Fifth Trade Policy Review of Nigeria: Minutes of the Meeting
The fifth Trade Policy Review of Nigeria was held on 13 and 15 June 2017. The Review offered a very useful opportunity for WTO Members to deepen their understanding of the trade policies and practices of Nigeria, and to collectively appreciate the challenges it currently faces in sustaining and improving its economic prosperity.
At its last TPR, Members had commended Nigeria on its robust and broad-based economic growth, and had recognized its efforts towards the diversification of its economy and its regulatory reforms. Six years on, Nigeria had become the 26th largest economy in the world and the biggest in Africa. Indeed, its economy had grown by almost 90% as a result of the 2014 rebasing exercise. According to the authorities, this exercise had consisted of the re-estimation of contributions from certain sectors such as telecommunications, entertainment, and retail which had previously not been captured or had been underreported; it had also been estimated that the informal sector accounted for 44% of GDP.
Nigeria was the leading oil exporter in the continent, with the largest gas reserves. Nevertheless, since the third quarter of 2014, the sharp decline in oil prices had posed major challenges to the economy, whose rate of growth had significantly slowed down to 2.7% in 2015. The Nigerian economy had gone further into recession in 2016 with a growth rate of -1.5%. Overall, the economic slowdown and the various measures taken to address it had more significantly reduced exports than imports, and the importance of trade for Nigeria had decreased as a percentage of its GDP from 52.8% in 2011 to 21.1% in 2015. According to the Secretariat report, other factors contributing to slower economic growth were related to the business environment, such as unreliable and expensive electricity supply, and governance issues, including in the oil sector.
In April 2017, the Government had embarked on the 2017-2020 Economic Recovery and Growth Plan (ERGP). This ERGP aimed at sustained inclusive growth through a structural economic transformation of Nigeria with an emphasis on the improvement of both the public and private sector efficiency.
Members wished to know more about the ERGP and its main components, including Nigeria’s plans for developing its digital economy and e-commerce.
On Nigeria’s trade regime, most of the concerns raised by Members during the last TPR remained to be addressed; they were also reflected in the questions posed by Members in the current review. For instance, Members, during the previous and current TPRs, had raised concerns about the lack of transparency in the implementation of laws and regulations on, inter alia, customs rules and procedures; and about the large number of important pieces of legislation still at the draft stage or pending adoption by the National Assembly. Moreover, Members had also highlighted during the previous TPR that certain measures taken by Nigeria had not been compatible with its WTO commitments, such as import prohibitions and restrictions and the local content requirement under the Nigerian Content Development Act, which had discriminated against foreign suppliers of goods and services in the oil and gas sector.
Since the 2011 review, the prohibition lists had been enlarged and Members were interested in the reasons behind Nigeria’s policy to maintain two import prohibition lists, as well as Nigeria’s import ban on 41 categories of goods for which access to foreign exchange from the Central Bank of Nigeria (CBN) had not been allowed since 2015; and its various other restrictions on imports.
As a member of ECOWAS, Nigeria had been applying the five-band Common External Tariff (CET) since April 2015, although with a certain flexibility. Nigeria’s average applied MFN tariff rate had increased to 12.7% in 2017 up from 11.9% in 2011. Its bound tariff rates averaged 117.3% and the tariff binding coverage remained low at 19.2% of total lines. Even though the average applied tariff rate was low, the bound rates were high and the binding coverage was low; this left ample margins for tariff changes, thus rendering the tariff regime less predictable. Moreover, a myriad of additional duties and taxes were charged on imports that were of export interest to some Members. These concerns had already been expressed at the time of the previous review.
Other developments in trade policy instruments highlighted in the advance questions included: notification requirements, local content requirements, investment incentives, SPS measures, technical barriers to trade, customs valuation, government procurement, and the protection of intellectual property rights.
Regarding sectoral policies, during the period under review, Nigeria had adopted the Agricultural Transformation Agenda (ATA) and the Agricultural Promotion Policy (2016-2020) with a view to transform agriculture from a development-oriented to an agribusiness-focused industry based on integrated value chains. Members wished to learn more about the different price support policies and incentives that were available to farmers to increase domestic production of certain commodities. Regarding oil and gas, Members had welcomed Nigeria’s recent efforts to remove subsidies on fossil fuels but wished to have further clarifications regarding the proposed new legal framework for the sector and for the investment regime in general.
Opening statement by the representative of Nigeria
H.E. Ambassador Chiedu Osakwe, Trade Advisor, Ministry of Trade Industry and Investment of Nigeria
The moment of this Trade Policy Review for Nigeria is very timely and this is by pure coincidence. We are not here for a ritual that happens every six to seven years, nor are we here defensively. The reason is that we are here to engage and to signal that there must be no ambiguity about the direction in which Nigeria is headed. We, the Nigerians, are approaching this Trade Policy Review as Acceding Governments approach the domestic economic and trade policy reforms associated with the WTO accession process. I keep saying in a previous life to acceding governments and to article twelve Members that they don’t actually know how lucky they are. They don’t know how lucky they are that there is a system here in the WTO that makes them go through a process of domestic reforms. They come out better, they come out stronger, more resilient. And I’m glad to see my friend the Ambassador of Montenegro. I hope that when you take the floor you will confirm everything that I have said, including Russia, including China and including the thirty-something Governments that have gone through the accession process. Countries that have not gone through the accession process in the WTO do not know how unfortunate they are and you can attribute this quotation to me “reforms make you stronger, they don’t make you weaker”.
Development – getting it going – and transforming out of poverty and development to more sophisticated levels will involve those developing country citizens in the diaspora and the Africans in the diaspora to go home and put the experiences and the intelligence and what they have acquired to good use. Salvation will not come from the outside. This is not a nativist comment. It is about the importance of expertise, specialization and experience, putting it to good use to where we should put it. The real struggle is not actually here or at the bank or at the fund. The real struggle, the crucible, of what needs to be changed and done and undoing the bad things that have been done in terms of unsound policies are in our countries. I think we need to be upfront about it. We do want to use this opportunity to communicate this into trade policy direction. Nigeria is also hopeful that WTO Members in this Trade Policy Review Board will use this exercise as an opportunity to support, not to criticize or impugn or undermine or treat with triviality, but to support Nigeria’s serious and far-reaching domestic policy reforms which are on-going. Nigeria sees this Fifth Trade Policy Review exercise as one of the effective instruments for building a stronger win-win partnership with its trading partners and a platform for modernizing and updating Nigeria’s trade integration in a fast-paced 21st Century economy that is actually global.
These reforms in Nigeria are far-reaching, I can tell you that. It is a daily struggle, it is a daily march. You won’t get this from Harvard business school believe me, you only get this where it is happening. They are work in progress. The macroeconomic setting is the Economic Recovery and Growth Plan (ERGP) launched on 5th April 2017 by President Buhari. Details are in the Government of Nigeria report. The plan sets the foundation for the transformation, diversification and competitiveness of the Nigerian economy, and let’s be clear, on the basis of a market economy, driven by the private sector and with public-private partnerships, where they are necessary, particularly in the areas of infrastructure and public utilities. There are five parts in the plan. I am not going to elaborate on this because these parts are elaborated both in the Nigerian Government report and in the expert and high-quality Secretariat report. There are agricultural and transformation for food security. We need to use the opportunity of the Nigerian TPR to say that food security is critical. Let’s not leave any doubt about that. Economies that are not able to feed their own people don’t qualify as sovereign entities. Dealing with food security is not something that should be trivialised so agriculture and food security are number one. In our countries you don’t want to be in a situation you had prior to the French revolution where the great empress said well if they don’t have bread why don’t you give them cake. The cake isn’t there, the bread isn’t there. It’s a question of the gruel for the basic feed. Secondly, energy sufficiency in power and petroleum products; transportation infrastructure; industrialization, and we can talk about this ad nauseam, especially with focus on SMEs, and, of course, stabilizing the macroeconomic environment.
I just want to spotlight a few areas. Under President Buhari’s Administration there are important lessons that we have learned. I’ve only been assigned to work with the Government in the past twelve months but there are important lessons that we have learnt. I think that it may be of use to other Members here in the TPR to know the areas that we are working on:
- Coherence in economic policy making
We have learnt an important lesson on coherence. If there is a coordination deficit in domestic economic policy-making, there is a very high risk for growth and development. The absence of coordination, the deficit in coherence between fiscal, monetary and structural reform, in which we put trade policy, has carried a huge cost for the Nigerian economy which has now been remedied. Part of the questions that we have to answer here are questions that have arisen as the result of a right-hand left-hand problem. But the reforms to address this are underway. They are systematic and institutional. The Government is introducing systematically institutional coherence into fiscal, monetary and structural reform policies. The purpose of this is to restore market confidence and to generate robust and sustained growth, and take account of WTO consistency questions and then be mindful of the effects of what Nigeria does, and this is part of the message that we will take back, the message that you, Juan Carlos, gave. You have reminded the Nigerian delegation that Nigeria is the 26th largest economy in the world and that is not a boast to be pinned on anyone’s shoulders. That’s a message about responsibility. When you are that big, you carry a lot of obligations. So, we will be mindful about the effects of our policies domestically but also in the region in ECOWAS, in the continent and in the larger global economy. Now, the coherence objective is being implemented in the Economic Management Team (EMT) chaired by Nigeria’s very cerebral Vice President, Professor Yemi Osinbajo, who is currently also the acting President of Nigeria and with the Ministers involved in economic policy making. These economic management team meetings take place every week. Some of my friends and colleagues here are part of that economic team as technical advisers. Me, as the technical adviser on trade to the EMT, Sadiku was technical adviser on investment to the EMT, and my brother, Yemi Kale, is technical adviser in his capacity as Nigeria’s Statistician General. So we give them advice. We are out of the politics but we tell them you can’t do this, you can do this, this is good, do more of this, and so that is how it works and that is how we are trying to bring coherence into the Government. Back to my accession experience, I wish acceding Governments knew how lucky they were to have the WTO help them and show coherence.
- Trade Policy and Negotiations: how do you use it and so that is not just a glib expression at meeting rooms of the WTO?
I’ve done trade for too long. Perhaps for far too long. It is very cerebral, it can become academic and it can be out there in stratosphere. People sometimes are not able to download trade policy and negotiations and actually understand how it works in generating growth, but we mutter the chant, the refrain and the song: trade is an engine for growth, trade and investment are inseparable. But how does it really work? What we are doing in Nigeria is that the ERGP identifies trade policy as an engine for competitiveness and growth. The Statistician General has helped the Economic Management Team and the broader constituency understand that over thirteen million jobs, in terms of the entirety of trade, wholesale trade in Nigeria, are dependent on trade. Specifically for imports and exports, 1.2 million jobs are dependent on trade. 19% of Nigeria’s GDP is accounted for by trade second only to agriculture at 26%. So, there is a greater understanding that trade is not just for the outsiders. It’s not out there in the stratosphere. It is something that is real, that creates jobs and expands opportunities. Related to this is that Nigeria is engaged in several negotiations. Some on the threshold, others are being opened and the objective is to use them for market access expansion for growth in the economy.
I should report to you that on the 10th of May, the Nigerian Cabinet, that is the President and its Ministers, approved the establishment of a new institution – the “Nigerian Office for Trade Negotiations” (NOTN). We have never had it before. It is going to be modelled on some of the trade offices that you see in the most sophisticated economies. It shall be headed by an Ambassador with a title of Trade Adviser to the President and the Chief Negotiator for Nigeria. That office is in the process of being set-up. And so, Nigeria will be consulting several of you who have good experience here as this office is being set-up. A couple of words that may be of interest to you with regard to negotiations. In Africa, there are the negotiations for the Continental Free Trade Area for the continent, the CFTA. The purpose is simple: to create an integrated market for goods and services on the continent. The objective, the timeline is to complete it this year. The CFTA was actually declared in 2012, actually launched in Johannesburg in 2015 but the actual negotiations began in 2016. I was in Niamey a couple of days ago (Niger), Nigeria has just been elected to chair the negotiating forum for the continental free trade area for Africa. It is serious business. We have just agreed to modalities for trade in goods and services. In the 277 questions that we got from you the Members, we know that a couple of questions are on the CFTA and we can take that up in the conversation. But it is serious business, so the African mammoth is beginning to turn its attention to the reality and the mechanics, and the toughness of trade negotiations and to use it as an engine for growth. And I say this one because Nigeria is leading the process, and secondly because I think that the support of the WTO Members would be needed.
The final element on trade: we know the range of Members’ concerns since the last review; Juan Carlos mentioned a couple of them, including the items on the import prohibition list, we shall address them. But the measures that are being taken by the Government are to reduce that list. That list is being reduced and we have the facts and the figures and the details. Part of what was on that list was if you have an exogenous shock in which you lose 60% of your export receipts, something really massive has to give. You don’t have an ideal foreign exchange policy. I don’t know about ideal foreign exchange policies. But this is less than ideal, because there was a shock. But it is being addressed and there are, to use the language of the IMF, several UMPs (unconventional monetary policies) but gradually they are being unwound.
Ease of Doing Business and Trade Facilitation
Is the WTO Trade Facilitation agreement just for conference rooms? Is it just a star that we wear on our shoulders that we were able to deliver this? Does it matter?
The Presidential initiative on the Ease of Doing Business is the signature statement and test of President Buhari’s Administration to tackle the institutional and systemic challenges of doing business in Nigeria. With Cabinet Ministers and Agency Heads, the Administration is determined that it shall not be business as usual in Nigeria. The Presidential Enabling Business Environment Council is chaired by the Vice President Professor Osinbajo and Dr. Oduwole who is Secretary of the PEBEC, who is not here but her representative from the office of the Vice-President is here pushing very hard on it. The Secretariat of the enabling business environment is housed in the Nigerian Investment Promotion Commission, headed by Ms Yewande Sadiku, who is here with us today. They are reform champions. They have been recruited, they have been told that their job is to be reform champions, not to be bureaucrats and not to push papers and take three, four, five, six months to reply a letter, but to act as if they really cared for what they are working for and to make it count. There is real work that is underway and there are five aspects to the ease of doing business: transparency; default approvals. And so now, if you go to register your business in Nigeria, no one can string you around on a rope “it hasn’t been approved, it hasn’t been approved, it hasn’t been approved”, and we have someone here from the Office of the Vice President. If it is not approved in seven days it stands approved and then it is the problem of the government agency to explain why they didn’t do it. And I should say we are getting a lot of help from the Georgians, the former Georgian Prime Minister is a consultant for Nigeria, because the Georgians did some really smashing work on Trade Facilitation and Ease of doing business. So, he is advising the Government on that. One Government, and then we are dealing with the questions of entry and exit into Nigeria; and, there will be expedited Port Operations. All these reforms were institutionalized. Nigeria is also using very aggressively executive orders. Executive Order number 01 was signed by the acting President, Professor Osinbajo on the Ease of Doing Business. There shall be sanctions, punishment for Nigerian civil servants who don’t implement what they are supposed to do, based on the executive order. Let us shed stereotypes. This is the key. Let us shed the stereotype about Nigeria being a hard place to do business. Once upon a time it was. Now it isn’t. One of the most difficult things to deal with is stereotypes because they can hang around for ever. They really can hang around for ever. So, part of what we are hoping will be the message that comes out of this Trade Policy Review is for you to help communicate the message to dispense with the stereotype and say that the Nigerian situation is significantly improving across a range of areas and this is all evidence based. As you know, we also ratified and are an original member of the TFA. We have notified the category A commitments, the category B & C Commitments were recently communicated, notified to the WTO Secretariat in the past couple of days and are now being processed by the Secretariat for circulation to the Members.
- Industrial Policy that has made a massive resurgence in the developed economies
If you can’t make things, if you can’t make stuff, tables, chairs, frying pans, electric bulbs, if you can’t create value, you can’t employ people. So, there is a place for Industrial Policy. We have been watching very carefully the resurgence of Industrial Policy in the most sophisticated economies in the world. But it has to be the right Industrial Policy. It has to be the Industrial Policy that is geared or linked to innovation, creativity and enterprise, where there is ease of entry into the market and ease of exit for those that fail.
Last May 30th, the “Nigerian Industrial Policy and Competitiveness Advisory Council” was inaugurated by the acting Vice President, with a huge component from the Nigerian private sector. Also, to underscore this industrial policy, you would have seen in the Government of Nigeria report and also in the Secretariat report, the six industrial zones that have been created. So you know exactly what we are doing. We are doing this by the book. Nigeria is working with the former chief economist of the World Bank to move on these six industrial zones. There have been questions that have been asked and I have seen all of them in the 200, approximately 300 questions we have. Listen, let us be clear about this, in a country like Nigeria, 180 million people, you have the classical problem of economics that manifests itself, namely, you have infinite demand and you have a finite supply of resources. Something has to give. You can’t do everything all at the same time and satisfy everyone. But even in the most sophisticated economies that is also not the situation. And so, the Nigerian Government is working to implement these six industrial zones because the problem of infinite demands and finite resources has to be resolved somehow. This is the reason for the digital economy.
- The digital economy: why should we not evade it?
The 21st Century is defined by the digital economy. We harbour no illusions about its challenges and complexities, but we are committed to working to harvest its opportunities. Nigeria believes that being defensive or evasive about the digital economy, frankly is foolish. It is not an option. A Smart Nigeria Digital Economy Project is under advanced policy development. The key policy components have been identified in the questions from Members already answered. They range across a 100% broadband coverage of Nigeria; e-commerce development by supporting the operators in the real sector; using technology to create a platform for the integration of Small and Medium Enterprises into supply change; development of digital payment infrastructures; capacity-building and training of software engineers and coders; e-government; digitizing data across sectors; cyber security. A lot of this work is underway. But it is a very exciting work. This is an area where the youth in Nigeria ran ahead of the Government. Before the Government could say Jack Robinson Nigerian coders and software developers were being poached by the developed business counterparts. The great man Mark Zuckerberg came to Nigeria last year. No one invited him, Nigeria was very happy to have him, but he wasn’t invited, not that that made him any less welcome, he was most welcome. He actually came to see what was happening on the Nigerian digital scene. It is accelerating. And you know the reason for this. This is just one sentence. It is a paradox. The youth simply in wanting to circumvent the challenges and the complexities of the Nigerian economy, and operating in Nigeria at the time, simply went into the digital stratosphere and they are operating at world class levels. Employment there is huge. Market opportunities are being expanded. And so now the Government, President Buhari, is doing the right thing by supporting them and creating an environment for them. Our message here is the digital economy matters. It is very important. It is a source of growth. And to that we add another message. Here in the WTO we need to modernize and update our agenda for negotiations. And this is why you find that Nigeria is championing this agenda in the WTO. As a member of the Friends of E-Commerce for Development (FEDs), we are co-sponsoring proposals including with Singapore and many other friends to move ahead on this. Nigeria is positive and is looking very positively at the proposal by the European Union on online transactions, and we shall revert to that as soon as possible. The digital agenda should not be held hostage to other issues. Just to be clear about it. Nigeria will push harder, not just at home but here in the WTO on what we consider to be at the forefront of the development agenda. And that is the internet economy and associated areas of work.
- Investment Policy
Trade and investment are two sides of the same coin. They are inseparable in policy and practice. Fire away, machine gun her, the lady has lots of bullet proof vests, Ms Sadiku, on what she is doing in the agency with regard to investment: formidable. She will be working very closely with the Nigerian office for trade negotiations. That is being set up. Nigeria is working to focus its investment promotion efforts not only to encourage wealthy Nigerians to invest in direct opportunities in their own country, but to target FDI from countries with which they actively trade.
- Domestic Resource Mobilization (tax policy)
Our finance Minister, I mean a real class act: Kemi Adeosun, at I think the two last meetings of the Economic Management Team, she put out data to show that the tax-to-GDP ratio in Nigeria is 6%. It is the worst amongst all developing countries: India, South Africa, the average is about 24, 25, 26% and other countries do much higher. You need to know that we understand, the Nigerians understand also what they have to deal with. The tax-to-GDP ratio in Nigeria is very low at 6%. So, there is a programme, there is a policy, I fail to remember when it is coming into effect but we have enough brain power there that they will give you the details. Amnesty will be granted to those who are not currently paying tax but when that amnesty period is over, there are lots of wealthy Nigerians that will have to start paying taxes. I was in a meeting that had been convened by my friend Madam Sadiku and she had invited Africa’s richest man Aliko Dangote. She convened that meeting because in her former life as a banker, Dangote was her client. So, I went to this meeting and Dangote was saying to a group of us: there are Nigerians with 200 aircrafts, very few paid taxes and if they paid their taxes and if those aircrafts, in a sense, were turned into productive assets, the economy would get a boost.
Let me conclude because I know I have been long in this but then it is too long to have this interval of six to seven years. I am not criticizing anyone. I think that the intervals should be shorter. Let me conclude by saying this: the context in Nigeria is one of reform, change and transformation. This is why Nigeria very much welcomes the engagement by Members which we consider very positive as reflected in the 270 questions from 24 Members. Nigeria kindly asks you please that you sustain this engagement and dialogue. And so we ask that you keep the questions and comments coming, even well after this exercise. It will strengthen the Nigerian economy and it will ensure our competitiveness. In Nigeria, President Buhari’s Government is strongly committed to building a modern welfare-enhancing economy that is integrated into the regional, continental and global economy. There are policy shifts that Nigeria delayed for far-too long, which are now being corrected, at this time, through policy reforms, restructuring and institutional adjustments.
Nigeria seeks a win-win situation with all its WTO partners. The Government is implementing bold policy changes and measures to ensure that it shall not be stuck in the past.
On 18 November 1960 (that is one month basically after independence), Nigeria committed to the rules-based global economy by acceding to the GATT ‘47. In 1995, we became an original Member of the WTO. This year, as you know, we are original Members of the TFA and the Amendment to the TRIPS Agreement.
So we want to see a WTO that is constantly updating, implementing its results from Hong Kong to Bali to Nairobi. This is an indispensable Organization. If it did not exist, economies would band together to create it.
We want to see a WTO that is forging ahead, in where trade would serve a development agenda: spurs growth, creates jobs, reduces poverty and, to quote the WTO Director-General, “does more than trade, contributes to peace, security and solidarity amongst countries”. This is Nigeria’s message at its Trade Policy Review. Work with Nigeria and you will not be disappointed. It is Africa’s largest economy, it is pulling out all the stops at the moment and pumping on all pistons.