely to their organisations systems. For any business, cyber-attacks can be devastating as the ability to recover is curbed by a lack of resources.

Seamless, scalable remote working solutions: Thanks to software defined workspaces, employees can access the tools and apps they need on any device. This keeps the day-to-day business rolling, ensuring the playing field is levelled in terms of accessibility and updates. As businesses adjust to the all-in working from home demands, they may find that consumption and ‘as-a-service’ solutions on-premise will help – particularly with economics and the short turn-around they have been faced with. For example, “Virtual Desktop Infrastructure” (VDI) provides secure, high-performance access for critical users while the “Hybrid Cloud” can scale data center resources.

In conclusion, every organisation needs to adapt to the changing expectations of the workforce in order to thrive, and ten years out, businesses that successfully achieve digital workplace transformations will be at an advantage over businesses struggling with legacy systems, massive amounts of data and workforces unprepared for change. Ultimately, by empowering remote workforces, organisations can unlock creativity, productivity, increase job satisfaction and most importantly learn to collaborate in new and improved ways – bringing to fruition the next wave of human led, technology-underpinned progress.

by Habib Mahakian 

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When policies conflict with reality

by with No Comment Opinions

The saying, ‘desperate times call for desperate measures’ isn’t new to most people, including Nigerian policymakers. But a situation where the Nigeria monetary authority, the Central Bank of Nigeria (CBN), seems to imply it has little idea of the ravaging impact of the COVID-19 pandemic on Nigerian economy, leaves a sour taste in the mouth and makes one wonder how it can put desperate measures in place.

Often times, Nigerian policymakers have enacted policies that have conflicted with the country’s reality due to their poor perception or understanding of what the true state of the economy is.

To the surprise of most economists, the CBN stated clearly in a note published on its website that it expects Nigeria’s economic growth to decline by a meagre 1.03 percent. This is at variance with the thinking among analysts, economists, international bodies and even Nigeria’s Ministry of Finance.

The International Monetary Fund (IMF) in June revised further downward to 5.4 percent their economic contraction expectation for Nigeria from 3.4 percent. Zainab Ahmed, Nigeria’s Finance Minister, projected that the country would contract between 4 to 8.9 percent.

This begs the question as to what parameters the CBN’s optimism is based. We cannot but wonder whether the CBN has opted for ‘walk by faith’ rather than ‘by sight’ in what is glaring to all.

CBN’s second quarter outlook of seems to point to an almost certain possibility that Nigeria’s economy is headed for a V-shaped recovery after plunging quarter-on-quarter by 0.64 percent to 1.87 percent in Q1 2020.

This also creates a misleading illusion of Nigeria’s resistance to the COVID-19 pandemic. Hence, the question: Is the CBN insinuating a contraction by 1.03 percent is the worst impact the pandemic has on economic activities in Nigeria?

Given that the negative effects of the pandemic was felt more in the second quarter of this year, the CBN’s outlook is, at best, a wish and not realistic as factors that will support its optimistic stance are missing.

Nigeria’s Purchasing Managers Index (PMI) which is a leading indicator providing valuable insights into the state of the Nigerian economy in general and the manufacturing sector in particular, provides a picture of what the Nigerian reality is.

The PMI reading for Q2 2020 was below 50, signifying manufacturers and non-manufacturers pessimism on the state of the economy and this signals a contraction.

It was no longer business as usual for the Nigerian manufacturing sector which contributes over $30 billion to the GDP. COVID-19 induced disruptions in business supplies, fall in household demands etc, coupled with foreign exchange scarcity, took a toll on manufacturers in the last quarter. Many had to lay off staff while some cut salaries.

Worsened by rising inflation which has caused consistent weakening in households purchasing power amid job losses, many manufacturers and non-manufacturers , especially manufacturers of non-essential commodities, will see sales drop and profit margin shrink.

Also, Nigeria risks another year of underperforming budget as price of oil is yet to recover to levels above $60 witnessed in January 2020. As a result, the FG had to cut down its revenue expectation by 36.4 percent to N5.16 trillion.

Therefore, we employ the Nigerian authorities and policy makers to remain factual and realistic when reviewing and giving outlook for the economy. We hope that this will help drive policies and actions that will suggest the level of work that must be done in line with current reality.

We believe that CBN’s outlook is unrealistic given how its FX demand management activities and reluctance to unify Nigeria’s exchange rates have stifled business operations and driven away foreign investors from our markets.

Nigeria’s journey to recovery calls for desperate measures and we urge the CBN to start this by providing clarity on Nigeria’s FX rate position and how it hopes to clear dollar-demand backlog.

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Covid-19: Osinbajo, Okonjo-iweala, Kaberuka outline measures to revive the economy, boost SMEs

by with No Comment Business

Yemi Osinbajo, vicepresident of Nigeria, has said the Muhammadu Buhari administration would formulate policies to aid local production of goods, while also creating the requisite environment to aid local industries.

Osinbajo said the administration plans to invest in the housing sector by building 30 million homes for Nigerians in five years, while the labour and raw material would be sourced locally to create jobs and boost local industries.

He stated this on Friday while featuring in a Covid-19 webinar interactive with the theme: ‘Economy sustainability beyond covid-19’.

The interaction was organised by the em manuel chapel methodist Church.

The interaction also featured Ngozi Okonjo- Iweala former finance minister in Nigeria and current chair- Gavi, the Global Vaccine Alliance, and Donald Kaberuka, former president of the African Development Bank (ADB).

Osinbajo further said that the Federal Government was planning to boost the power sector by investing more in renewable energy, liberalising the sector to encourage private investment in whose tariff would be service driven.

Speaking further, Osinbajo added that the liberalism of the power sector had reduced the subsidy regime and saved a huge significant amount of money for the federal government.

According to him, “If we have a cost effective value chain it would make the Gencos and Discos to have their value chain. The critical thing is to make the market based system work.

“NEC has proposed a system where the Gencos can go and negotiate the price with their customer on service. Through this we can reduce the subsidy regime which has consumed money in the country.

“We intend to build 30 million homes in five years it is an opportunity to grow the local industry and develop the housing programme; We thought we can generate jobs, because we intend using local materials, the engineers, architecture would all be source locally and we can give them 20 or 10 houses to build in some states.

Also speaking Donald Kaberuka advised African leaders that providing a relief package for the citizenry to cushion the effect of the covid-19 was crucial than projecting economic growth.

Kaberuka identified policy inconsistency as the reason for retarded growth witnessed in several African countries over the years, while urging Africans to take extra precautionary measures toward safe-guarding the economy and empowering their citizens because the Covid-19 may stay for long.

“This is a crisis like no other, the government has reduced lockdown because people have to survive; what is happening to families matters, providing support for households is more important than saying my country is growing at 7%,” Kaberuka said.

Also speaking , Iweala outlined the achievements of the African Union (AU) in mitigating the virus in the continent, stressing that AU was putting measures in place that make newly discovered vaccines accessible and affordable to every class of persons in the society.

“The lockdown was necessary because of the increasing number of the virus across countries in the continent and it was to tell the people the severity of the infection.

“We don’t want a situation where the vaccine, if it is discovered, is bought off by the rich countries, that is why we are taking measures so that the poor countries can see it,” Iweala said.

Source – businessday.ng