Nigeria Trade Policy

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Nigeria: Trade and industrial strategies for

quantum leap (I)

Is Nigerias free market responsible for her free fall from industrialization? The truth is that we are drifting

farther away from industrialization. Im typing this article on a HP laptop assembled somewhere in Asia. The

laptop is running on an Operating System designed by the American company, Microsoft. There are also some

other installed application software designed in countries such as USA, UK, Canada, India and China, all

running on my laptop. The shoes, trousers, shirt and wristwatch Im wearing are all proudly made in different

parts of Europe. I ate wheat bread this morningIm sure the wheat was imported. I even picked my teeth this

morning with toothpick not made in Nigeria, drove to work in a car made somewhere in Asia even the fuel in

my car was imported. More than 70% of my income is spent on foreign goods, enriching their economy at the

expense of ours.

Would you blame me or other Nigerians for not patronizing made in Nigeria goods? Of course not when you

give any buyer freedom to choose, hell most certainly choose what is availab le, that is of good price and of

good quality. Our markets are flooded with lots of products and alternatives, most of which were not made in

Nigeria; so the buyers are left with little or no choice.

Free market! But, its not free. In fact, its proved very expensive. We have paid with the life of our industries.

Rewind to the Nigeria of the 1980s when I was in primary school. My father, a school principal, had two

Peugeot cars, which were assembled in Nigeria by Peugeot Automobile Nigeria (PAN) and powered by petrol

refined in Nigeria. For every car bought, the proceeds trickled down several homes from the craftsmen to the

technicians, technologists, engineers, sales representatives and managers. In those assembly lines, we had

indigenous painters, welders, fitters, auto-electricians, etc. Back then, one of my uncles drove a Volkswagen

Beetle also assembled in Nigeria. Government institutions and offices ensured that only vehicles assembled in

Nigeria were procured. That explains why Peugeot was almost synonymous with government officials. As a

primary school pupil, my school uniform was made from Nigerian textiles; my belt, sandals, bags, pencil, etc,

were all made in Nigeria. And this had positive implications to the Nigerian economy. Think of the many

Nigerians that worked in the production line of the assembly plants; the many families that benefitted from the

textile mills; and the income earned by the nation. Now, that is supposed to be what we should call our humble

beginning from which we were supposed to have made steady progress. Today, we are experiencing a free

fall, a steep decline; the industries have closed shops, jobs have been lost, leaving the economy solely

dependent on crude oil.

To accelerate the pace of industrialization, the government must put in place certain deliberate policies policies that promote enterprise creation, engender their growth and provoke innovation through the creation

and application of science and technology. There are several ways this can be done, but we will concentrate

more on trade policies and protectionist strategies of government.

There is hardly any industrialized country today that did not at some point enact infant industry protection

policies or other protectionist strategies. As George Friedrich List (1856) once said, Political economy, in
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matters of international commerce, must draw its lessons from experience. We will therefore draw our lessons

from the experience of other industrialized nations, beginning with Britain.

It is true that the industrial revolution aided the rapid industrialization of Britain. It is also true that other factors

such as development of infrastructure, capital accumulation, scientific advancement, institutional development,

reduction of interest rates, and the availability of credit lines from institutions, such as the Bank of England, allcontributed to the rapid industrialization of Great Britain. However, the deliberate introduction of restrictive

policies by the government towards protecting infant industries in the country also played a great role. A

specific example was the prohibition of importation (or consumption) of silk and cotton from India, which at that

time had comparative advantages in that sector over Britain. There were also the Act of Navigation of 1651,

whose aim was to protect the ship building industry; the Corn Bounty Act of 1614; and the Corn Law of 1815

(both aimed to protect the agricultural sector). It took Britain almost two centuries to completely liberalize its

market. By then its industries were fully grown and mature to compete at the global level. Today, Britain is out

there preaching that you open up your economy so they can push in their finished products.

Equally, the USA is seen today as a strong advocate of free market, but it was never the case back then when

it was on the path to industrialization. Several times, the government, either directly or indirectly, put in place

policies that protected infant industries. As early as 1789, the US had deliberately imposed duties on 38 items,

obviously to protect the local industries. Several other tariff acts were subsequently passed, imposing import

duties on certain commodities and outright ban on exportation of certain others. Industries such as textiles,

glass, iron, etc, were beneficiaries to this policy. The government also promoted industrialization through direct

investment in infrastructure, encouragement of technological innovation, funding and direct involvement in

research and development, etc. When the American industries were mature and strong enough to face robust

international competition, the government relaxed the protectionist policies. Today, the US is out there

preaching liberalization and free trade.

Furthermore, Malaysia, a country that got independence from Britain just about three years before Nigeria, has

risen from a supplier of raw materials (tin, rubber, palm oil, timber, etc) to industrialized countries to an exporter

of finished and processed products. Following a series of deliberate policies from the government, the country

has become industrialized, with a range of export-oriented manufacturing industries. By 1990, 30% of exports

consisted of manufactured goods ranging from electrical and electronics products, rubber products, textiles,

etc. The story of how Malaysia came to Nigeria less than 4 decades ago to take palm seedlings is a well-known

one. Today, that country produces more than 30 finished products from that same palm tree.

Malaysias main policy thrust was built around creating incentives for Foreign Direct Investment, while ensuring

domestic participation. The Import Substitution (IS) strategy led to the Pioneer Ordinance plan of 1958, with

incentives such as a 5-year tax holiday to companies that came to invest in Malaysia. Other legislations such

as Investment Incentives Act of 1968, Free Trade Zone Act of 1971, and the Promotion of Incentives Act of

1986 were also crucial in the promotion of Foreign Direct Investment. Thus, more than half the capital invested

in Malaysia came from offshore. The Malaysian authorities saw the need to encourage heavy industries and

this led to the setting up of the Heavy Industries Corporation of Malaysia (HICOM), a public sector company put


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together in 1980 to partner foreign companies to set up industries in sectors such as machinery and equipment,

petrochemicals, iron, steel, building materials, etc. In less than a decade, of the 867 corporate enterprises in

the country, over a third were involved in manufacturing. In 1990, the Malaysian government came up with an

economic blueprint tagged Vision 2020, with a view to making Malaysia a developed and industrialized country

by the year 2020. In summary, Malaysia is one country that has ensured economic prosperity and a steady

growth in industrialization as a result of carefully thought out policies and strategies. The result is there for all to

see: Malaysias manufacturing sector accounts for about 30% of the countrys GDP and 76% of its exports. The

examples of Korea and Singapore are also instructive.

What about Nigeria? According to the National Bureau of Statistics, the manufacturing sector only contributed

3.51% to the GDP for Q3 2011. This is quite pathetic for a nation that got her independence 52 years ago. But

we can start a process to halt the free fall.

Infrastructure (power, roads, rail, etc) remains the backbone of any quest for industrialization. It is the

foundation upon which industrialization thrives. Thus, whatever policies we enact will be futile if the government

does not build good roads, ensure efficient rail system, fix power system, ensure the ports are efficient,

encourage research and development, build good schools, ensure peace and security, etc.

Note that there are policies that initiate industrialization and those that ensure the continuation of the process

after the country has reached an appreciable growth. There are other basic truths. First, the pressure of

globalization and influence of organizations such as WTO, World Bank and IMF will not give us the luxury of

time and space enjoyed by the other countries we have reviewed. We must therefore build momentum and

resilience to withstand such resistance when they come. Second, the time taken to industrialize has reduced

over time as developing countries have leveraged on technological advancements el sewhere to fast-track

their pace of industrialization. Therefore, whatever policies to be enforced must seek to take advantage of such

technological advancements elsewhere to ensure an even faster pace of growth. We cannot industrialize in

isolation! The above policies that seemed to have worked effectively elsewhere may not necessarily give us

same level of effectiveness because of our peculiar terrain and unique circumstances. We have to evolve our

own success formula.

Looking at our present trade and industrial policies, most of which were highlighted in the presidents budget

speech 2012 liberalization and privatization of the power sector to attract private and foreign investors, setting

up of the Nigeria Bulk Electricity Trading Plc (NBET), among others they are quite laudable, in principle,

especially for the agricultural and power sectors. However, history shows most of our problems have always

been as a result of poor implementation. Already, there have been lots of complaints that the conditions to

access the various credit lines are quite impractical and unfriendly. We eagerly await the proper implementation

of these. Also, the policies seem to address only agriculture and power sectors. Little was done in other areas

to boost industrialization.

As a way forward, we must at some stage adopt Import Substitution (IS) and focus on labour-intensive

industries as against capital-intensive industries. Policies must be such that discourage industry from

dependency on capital goods importation and encourage local production of capital goods. We must intensify

efforts to attract Foreign Direct Investment in the manufacturing sector. We need to leverage on the

technological advancement of the developed world by giving incentives for technology transfer. But while FDI-


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based industrialization can be a shortcut, it is not a panacea for industrialization and does not completely tackle

the national challenge of industrialization. It is, however, a safe and fast way to jump-start industrialization.

Manufacturers must also ensure that at no time should the quality of finished products be compromised.

Institutions like the Standard Organization of Nigeria (SON) must be empowered to ensure compliance to

standards. Nobody is going to patronize a sub-standard product all because of patriotism. We must ensure thatwe give our people value for their money to boost their confidence in made in Nigeria goods. Equally,

liberalization of the downstream sector of the petroleum industry will encourage the setting up of more

refineries and petrochemical plants, provide more jobs and save the country what hitherto was paid to offshore

companies for importation of refined products.

The government must also encourage industries such as automobile companies to set up assembly plants.

This can be achieved through provision of tax holidays for the companies that comply; patronizing of vehicles

assembled in Nigeria; and increasing import duties to cars not assembled in Nigeria. Kia, Hyundai, Honda,

Toyota and others sell hundreds of thousands of brand new cars to Nigerians every year. HP, Dell, Compaq

and others export millions of computers and other ICT infrastructures to Nigeria annually. Nokia, Research in

Motion (RIM), Samsung, Sony Ericsson, and others sell millions of phones to Nigerians annually. I do not see

why we cannot get them to set up assembly plants in Nigeria instead of dumping the finished products on us

and repatriating all the profits to their home countries. If the government could get PAN and Volkswagen to do

this in the 1970s and 1980s, I believe we can do it with more success even today.

ISSUES IN NIGERIAS TRADE AND INDUSTRIAL POLICY: LIKELY AGENDA FOR THE NEW

MINISTER OF COMMERCE AND INDUSTRYLeonard Ugbajah[1]IntroductionAt last the new Executive Council of the Federation has been inaugurated and the new Ministers assigned their

respective portfolios. It is pertinent we begin to take stock of what needs to be done by the different Ministers

in their respective Ministries to further move this country forward in the path of greatness. As always, about 38

Nigerians have been selected out of the over 140 million Nigerians to pilot the affairs of the different

Ministries; these chosen few are by no means the repositories of wisdom in any given field of human

endeavour. Moreover, political expediency does not always demand that nominees are assigned to the areas of

their best competence in terms of academic qualification and work experience.I have this urge to articulate some of my thoughts (and they are quite long as the length of this essay shows) on

an aspect of our national economic development that is very close to my heart- trade policy. Having had the

opportunity of working in this field and interacting closely with the Federal Ministry of Commerce and

Industry (FMC&I) and other relevant public and private sector stakeholders in the last two to three years, I

have had course to think critically about how trade/trade policy can spur industrialisation and deliver on
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poverty eradication in Nigeria. This essay, therefore, is intended to achieve some broad objectives which

include: provoking better appreciation among the policy makers and the general public on the potentials of

trade for national development; and highlighting the various challenges facing the country in actualising these

potentials. Unfortunately, we talk so much about economic diversification but efforts and results on ground

still suggest that we are far from getting off the dutchdisease syndrome. A very sad testimony of this state of

affairs is the fact that the country has failed to take advantage of the AGOA initiative several years after it

came into existence basically because we have little or nothing to export apart from crude oil. This is more

appalling in the face of countries like Kenya and Ghana making giant strides on the initiative. This is just one

of the sad stories!The contents of this essay are basically my reflections on policies and processes. May I state beforehand that

the positions, figure, institutions and even persons mentioned in this essay are as recollected to the best of my

ability, hence anybody or institution who has a contrary opinion to what has been written here is free to so

express. In the event that this gets to the new Minister (as I believe it would), it is hoped that it would provide

alternative views on some of the issues he will be confronted with in the days ahead.A note on the organisation of the essay; the essay starts with a brief comment on the imperative of sound

policies generally, and trade and industrial policy particularly, for national development. I then move on to

articulate some of the challenges facing the trade policy process and mechanism in Nigeria. I look at issues like

the need to conclude the process of formulating the new trade and industrial policy; the challenge of

industrialisation, where I propose the implementation of the cluster project; I then examine the imperative of

policy consistency and coordination across the various MDAs involved in the trade and development policy

process- the Ministry of Finance, National Planning, Agriculture, Foreign Affairs, etc. The next item explores

issues in the countrys external trade engagements at the multilateral (WTO),bilateral (focus on the Economic

Partnership Agreement, EPA) and regional (ECOWAS Trade Liberalisation Scheme, ETLS, and the Common

External Tariff, CET) spheres, as well as the dynamics of development cooperation (official development

assistance, aid for trade). The last item focuses on human and institutional capacity gaps; with a final note on

the need to recognise the role of the Legislature in the trade policy process.Policy Corruption and National DevelopmentBefore I proceed, permit me to relay some thoughts about policy and national development generally. It is true

that the most important reason why Nigeria is still struggling to deliver on the demands of human development

is due to policy failure. Policy failures can, and do, occur at two different levels- first, at the level of

formulation; and secondly, at the level of implementation. This is a concept I have come to regard as policy

corruption. Policy corruption is by far more important a factor in the national development matrix than the

more common kind- financial corruption, which we are so used to and pay so much attention to. For the

avoidance of doubt, the word corrupt in ordinary dictionary usage can be used to mean: to taint; to debase; to

spoil; to destroy the purity of; to pervert, etc. It therefore follows that corruption exists when the intention or

the result of a policy is tainted, or debased, or spoilt, or destroys purity, or perverts, etc. These words and


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phrases all essentially carry the same sense, which is the sense of changing the form of a thing from what it is

or ought to be to what it is not or ought not to be. They also carry the sense of wrongful use or abuse of a thing

or process.Now, how do these relate to policy and development? On the first level, policy corruption occurs when a

policy by design (i.e., at the stage of formulation) fails to embody optimally, the correct statement of problems

and their solutions. This can occur advertently or inadvertently. Policy failure at this level occurs inadvertently

when the formulators of the policy are either incompetent or lack the necessary information to make a sound

policy. On the other hand, policy failure at this level occurs advertently when policy makers are swayed by

extraneous considerations such as vested interests of whatever kind, including personal interest for some

material gain and pressure from external forces (countries, institutions, or businesses). Moreover, a

fundamental flaw in any policy process is the failure to harvest inputs from the relevant stakeholders. This

failure or omission can be advertent or inadvertent. However it occurs, the most important factor is that the

output from this tainted policy making process will necessarily be tainted, impure, perverted, corrupt. The

point must be made that a corrupt policy cannot be remedied by any stretch of good implementation. The

defect is terminal; perhaps, it could be saved by the surgeons knife in the form of radical reformulation.The second level policy corruption occurs is at the level of implementation. Just like at the first level, the

corruption may occur inadvertently or advertently. It is inadvertent if incompetence and/or improper

information leads to poor implementation of policy. On the other hand, it is advertent when those saddled with

the responsibility of implementing the policies as in the first case are swayed by extraneous considerations as

indicated above. It is easy to relate with this propositions in real life. For example, a policy of rural

electrification or urban road rehabilitation may be motivated by the overriding interest of political patronage

instead of human development. Such policy is skewed (corrupt) ab initio. The initial motivation will determine

the manner of implementation. On the other hand, a policy may have been well conceived but hijacked at the

level of implementation so as to achieve goals which are contrary to the initial conceptualisation or which at

best should be secondary.So, we come to the conclusion that a policy must first be good as a correct statement of the problems and their

solutions; and the policy must be properly implemented to achieve the set goals. It is here taken for granted

that the end of every public policy is to advance the common good as articulated through the process of

popular participation in political governance. When a policy meets the foregoing criteria, then we have policy

integrity. Policy corruption, therefore, is a deviation from this norm and forms the super-structure upon which

the more obvious kinds of corruption- embezzlement, bribery, etc thrive. Having said that, we take it for

granted once again that the goal of any Minister (or any public servant for that matter) would be to advance the

common good by ensuring the integrity of policies both at the level of formulation and implementation. In

other to achieve this, therefore, he/she would need to get all the necessary assistance within and outside the

Ministry to offer valuable inputs into the running of the affairs of the Ministry. It is on this premise that one


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calls on all Nigerians at home and in the diaspora to respond to the noble task of nation building, for ourselves

and for posterity.The Imperative of a Sound Trade and Industrial PolicyNow, to the maincourse of this essay: issues on Nigerias trade and industrial policy. I personally consider

the Federal Ministry of Commerce and Industry as one of the most important ministries in terms of potential

for economic growth and national development. Truth is that we cannot talk about growth or development

without productivity and exchange- the concerns at the core of the responsibility of this Ministry. It has been

shown in theory and practice that industry and trade are the most potent instruments of development. Industry

here is used to mean productive activities, and trade used to mean buying and selling of goods and services,

including those occurring across borders.The role of investment (especially, Foreign Direct Investment- FDI) in economic development is one that has

been widely acknowledged and vigorously pursued. However, investment cannot flow in, or thrive, except

within a sound trade and industrial policy framework which complements the investment policy. Trade and

industrial policy are components of a nations overall economic development strategy. In Nigeria, the overall

economic development policy is contained in the NEEDS II document. Though NEEDS II has components on

trade, the country has a trade policy which came into existence in 2002. The Ministry has set in place

machinery for the formulation of a new policy which will align trade and industrial policies and articulate both

in a single document. This is obviously in keeping with the governments decision under the Obasanjo era to

merge the Ministries of Commerce and Industry. We shall return to the process of formulating this policy

shortly.While some countries have separate policies for trade and industry, the emerging trend seems to be the

articulation of both policies in a single document showing the linkages and complementarities between the two

policy spheres. Indeed, this orientation is most welcome given the linkages between the two fields such that

except they are jointly addressed, there is the grave danger of each working at cross-purpose with the other. A

simple example would suffice to illustrate this. Tariffs is very important to trade and industry. A country that

wishes to liberalise its trade (i.e, reducing or eliminating tariffs) while at the same time seeks to build local

industries would run into some problems except the policies are properly aligned.Proper alignment demands that the country only liberalises on those products which would make it easier to

import critical inputs in form of raw materials and machineries where they are needed by the local industries. If

the country for any reason liberalises its tariff rates on those products showing good prospects in terms of local

production, then that may be a sure way to kill the emerging local industries. This can also be said about

exports liberalisation. A country may also want to protect some of its products especially natural resources

from export by the means of export taxes, quantitative restrictions, or outright ban of exports. There is indeed

some merit in the logic that a country need some measure of safeguard against the tendency to be crude, that

is exporting only primary goods (raw materials) and depending on importation for finished or processed

products.


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The above is a rather simplistic illustration as other factors can come to play in the given examples- such as the

need to achieve optimal allocation of resources and avoiding rent seeking and waste; and promoting consumer

welfare. Therefore, knowing where to draw the lines is the critical task of a good policy. Another scenario

would be where the country goes ahead to negotiate a multilateral or bilateral trade agreement which gives it

market access for goods and services which it does not produce competitively while denying it access for

goods and services it produces more competitively. Of what positive impact would this be to local industries

and investment? It has already become obvious from our illustrations that a number of dynamics come to play

in the choice of right trade and industrial policy framework. The point, however, is that great care and

expertise is needed to ensure that policies across these two fields are consistent and complementary. It would

be shown in the course of this essay that the need for policy consistency and complementarily as it relates to a

countrys trade and industrial policy runs beyond these two fields of trade and industry and includes other

spheres as finance, agriculture, labour, research and education, etc. This brief analysis of policy imperatives

leads us to the first challenge on the agenda.1. Finalising the New Trade and Industrial Policy for Nigeria

The FMC&I started the processing of formulating a new trade and industrial policy for Nigeria to replace the

2002 trade policy. A draft policy was produced sometime in 2008 and circulated to a limited number of

stakeholders for comments. There was a plan to hold a stakeholders consultation on the draft with the view to

finalising the document. To the best of my knowledge, the Ministry has not held the proposed consultation up

until this moment. However, a concerned stakeholder, the National Association of Nigerian Traders (NANTS)

hosted a stakeholders parley on the draft policy. The workshop was well attended by representatives of the

private sector (MAN, NACCIMA, NASSI, etc), labour, academia, relevant government ministries,

departments, and agencies, development partners, with international and local resource persons who dissectedthe draft policy. At the end of the workshop, the stakeholders came up with a report which was submitted to

the Ministry.Some of the issues highlighted in the report include the need to make the policy pro-poor; the need to properly

align it to the overall economic development strategy; the need for consistency and proper coordination among

MDAs; the need to involve the stakeholders in the formulation and implementation process; inclusion of

monitoring and evaluation mechanism with benchmarks and indicators; the need to align the policy with

Nigerias engagement at the multilateral, bilateral and regional levels; etc. These issues are reflected in the

analysis contained in this essay.It is imperative that the new Minister picks up what is left of this process and brings it to a conclusive end,

incorporating the inputs harvested from the stakeholders. The Minister may also consider setting up an experts

committee to finalise the document. The country cannot afford to remain without a comprehensive policy

framework in this area. This is a tangible output the Minister should strive to deliver on.1. Tackling the Problem of Industrial Development


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Nigeria operated an import substitution industrial policy in the 60s up to the early 80s. The coming of SAP was

to change this in favour of liberalisation. Unfortunately, today, partly arising from the failure of SAP, the

industrial policy environment seems to be in a state of flux. The government is trying out different approaches

usually based on the fancy of those in the helm of affairs at any given time and those who advise them. The

result in most cases is policy corruption, favouring rent seeking. The absence of a consistent and coherent

strategy for industrialisation is telling on the countrys poor industrial output in the face of enormous capacity

for industrialisation, given the abundance of natural resources, human capital, and a relatively large market

both domestically and regionally, at least.In as much as one recognises the role played by the lack of critical infrastructure in limiting the countrys

industrial development potentials, one would rather suggest that there are other ways of getting through the

challenge. In developing economies like ours, the idea is to adopt selective intervention measures. The logic of

selective intervention lies in the fact that since we can not solve all the problems at once, we prioritise and give

preference to sectors that are potential growth drivers, whose development would have a multiplier effect in

terms of backward and forward linkages with the other areas of national economic development. The caveat,

however, is that selective intervention must be accompanied by policy consistency across sectors for it to yield

the required result. Following this logic, behind the background of poor infrastructure, the country can still

pursue an industrialisation strategy that focuses on developing value chains on locally available cheap primary

goods and this could be done very effectively using the cluster concept.The cluster concept involves the setting up of firms operating in the same or related industries in a particular

geographical location. This can be in form of industrial estates, or parks. Traditional economic theories

show that industrial clusters benefit from external economics of scales. But beyond this benefit, the cluster

approach becomes more compelling in a country like ours where availability of infrastructure is a major

challenge. Industrial clusters, therefore, become attractive as a way of accomplishing in a controlled

environment what otherwise could not be accomplished on a general scale. The idea is to prioritise the

provision of basic infrastructure in the area so that the firms located within the area have an edge which

enhances their competitiveness. Another factor that usually comes to play is the need to locate

production/manufacturing close to the source of all or some of the inputs needed in the process. This could be

skilled labour, raw materials, technology, etc. Thus the most suitable way to solve the problem of value chain

development especially in agriculture would be to locate processing plants close to the farmgate or even

within the farm. Firms within this cluster could operate at different or all levels of the value chain from

primary processing to finished products and marketing/distributing services.Clusters can develop spontaneously, i.e., without any policy or positive intervention by the government. In fact

apart from the large industrial estates in the big commercial cities in Nigeria, the small clusters scattered in

different parts of the country developed spontaneously. In most cases these clusters came into existence over a

period of time as entrepreneurs got increasingly drawn together due to availability of space, or skill or market

in a given location. Examples include the foot-wears, leatherworks and garment cluster in Aba, the computer


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village in Otigba, Lagos, the auto and industrial spare parts fabricators of Nnewi, the leather tannery in Kano,

etc. We shall speak more about these clusters later in this work.The need to utilise the cluster concept as the industrial development strategy for the country has been

recognised at the highest policy level. The FMC&I under Engr. Charles Ugwu did a lot of work in this regard

leading to the approval of the concept by the Executive Council of the Federation as the countrys industrial

development strategy. The Ministry in developing the strategy borrowed extensively from the East Asian

Tigers who have proved most successful in this area. The Ministry also commissioned feasibility/mapping

studies for industrial clusters in different parts of the country. Unfortunately, the immediate past Minister,

Chief Achike Udenwa, did not show much enthusiasm in the project, consequently, the project with all the

reports and efforts/funds invested in it seem to have become another volume for the shelves. One must decry at

this point the attitude of Ministers or even Presidents abandoning policies and projects initiated by their

predecessors for no just reasons and re-inventing the wheel. No country can ever develop in this way. This has

been one of the major challenges facing the FMC&I which the new Minister must avoid by every means.Let us dwell more on the importance of clusters. I think that there has been this fixation when we talk about

industrialisation in Nigeria. We think more of the large manufacturing plants and hardly seem to reckon with

small and medium scale or household production. The sheer size and complexity of the machines in the

factories along Oba Akran Road in Lagos and other such industrial estates dotting the landscape of the major

cities in Nigeria seem to reflect our conception of industrialisation as a huge and complex issue. The problem

is that we have a challenge with starting small forgetting that big things start small; and as the saying goes,

beware of small things that start big. This conception of industrialisation was responsible for the policy of

the 60s and up to the early 80s where government invested heavily in large manufacturing plants whose ends

we need not recount here.Contemporary global trends have shown a remarkable shift in the structure of manufacturing across the world.This shift has been appropriately captured in the 2009 Industrial Development Report of UNIDOtitledBreaking In and Moving Up: New Industrial Challenges for the Bottom Billion and the Middle IncomeCountries. There is something exciting about the phrase- breaking in and moving up. It tells of possibilitiesthat have been created by the shift in structure. What is this new trend, if one may ask? Permit me to present itto you in the words of the Director- General of UNIDO in his Preface to the Report. According to him,[O]neof the outstanding features of the process of globalization has been the rapid diffusion of industrial productionfrom the developed to the developing countries, based on such developments as specialization in production bytransnational corporations, the development of international supply chains and the liberalization of trade flows.This has allowed the production process to be disaggregated and the production of individual components andservices to be outsourced, often to developing countries that enjoy competitiveadvantages in their production. Where this process has been successful, the resulting so-called trade in tasks

has had a dramatic impact in promoting industrial and economic growth, reducing poverty and generatingsocialprogress.What this is simply saying is that a country can take advantage of this internationalisation of the value chain byspecialising in the production of those components in which the country has the greatest competitive edge.Hence we need not wait until we can have a wholly made-in-Nigeria car, we can start by specialising inproducing simple components- this is breaking in. The story does not end there; we can build capacity overtime to upgrade our place within the value chain until we get to such a place where we can produce whollymade-in-Nigerian cars, if we so desire- that is moving up! This is like industrialisation by ambush- taking thevalue chain at the point most advantageous to you. Most people are very familiar with the concept of


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outsourcing which has helped so much to advance the economies of the Asian Tigers. In our world today, ifyou pick a piece of electrical appliance, computer system, etc, you would observe that the differentcomponents were manufactured in different countries, even by different companies and then assembled by themanufacturer. A firm or a country can be reputed for just producing one component. Same applies to textilesand apparels, shoes, etc. There is the story one region in China producing more than half of the buttons used inthe entire world. This strategy tallies with our earlier argument about starting small and promoting SMEs as

catalysts of industrial development.The closest we have come to this strategy in Nigeria is the establishment of assembly plants. However, becausethis initiative not based on any specific competitive advantage, coupled with poor policy environment andmismanagement, the plants are either moribund or struggling today. A more apposite competitive advantagewould have been the availability of indigenous technical capacity but we rather relied on the expectedtechnologytransfer which has proved very elusive. We also have the Export Processing Zones which are alsonot in the best of conditions. Contrast this with a situation where Nigeria had concentrated in the manufactureof say bolts or tires. There is every possibility that the country would have attained global acclaim on thesecomponents and would have moved up more easily to more complex components or even complete units -allbased on the development of indigenous technical capacity. The point sought to be made is that it is easier todevelop indigenous technical capacity when you start from things you can do more easily and then try to moveup to more complex tasks over time. The approach proposed herein favours the development of SMEs ratherthan giant manufacturing plants. Ironically, Nigeria has an SME Policy whose administration is detached from

the FMC&I! We shall revisit this when we look at cross sectoral/ inter-agency cooperation and coordination.Implementing the cluster concept in Nigeria, to me would not be such a difficult task. The reason is because

we have, scattered all over the country, clusters at different stages of development as we have pointed out

earlier. The logical thing to do is to build on these existing clusters. From the leather tannery in Kano, to the

shoe and leather works in Aba, to the auto and industrial components fabricators in Nnewi, to the computer

village in Lagos. What is needed in each of these clusters is appropriate policy intervention in form of

restructuring and upgrading for which the country can get the requisite technical support from multilateral and

bilateral agencies. UNIDO has a Project in this regard in the West African region and already countries like

Senegal have taken advantage of it while Nigeria for some inexplicable reasons is yet to take advantage of the

Project.This writer was opportune to work in a team that conducted a rapid field survey on the foot-wears, leather

works and garment manufacturers in Aba in 2008. The work was sponsored by the National Association of

Nigerian Traders (NANTS) as one of the steps in finding solution to the problem of low industrial capacity

which we always identify as a constraints within the context of multilateral and bilateral trade engagements.

The team visited the different zones and lines in the market where we met with the entrepreneurs and the

market leaders and had fruitful discussions with them at that micro level. One of the findings is that apart from

the usual story of poor infrastructure- roads, power, etc; the entrepreneurs were aware of the fact that they can

improve tremendously in the quality and quantity of their products given the right machines and somesharpening of their skills. I would recommend that the incoming Minister pick up a copy of this report from

NANTS and the accompanying documentary by an AIT crew titled TheAriaria Revolution. We also

discovered that in spite of the general perception of made in Aba products as being of inferior quality, these

entrepreneurs have markets extending as far as the Central Africa Region. On the quality of their products,

they were able to show from samples that they produce based on what the market demands, given that the


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average Nigerian prefers cheap products for economic reasons; nevertheless, when the price is right, they are

equally capable of producing high quality products. We were impressed to see ongoing production of oil

resistant boots on order from contractors supplying big oil companies. It may also be of interest to learn that

made in Aba suits can compete favourably in quality and finishing with the imported brands tha have flooded

our markets; and in spite of the time and labour consuming manual process of production, the prices are still

highly competitive. Then imagine what would be the outcome where these garment makers are provided with

the right machines, improved skills and infrastructure.Aba already has the reputation as an industrial hub for specific products like footwear and garment, the

manpower is there even if not so refined. Same can be said of other such clusters in different parts of the

country, therefore, one wonders why the government cannot concentrate on developing what is already in

existence. In Aba, we also discovered that there is already a pilot project aimed at refining the skills of these

footwear and garments makers, and providing them with a common pool of modern facilities. This Project is

under the auspices of UNIDO in collaboration with the FMC&I, NEPC and the Abia State Government. Apart

from the fact that this Common Facility Centre is like a drop of water in the ocean, there are other reasons

bordering on location and seeming lack of good relationship between the majority of the entrepreneurs and the

Centre. These are foundations that can be built upon instead of trying to erect skyscrapers in the air.I would therefore, urge the new Minister to look critically at the industrial cluster project started by Engr.

Ugwu and get it rolling once again. This is more profitable than running a campaign for Buy Made in Nigeria

Products. Truth is that the made in Nigeria products that have demonstrated good quality (mostly the food and

beverage/pharmaceutical industries most of which are controlled by multinational corporation) receive and will

continue to receive due patronage from Nigerians without any campaign by any Minister. Moreover, without

any campaign, the government can adopt a deliberate internal policy of patronising Made-in-Nigeria goods in

public procurements. What we need now is to tackle areas that have great potentials for economic revolution at

the grassroots, and industrial clusters targeted at international (or even domestic) value chains seems to be the

answer. Agriculture based industrialisation, light manufactures, etc should form the basis of this revolution. To

this end, the new Minister should immediately put together an implementation committee, bringing together

experts with different relevant backgrounds that would help drive this process.There is also the possibility of adopting a private public partnership (PPP) approach which will see the private

sector contributing to the design and management of the clusters with the provision for recouping investment

with reasonable profit over a reasonable period of time. If the legal framework is in place, this would not be a

difficult approach.1. The Imperative of Policy Consistency and Coordination across MDAs

Another issue the Minister may want to pay attention to is the need to ensure consistency and proper

coordination between the core policy and operations of the Ministry and related policies and processes in other

ministries, departments and agencies (MDAs). There are other Ministries who are important stakeholders in

the trade and industrial policy of the country. These include the Federal Ministry of Finance (FMF), the


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National Planning Commission (NPC), the Ministry of Agriculture, the Ministry of Foreign Affairs (MFA) and

the National Planning Commission (NPC). Apart from these ministries, there are also agencies some of which

are under the FMC&I like the Consumer Protection Council (CPC), the Standard Organisation of Nigeria

(SON), the Nigerian Export promotion Council (NEPC), etc; while others are located in other Ministries like

the Raw Materials Research and Development Council, NAFDAC, and other numerous research institutes

under the Federal Ministry of Science and Technology, the Nigerian Customs Service under the FMF; and a

few under the Presidency like Small and Medium Enterprises development Agency of Nigeria (SMEDAN),

Nigerian Export Processing Zones Authority (NEPZA), Nigerian Investment promotion Commission (NIPC),

etc.In as much as it is desirable to have some of these agencies, especially those under the Presidency, brought

under the FMC&I, there are equally compelling reasons why this should not be done. What is needed,

therefore, across these sectors and MDAs is to have a method of effective policy coordination. There are two

ways of achieving this- the Ministry of Commerce can establish mechanism for regular consultations with

these MDAs; or the Federal Government can set up a mechanism for coordination at the level of the

Presidency, possibly under the office of the Chief Economic Adviser. The advantage in the second option is

that it would serve to reduce turf fighting since no MDA would feel that the other is encroaching into its

domain. But whichever option is chosen, the most important thing is for the Government generally to be able

to identify issues that fall within the ambit of trade and industrial policy and insist that the Ministry of

Commerce either leads or be carried along in the processes whether domestically or internationally. This writer

has witnessed a situation where the Federal Ministry of Science and Technology was leading the process an

international trade negotiation. In fact, the preliminary work that has been done so far in Nigeria on industrial

restructuring and upgrading was done by the Raw Materials Research and Development Council, which again

is under the Ministry of Science and Technology.1. Trade and Agriculture

The linkage between trade and agricultural policy is too obvious to need too much elaboration. In fact at the

international scene, trade in agriculture forms one of the major pillars of the WTO regime with a separate

agreement known as the Agreement on Agriculture (AoA). It is only logical that agricultural policy be aligned

with trade/industrial policy as this would serve to ensure that agricultural production feed into trade and

industrial development. One of the acclaimed banes of agricultural development in Nigeria is the lack of

processing capacity to absorb surpluses at the time of harvest or to transform primary products to finished

goods, thereby adding value. Poor integration of value chain in agriculture can therefore, be addressed with the

instrument of trade/industrial policy. Apart from the local policy and infrastructural demands, another

important role a countrys trade policy can play in agricultural development is by seeking high income

markets, through multilateral and bilateral agreements, for the countrys agricultural produce whether at the

primary or processed stages. An agricultural policy well aligned to the trade/industrial policy would ensure


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effective backward and forward integration within the economy and has great potentials for poverty alleviation

at the grassroots.1. Trade and Fiscal Policy

The FMF is in charge of fiscal policy in Nigeria. Due to the close relationship between tariffs and fiscal policy,

the responsibility for setting the countrys tariff policy lies with the FMF. One has noticed on several occasionswhere the FMF and the FMC&I are involved in the same or similar trade policy processes at the ECOWAS

level with little or no coordination at home. One glaring example was the process leading to the finalisation of

the ECOWAS common external tariff (CET). At a time when the Ministry of Commerce and other

stakeholders were busy pushing for a fifth band of 50%, a really difficult demand on other countries of

ECOWAs especially those on the UEMOA (French acronym for the West African Monetary Zone made up of

8 francophone West African Countries) bloc; the FMF was busy writing the 2008-2012 tariff book for Nigeria

(which was supposed to reflect the CET to the extent it had been agreed upon at the moment) but obviously

without the effective participation of the FMC&I.The result of this lack of coordination was that the tariff book was released just before the stakeholders (this

included organised private sector represented by MAN and NACIMA, the small scale industrialists represented

by NASSI, traders represented by NANTS, farmers groups, labour, academia, MDAs like Customs, NEPC,

NPC, and even the FMF, etc) had the final meeting to reach a decision to be forwarded to the Honourable

Minister of Commerce for approval and transmission to the Committee of Ministers of ECOWAS member

states. Even though the stakeholders were already tending towards a fifth band of 35% following studies that

had been conducted, the FMF already had 35% in the tariff book. The implication was that had the

stakeholders arrived at a different position or if the country had decided to use, say 40% as an initial

negotiating position (which is usually the practice), the purpose would have been defeated because the othercountries would just refer us to our current tariff book which already reflected 35%. This is just one example

where lack of coordination in the home front causes the country embarrassment at the regional or international

level. The most unfortunate thing sometimes is that there are existing frameworks for consultation and

cooperation on these issues, like the inter-ministerial committees, but they are rarely effective for so many

reasons ranging from lack of funds for regular meetings to disagreements among participating MDAs.Indeed, the practice here in Nigeria where the FMF is in charge of tariff policy has been challenged by

stakeholders in different fora. Tariffs play the double role of trade facilitation and revenue generation. Some

countries place more emphasis on one than the other. Where the emphasis is on the revenue generating role as

it is in Nigeria at the moment, the administering agency which is the Customs is usually under the Finance

Ministry. On the other hand, in countries where the emphasis is on the trade facilitating role, the Customs is

usually under the Ministry of trade/commerce. It has been argued by some experts that countries including

Nigeria should move away from over reliance on tariffs as a source of government revenue but rather to tow

the line of tariff liberalisation as a means of facilitating trade flows. Whether Nigeria is ripe for this is arguable

but the point need to be made that global trend is in favour of the latter position and with the spate of bilateral


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and multilateral trade negotiations, it is only a matter of time before tariffs finally lose their importance as

revenue source for the government.1. Trade and Foreign Policy

The role of trade as an instrument of foreign policy is one that dates back to antiquity. In principle, a nation is

free to choose the kind of economic (trade) relationship it wishes to maintain with any particular country orgroup of countries. This includes the decisions as to where to sell the countrys products, where to buy the

countrys needs and on what conditions (pecuniary and otherwise) the country is willing to enter into the

transaction. Therefore, trade is an instrument a county can use in enforcing or reinforcing its positions in

international arena. The discovery of Africa by the Europeans, the scramble for raw materials and slaves and

the subsequent partitioning of the Continent among the European countries, were all motivated by economic

interests. Wars have been and are still fought today across the world for economic reasons. This only goes to

reflect how powerful a tool of international diplomacy trade could be.This connection has made it practically impossible for a country to detach its trade policy from its foreign

policy. Perhaps, the economically advanced countries understand this more than the developing countries. In

fact, under the recently restructured European Union following the coming into effect of the Lisbon Treaty,

trade has been explicitly stated to be a component of the EUs foreign policy. Though this has always been the

practice, the difference now is that of manner of coordination. For example, EUs economic relationship with

her former colonies in Africa, Caribbean and Pacific (ACP) group of states has been within the framework of

the successive Lome Conventions and currently the Cotonou Agreement. These instruments also provide a

comprehensive framework for cooperation across political, socio-cultural, and economic spheres. Hence it is

primarily a foreign policy instrument. The United States of America has been in the forefront of using trade to

promote its political interests all over the world. From the North American Free Trade Agreement (NAFTA) tothe U.Ss trade embargo on Cuba or Iran, the story is same- trade in the service of political interest. In fact, we

can not possibly fully explore this linkage between trade and foreign policy in this write up but suffice it to say

that whether at the a bilateral or multilateral level, countries that know their worth in international politics

would always use their perceived economic advantage to make their voices heard in the comity of nations.Unfortunately, Nigeria as a country does not seem to have drawn this linkage between our foreign policy and

our trade policy. Nigeria is party to numerous bilateral cooperation agreements most of which have enriched

the shelves rather than the nation; that is, those agreements that their copies can still be found. Usually these

processes are led by the Ministry of Foreign Affairs with the participation of the Ministry of Commerce to

cover the trade and investment components. However, the more commercial oriented agreements are driven by

the Ministry of Commerce. What seems obvious, however, is that there is no comprehensive strategy for

determining the appropriateness or otherwise of entering into agreements with particular countries or group of

countries, the agreements rarely reflect anything the country stands for or against. We need to ask ourselves as

a country: what are the strategic national interests we promote by our trade engagements? There is therefore,


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need for the new Minister to have this broad perspective of trade policy which would enable him to form a

synergy with the Ministry of Foreign Affairs, which is primarily responsible for the countrys foreign policy.The challenge for Nigeria is in different fronts- one, is the countrys position within the West African and

Africa region; two, is the countrys bilateral engagements with other countries or group of countries around the

world; and three, is the countrys engagement at the multilateral level under the WTO. We shall consider these

under the item on multilateral and bilateral engagements and development cooperation.1. Trade and National Development Planning

Another Ministry that plays an important role in the countrys trade policy arena is the National Planning

Commission (NPC). The NPC is the government ministry in charge of development planning. We have

highlighted above that trade policy is a part of the broader sphere of development policy. There is need,

therefore, for inter-ministerial cooperation and coordination between these two ministries. For example, it is

not advisable for the NPC to produce development plans like the NEEDS II, the vision 20:20:20, etc which

have trade components without the active participation of the FMC&I. No matter the number and expertise of

consultants used in such processes, the contribution of the FMC&I can not be dispensed with. Perhaps, where

the operations of both ministries most need some fine-tuning is in the area of approving disbursements of

funds from overseas development assistance. Statutorily, the NPC is in charge of coordinating all official

development assistance coming into the country. There are some funds by foreign donors that can only be

accessed with the approval of the NPC. The two ministries will need to work out modalities to ensure that such

funds are made accessible and utilised on the right projects. To this end, it may be necessary to engage in joint

development of projects as the need arises.We can continue endlessly to explore the strategic alliances the new Minister would have to build or strengthen

but we have selected these few to show that the trade policy process is a complex process that requires activemulti-stakeholder participation. But before we leave this item, it is pertinent to point out a very important but

largely neglected area of coordination/cooperation. That is between the FMC&I and the agencies that are not

under it. It is high time we recognised and developed strategies for coordination and cooperation with such

agencies like the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), National

Agency for Food and Drugs Administration and Control (NAFDAC), Bank of Industry (BOI), Nigerian Export

Import Bank (NEXIM), etc. Equally important is the need to find a place for the research institutes in the trade

policy process. These include bodies like the Raw Materials Research and Development Council, Federal

Industrial Research Institute, the numerous agricultural research Institutes, etc.1. Multilateral, Bilateral and Regional Engagements and Development Cooperation

A countrys trade policy is not worth the name if it does not take into account the place and interests of the

country among the comity of nations, either those geographically contiguous to it or those far away. The

process of globalisation has changed significantly the way people and nations relate across borders. Whether

one sees trade (that is, the search for new markets for finished goods and sources for raw materials) as one of


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the major drivers of globalisation, or sees globalisation as the major catalyst for international trade, the fact is

that both phenomena are so closely tied that no country dares address one as if the other is not important.Under this item, the objective is to highlight the challenges and prospects before the country as it relates to the

countrys engagement in multilateral, regional and bilateral trade policy processes on the one hand, and in

tackling the dynamics of development cooperation on the other hand.1. WTO and Multilateralism

At the multilateral level, Nigeria is a member of the World trade Organisation (WTO). What is needed at this

point is a re-evaluation ofNigerias strategic interest at the WTO vis--vis the countrys domestic trade policy

and commitment to regional integration in West Africa. Unfortunately,Nigerias otherwise imposing structure

as a global player is seriously diminished at the WTO for the simple reason that the countrys share of

international trade is minuscule. Nevertheless, Nigeria can still assert herself at the multilateral level if she can

drive strategic alliances and serve as a rallying point for the rest of African countries.The Doha Round was seen as having a lot to offer in terms of the development aspirations of developing

countries but the Round has remained inconclusive, if not stalled. We may want to recall that from the

inception of the multilateral trading system (first under the General Agreement on Trade and Tariffs (GATTS)

of 1947- following the failure of the proposed International Trade Organisation (ITO), through the various

negotiation rounds, up to the finalisation of Uruguay Round and the Makarresh Agreement setting up the WTO

in 1995), there has always been a conflict between the developed countries on the one hand and developing

countries on the other hand as to how to accommodate the interest and needs of the latter group within the

multilateral trading system.It is no news that that the policy of the multilateral system is based on mercantilism which encourages

countries to export as much as they can and to import as little as they can. Behind this background, therefore,countries tend to guard their domestic markets jealously while aggressively seeking access to the market of

other countries. The general perception is that the developed countries have used the platform of the WTO

(with the connivance of other agencies of economic globalisation like the IMF and World Bank) to gain

unrestrained access into the markets of most developing countries, especially those low income countries who

still lack the capacity and economic independence to negotiate their positions in the WTO, or are unduly

dependent on development assistance managed by these institutions. At the same time, these developed

countries tend to shield their markets from competition in critical sectors where the developing countries have

competitive advantage, like agriculture or even labour. This is the major criticism against the WTO regime; it

has been described as rigged rules and double standards, by an Oxfam International report. A situation where

free trade is stated as the goal but where all manner of polices, domestic and otherwise, is used to truncate the

benefit accruing to some countries from the system can not be better described.The perceived imbalance in the system has made the developing countries, from inception, to demand for

regimes that grant preferential market access to them as well as exempting them from the strict application of

certain disciplines of the WTO. The result is that the rules have evolved since 1947 to include such principles


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like the enabling clause, exemptions relating to regional agreements and customs unions, special and

differential treatments, etc. It remains arguable whether these preferences accorded developing countries have

had the necessary impact on their capacity to trade. In fact some analysts have argued that these preference

work against the interest of developing countries in two ways- one, by reducing the moral binding force of

other rules on the developed countries who would be tempted to view strict application of the disciplines as a

favour rather than a legal obligation, in the absence of such reciprocation from the developing countries; two,

by encouraging perpetual spoon feeding of the developing countries who, therefore, may never see any

incentives to move up the ladder, thereby continuing in sloppiness and indiscipline in domestic trade policy.The last milestone in the process of balancing the perceived imbalance in the system was the Doha Declaration

which stated its major focus as meeting the development aspirations of the developing countries within the

system. This is to take the form of modification of certain rules especially on agriculture and the increase in

development assistance in terms of Aid for Trade to enable developing countries take full advantage of the

opportunities in international trade- alas, the Doha Declaration remains a project in the pipeline and, on a

lighter note, we here in Nigeria understand well that things in a pipeline are most times at the mercy of

vandals, and therefore may never reach the desired destination!There are so many issues on the table at the WTO that calls for critical engagement and on which Nigeria

should play a proactive leadership role in articulating and championing the position of the developing countries

especially the low income developing countries (where the country falls) and the least developed countries

(LDCs)who form the bulk of ECOWAS members states. Fortunately, the profile of Nigeria at the WTO was

raised recently with the appointment of the countrys Ambassador as the Chairman of the Dispute Settlement

Body (DSM), a move seen by some analysts as a prelude to appointment as the Chair of the General Council.

Some of the issues of interest to the country include the interpretation and possible modification of Article

XXIV of the GATTS to determine the appropriate liberalisation threshold that constitutes substantially all of

the trade in relation to customs unions and regional trade agreements. This move has become important in

view of the current disagreement between West Africa and the European Union as to the acceptable

liberalisation threshold within the context of the Economic Partnership Agreements negotiations between the

two regions. We shall consider this in more details subsequently. Other issues that would demand the countrys

attention include negotiations on trade facilitation, standards (sanitary and phytosanitory), subsidies and

safeguard mechanisms, aid for trade, trade related intellectual property (especially on access to medicine and

protection of indigenous knowledge)and the so called Singaporeissues of competition, investment and public

procurement which will surely come up in one way or the other.Even in the face of lack of progress in the Doha Round, the global financial crisis has thrown up more

questions about the orientation of the WTO and the future of capitalism upon which the former is founded. But

for our purpose, we highlight just three issues: one, the global economic crisis has revealed the weakness of the

commitment of some key countries, especially the developed countries, to the ideals of the multilateral trading

system. The immediate steps taken by some countries like the US sought to protect their domestic markets


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from import competition. Two, the collapse of the global financial system which precipitated the economic

crisis in the first place has raised the need to re-examine the scope of financial liberalisation under the WTO.

This is of particular concern to Nigeria because the country is one of the few signatories to the Financial

Services Agreement (FSA) under the WTO/General Agreement on Trade in Services (GATS) and has made

commitments on financial services liberalisation and is in fact likely to make additional commitments under

the Doha Round.Though Nigerias existing commitments do not cover trading in financial derivatives, regarded by many as the

most toxic commitment, but that does not rule out the possibility of such commitments in the future. This

concern is coming on the heels of the present posture of the CBN Governor who have variously expressed his

non-aversion to (indeed, preference for) 100% takeover of any Nigerian bank by foreign banks. One must

point out that such a policy has its downsides. For example, let us imagine that most of the Big banks in

Nigeria were owned by the Lehman Brothers and Meryl Lynch of this world prior to the financial crisis that

swallowed up these giants, the effect on the Nigerian economy would have been devastating as the banks may

close shops like their parent companies or place undue burden on government revenue in the form of bail out.

This is not to even talk of the effect of the ever present danger capital flight as a result of strategic divestment

decisions or diplomatic mischief originating from the home country of these banks. The CBN governor needs

to fully consider the implications of this policy. For the avoidance of doubt, there is nothing wrong with the

establishment of wholly owned foreign banks in Nigeria but to allow foreign banks to acquire majority equity

in existing Nigerian banks is a different kettle of fish. The global community is calling for better regulation of

the financial services sector at the multilateral level but this should not dispense with the need for countries to

adopt appropriate regulatory framework to safeguard their domestic economies from the bubble and burst

effects of unsustainable and reckless practices of global financial speculators.Three, the current global crisis has raised questions of the sustainability of Aid for Trade (AfT) agenda under

the WTO. Even though most of the developed countries fail to meet up with their commitments towards aid for

trade under normal circumstances, the trend is expected to worsen as countries battle to recover from the

recession. The message for Nigeria and other developing countries is that they should not expect too much in

terms of development financing in form of aids from these countries but rather be ingenuous in tackling

development challenges especially those that directly relate to countries ability to participate effectively in the

global trading system. In the light of this, it is pertinent to emphasize that the practice of developing countries

accepting developed countries proposals on the promise of more development assistance by the latter is a poor

negotiating strategy because in most cases, the commitments by the developing countries are binding while the

promise of development assistance are couched in bestendeavour language.1. Quality ofNigerias representation at the WTO and the question ofstakeholders participation at home

The last issue that deserves attention on the multilateral arena is that of representation and stakeholders input

into decision process. it is no news that most developing countries (and that includes Nigeria) are poorly

represented at the WTO. The countrys Trade Mission in Geneva needs strengthening in terms of number and


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expertise of personnel. The parallel processes at the WTO make it impossible for a country that has very few

personnel on ground to track and engage in all the processes. Also the technical capacity of the personnel at the

Mission to engage the issues need to be taken seriously even before postings are made. This could be achieved

by instituting a consistent strategy for capacity building within the Ministry here in Nigeria and ensuring that

the best and brightest get the opportunity to serve in the Mission. There is also the need to build a seamless

interface between the Mission and the Ministry here at home so that technical support, where available at

home, can be accessed by the Mission without much physical movement of persons- this means the effective

deployment of ICT. This leads to the next leg of the issue: stakeholders participation in decision process.Anybody who has been closely following the trade policy processes in Nigeria for a reasonable period of time

would agree that the participation of stakeholders at the domestic front in shaping the countrys position at the

WTO has been minimal and uncoordinated. A number of reasons account for this: one, the process of

stakeholders consultation is usually a tedious one taking much time and funds to drive. Secondly, the

stakeholders, especially the private sector, has not been proactive in articulating their positions and advocating

for same. Perhaps the last statement needs further emphasis. The private sector in Nigeria has not learnt to

prepare well researched and empirically compelling policy positions. Most of the positions they adopt are

based on crude perception of certain government policies. This has succeeded in some cases so far in getting

the governments attention but definitely can not continue as the norm especially as it tends to project the

private sector as rent seekers where they, in fact, have genuine demands. In other climes, the private sector

invests money in policy research and comes up with policy positions that would stand the fireworks of any

contrary opinion. It is admitted that this is resource consuming but our private sector should learn to put their

money where their mouth is and see this as a part of their business investment. Nigerian Economic Summit

Group (NESG), Manufacturers Association of Nigeria (MAN) and the National Association of Chamber of

Commerce, Industry, Mines, and Agriculture (NACCIMA) can do this if they consider it necessary.The third reason for this lack of participation by stakeholders is the relative ignorance of the average business

person in Nigeria of how the processes at the multilateral level affect his/her business. A call for dialogue ends

up being a workshop of sort to educate the participants who eventually go away without making much

constructive contribution. It is admitted that trade policy with its jargons can sound technical and strange to the

average business person or anybody for that matter who is not trained in their usage, but this should not

altogether be a barrier to constructive engagement. Here once again, the private sector organisations have a

huge role to play in educating their members.The implication of this dysfunctional consultation process is that decisions are almost solely made on the

discretion of the Ambassador and his personnel at the Mission and in some cases, the home officials of the

ministry of commerce. This is certainly not good enough. In a bid to solve this problem, the Ministry set up a

National Focal Point on Multilateral Trade some years back. This Focal Point was made up of stakeholders

from the public and private sectors and, very importantly, experts drawn from the academia, then the civil


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society. The Focal Point was bedevilled with so many limitations chief of which was funding for its meetings

and other activities.The Focal Point, therefore, was moribund for some years but has been recently reconstituted last year under the

chairmanship of an eminent Professor of economics and expectations are high that given the right working

conditions, the Focal Point would cause a revolution in the countrys trade policy process not just in

multilateral engagements but also in domestic policy making. This, it is believed would foster the needed

coordination between our external commitments and our domestic policies. Let me therefore, suggest that as a

way ofinstitutionalising the Focal Point, a Secretariat should be set up within the Ministry (directly under the

office of the Minister) to coordinate the activities of the Focal Point. This initiative can be funded under a

technical assistance project with one of the development partners. The Secretariat should have a programme

officer who is an expert on trade with sufficient experience on the local scene, and one or two other officials

seconded from the Trade Department. This is therefore, a call on the new Minister to recognise this Focal Point

as a major force if he must achieve any meaningful legacies within the short time in the Ministry and take the

necessary steps to make the Focal Point functional.One must also observe here that one successful attempt at coordinating different stakeholders in the trade

policy process in Nigeria was achieved under the Technical Committee on the Economic Partnership

Agreement (EPA) which brought together wide range of stakeholders covering the public and private sectors

as well as labour. This process was largely driven by the non-state actors, specifically NANTS, which provided

the secretariat and even funded most of the meetings. The Committee also benefited immensely from the UK-

DFID especially in funding technical analysis to help the stakeholders have empirical justifications for the

national positions adopted. The outcome of this initiative is that Nigeria has been able to articulate the

positions of local stakeholders which are presented to the ECOWAS Commission for harmonisation with

positions from across the region before presentation to the European Union as negotiating position. Also in the

harmonisation processes for the region, Nigerias representations usually cuts across the public sector to

incorporate private sector members of the Technical Committee.1. Bilateralism as the new game- EPA in focus

Let us consider the position of the countrys bilateral engagements. Nigeria has entered into numerous bilateral

trade and investment treaties with different countries. As we have pointed out in the early part of this article,

most of these treaties are just forgotten on the shelves. This raises the question whether we should enter into

these bilateral agreements just for the fun of it? Let us advert our minds to the fact that the current difficulties

in moving the Doha round forward has necessitated a shift from multilateralism to bilateralism in international

trade engagements. The consequence is that most countries today, especially the developed countries are

aggressively pursuing bilateral agreements with the emerging developing country markets either as individual

countries or as regional blocs. This is one trend the developing countries must be wary of. The reason is that in

most cases the developed countries seek to get through these bilateral agreements what otherwise they could

not get through multilateral negotiations at the WTO.


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Of all the bilateral processes Nigeria is involved in, there are three, in my opinion, that we need to watch very

closely because of their potential to make or mar our economic advancement. These three are the Economic

Partnership Agreement (EPA) with the European Union, the Trade and Investment Framework Agreement

(TIFA) with the United States of America, and the Nigeria-Chinese Trade and Investment Agreement. Of these

three, the EPA is the most controversial, at least for now.Nigeria is on the EPA negotiations under the umbrella of ECOWAS. The EPA is conceived as a

comprehensive free trade agreement (FTA) which covers trade in goods, trade in services, with the possibility

of including competition, investment and government procurement (the Singaporeissues). The EPA which is

designed to replace the non-reciprocal (preferential) market access enjoyed by the African Caribbean and

Pacific (ACP) group of states who are former colonies of the EU countries. The old regime was a part of the

overall development cooperation framework between the EU and her former colonies, which framework was

contained in the successive Lome Conventions and subsequently in the Cotonou Partnership Agreement (CPA)

of 2000. The framework for the EPA was provided under the CPA. The major reason advanced for the change

in the trade regime between the two regions is the need to bring the regime into conformity with the WTO

rules prohibiting discriminatory or preferential trade regimes between member states except within the context

of a customs union or a free/regional trade agreement; or in the case of developed developing countries, the

preference must be extended to all developing countries meeting the specified criteria.The major criticism against the EPA is that the conception of the Agreement under the CPA was a

development oriented trade agreement to assist the ACP countries in their quest for poverty reduction, regional

integration among themselves and integration into the global economy; however, these aims seem not to have

been given adequate consideration by the EU in formulating the negotiating positions. While the EU has been

accused of treating the agreement as basically an FTA- purely a commercial agreement; the ACP countries,

and West Africa in particular, see the EPA as a trade and development agreement, not just a commercial

agreement. This difference in orientation has been the major cause of conflict in the negotiation process. While

the EU has been aggressive in pushing for market access in goods and services, the West African countries

have been more interested in the positions that would safeguard and promote their development needs,

including adequate funding for addressing supply side constraints occasioned by poor infrastructure and low

level industrialisation. The negotiations are continuing on a more cordial note now after the frenzy caused by

the approach of the European Commission under former Trade Commissioner Mandelson in managing the

lapse of the initial deadline of December 31st, 2007.

As one who has been deeply involved in the EPA process at domestic and regional levels, one would admit

that it is not very easy to take a stand on most of the issues raised in the negotiation process but one fact that is

obvious is that it remains difficult to point at one country that is particularly enthusiastic about the EPA, even

among the Caribbean bloc that has already signed a comprehensive agreement. What this suggests is that most

of the countries are engaged in the process out of necessity rather than out of perceived advantages to be

derived from it. No doubt, the EPA has very lofty objectives as enunciated in the CPA, which include fostering


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poverty eradication, regional integration and gradual integration of the markets of the ACP countries into the

global market. However, the way the negotiations have proceeded has left serious doubts as to the likelihood of

the agreement to achieve these. For example, the process of regional integration is already jeopardised in West

Africa and elsewhere like Southern Africa by reason of the interim agreements which some countries have

broken ranks to initial, and sign, in some cases. The introduction of the interim agreements in the wake of the

brouhaha occasioned by the expiration of the 2007 deadline is generally seen by observers as a divide-and-rule

strategy by the EU.Even though the negotiation is nearing conclusion, let us still address our minds to the following questions:

should Nigeria have engaged in the EPA negotiation in the first place? Should Nigeria continue in the process?

What do we stand to gain from the EPA that we can not gain otherwise? What price are we paying for the

EPA? Without going into details, let me observe that even the World Bank has shown in a series of studies that

guided unilateral liberalisation by Nigeria would deliver more trade benefits than liberalisation under the EPA.

The logic is simple- an FTA/RTA is a double edged sword leading to both trade creation and trade diversion.What this means is that more trade is created among the parties to the agreement as a result of the elimination

or reduction of tariffs; but a more competitive producer of an item who is not a party to the agreement is made

worse off in trading with the parties to the FTA- this is trade diversion. For example, assuming countries A, B,

Documents

Nigeria Trade Policy