New AGOA deal offers Nigeria, others $8b export target
New measure to promote standards
In what might be a major boost to Africa’s economies, the United States (U.S.) has revalidated the African Growth and Opportunity Act (AGOA) by 10 years, to elongate the flagship trade deal with the continent till September 30, 2025.
The new window may have re-opened vista for Nigeria and other countries in the region to grow their present $4.8 billion worth of non-oil exports to the U.S. to over $8 billion within the next 10 years, under the extended trade deal.
Essentially, under the programme’s extended regime, African countries would be engaged in the rules of origin to engender value-addition of raw materials as they could now include the cost of direct processing, as they share production from one country to another on their way to the U.S. market.
Furthermore, African countries exporting to the U.S. can also use the programme across borders, thereby stimulating intra-African trade in regional markets, where value may be further added to export products.
Hitherto, processed cassava grains, popularly called “garri” is processed in Nigeria but packaged in Ghana for acceptability. Under the new regime, exporters of such products can enjoy the cost of direct processing with the rules of origin.
Similarly, the reviewed scheme equally renews focus on the ability of Africans to meet food safety standards in the U.S. and other industrial standards that have been identified for export products.
Specifically, sanitary and phytosanitary requirements for which many export goods originating from Nigeria have been rejected would be enforced and capacity of exporters built, to reduce the amount of rejection.
With the termination of crude oil export from Nigeria and others to the U.S. following the latter’s shale evolution, the need to diversify the Nigerian economy has been intensified through exploitation of opportunities in the non-oil sector.
At a yearly average of $369 million between 2001 when the AGOA scheme commenced and 2013 when it was subjected to review, AGOA non-oil imports were $4.8 billion, thus providing an opportunity for improved trade to reach over $3.69 billion within the next 10 years of the scheme’s extension.
Though several non-oil sectors experienced sizable increases during the 13-year period, including apparel, footwear, vehicles and parts, and fruits and nuts, South Africa remains the largest non-oil AGOA beneficiary.
The European Union (EU) recently suspended some agricultural food exports from Nigeria.
The food items banned from Europe till June 2016 are beans, sesame seeds, melon seeds, dried fish and meat, peanut chips and palm oil.
This further affirms a recent World Bank report which estimated that developing countries will lose about $6.9 billion by 2015 to rejection of their exported food items.
According to the Federal Government, Nigeria has continued to record the highest number of product rejection in the continent’s export profile to developed countries.
Former Minister of Industry, Trade and Investment, Dr Olusegun Aganga, had said the country’s image has been dented due to huge amount of rejects, maintaining that Nigeria, the giant of Africa, still has to depend on Ghana to export its products to the world.
According to him, the number of rejects in major foreign markets between 2012 and 2013 revealed that Benin Republic had two rejects; Egypt had 95, Ethiopia got three, Zambia recorded five, and South Africa 56 while Nigeria recorded 102.
Giving an insight into the programme, Assistant U.S. Trade Representative, Florie Liser explained that the renewal reaffirms the strong support in the U.S for closer commercial ties with its sub-Saharan African partners.
She said: “The 10-year extension – the longest in the programme’s history – will also provide certainty for African producers and U.S. buyers regarding access to the U.S. market under the AGOA programme and create a stable environment that encourages increased investment in sub-Saharan Africa.
“The AGOA Forum will provide also an opportunity for the top trade officials from both Africa and the U.S. to discuss how best to take advantage of the opportunities presented by the extension of the programme, including through developing AGOA utilisation plans that are included as a part of the new AGOA legislation. And now that we are no longer worrying about AGOA expiring in the near term, the AGOA Forum will provide an opportunity for us to begin a more strategic conversation about the future of our trade and investment relationship with Africa,” she added.
Acknowledging the challenges with the programme, Liser said: “We also know that there is still much work to be done to take full advantage of AGOA. So we in the U.S. are providing trade capacity building and other technical assistance, and we really look forward to engaging with our African partners.”
On the success of the scheme, she explained that U.S. has “used the AGOA eligibility criteria over the years to really work with our African partners in putting in place, a number of situations there that really promote trade and investment, having rule of law, respecting commercial relationships between U.S. businesses and African businesses that are partners in taking advantage of AGOA.
She added: “All of these things have not only led to the Africans being able to export more to the U.S. but also to the U.S. having greater relationships with increasing exports with our African partners. So we do believe that the great feat of AGOA over the past 15 years of the programme is not only the trade, but the relationships that have been put in place and the kind of trade and investment promoting environment that has been established in partnership with our African AGOA partners.”
In order to ensure proper harnessing of the scheme, Liser emphasised the need for a partnership between not just the U.S. Government and African governments, but also a partnership with the entrepreneurs and private sectors on both sides.
According to her, African entrepreneurs do need to make sure that they have all the information about AGOA, how it works, and about the opportunities that are present in the U.S. market for their products here.
Similarly, Assistant Secretary for African Affairs, Linda Thomas-Greenfield noted that the recent 10-year reauthorisation of AGOA garnered bipartisan support in the U.S.