Nigeria’s economy is set face more pressure amid falling oil prices and dwindling revenue, as the Economic Community of West African States (ECOWAS) implements the Common External Tariff (CET) regime this month.
The continued dependence on oil as the main foreign exchange earner, poor capacity in the manufacturing sector and ineffective anti-dumping measures, among others, are likely to undermine Nigeria at the take-off of the project, which is aimed at uplifting the economy of the region.
With uniform tariffs, revenue accruing to the Federal Government through the Nigeria Customs Service (NCS), which reached N3 trillion in 44 months preceding September 2014 and N977 billion between January and December 2014 , will likely plunge, according to analysts. This will put more pressure on the economy, which depends on oil, whose price has already fallen to below $50 per barrel, about $15 less than Nigeria’s budget benchmark of $65.
Nigeria depends on oil for 75 percent of budget and 95 percent of foreign exchange earnings.
“There is a likelihood that revenue could fall, though I know a few measures are in place to ensure no country loses out,” said Tunde Oyelola, vice-chairman, PZ Cussons Nigeria Plc.
The manufacturing sector and non-oil exports will be worst hit, as the twin sectors suffer from significant lack of competitiveness. While many sub-sectors in manufacturing have low capacity, non-oil export is mainly dominated by raw agricultural commodities rather than finished manufactured goods, stakeholders say.
For the CET regime, countries that do not have strong manufacturing base may lose out, as they will only become dumping grounds for other economies in the sub-region.
Stakeholders say this could affect output, employment and capacity utilisation in manufacturing.
President, Manufacturers Association of Nigeria (MAN), Frank Jacobs, said the implementation of cross-border policies such as the Common External Tariff (CET) and Economic Partnership Agreement (EPA) could throw up fresh challenges that might further complicate the current lack-lustre performance of the country’s manufacturing sector.
Under the EPA agreement, 75 percent of the West African market will be gradually be liberalised in favour of the EU export products over the next 20 years.
The EU is contributing up to 6.5 million Euros to support development programmes in West African countries during the first five years of EPA implementation.