“AGOA: IMPERATIVE FOR

DEVELOPING NIGERIA’S SME

SECTOR” Presented

By

Dr Ikenna Nwosu, Ph.D Dundee, LL.B. Hons. (Nigeria)

Director, Nigerian – American Chamber of Commerce

(NACC)

and

Chairman

Government and International Liaisons Committee, NACC

AT THE

3rd Annual Mpad & Nigerian Manufacturing EXPO

15 – 17 March 2016

Landmark Centre

Victoria Island, Lagos, Nigeria

APPRECIATION

Organizers:

• Manufacturers Association of Nigeria (MAN)

• Federal Ministry of Industry, Trade and Investment

(MITI)

• Lagos Chamber of Commerce and Industry

• A mammoth effort worthy of all commendation

• A pleasure and privilege to make this presentation on

behalf of the Nigerian – American Chamber of

Commerce

ABOUT THE NIGERIAN – AMERICAN

CHAMBER OF COMMERCE (NACC)

• Nigeria’s first AND oldest bilateral chamber of commerce – established 1960 (in Independence Year!)

• Pivot of Nigerian – American Trade and Investment Relations between the organised private sector of both countries.

• Recently played host to the US Secretary of Commerce – Penny Pritzker on January 25, 2016 – to whom a comprehensive memo was submitted on improvements required to unlock opportunities for US and Nigerian Companies.

• In the past NACC, was the official host of the AGOA Desk in Nigeria. Will be the PIVOT henceforth for promotion of AGOA in Nigeria.

AGOA: DEFINITION/BACKGROUND

– “AGOA” is acronym for “African Growth and Opportunities Act”.

– Passed on May 18, 2000 by the US Congress as Title 1 of the Trade and Development Act of 2000 – and amended severally thereafter.

– It is a unilateral, non reciprocal trade preference programme that prescribes duty – free access into the US for qualifying exports from eligible Sub – Saharan African (SSA) countries

– 49 SSA candidate countries are prescribed, with 39 currently eligible for AGOA in addition to the benefits of Generalized System of Preferences (GSP). Qualifying eligibility requirements are listed.

– GOAL: Enhancing export – led economic growth in SSA and increased US trade ties with the region.

SYNOPSIS OF AGOA PROVISIONS

– Qualifying Export Products: All products covered by GSP, (even without GSP reauthorization), including Oil and Gas, agricultural raw materials minerals, manufactured goods and several others. Excludes products the US President considers “Import – sensitive”.

– Duty free access is for approximately 5200 tariff lines, which added to products currently duty fee in US tariff system, grants qualifying SSA countries duty – free access to about 86% of US products.

– Textiles and apparels are economically vital, primarily because of special generous provisions prescribed for least – developed AGOA countries (“Third – Country Fabric Provision” – permitting them to use foreign fabric for their duty free garment exports to the US.

SYNOPSIS OF AGOA PROVISIONS

(CONTD)

– AGOA Legislation prescribes an annual high – level

AGOA Forum for US and SSA Governments to

discuss trade economic issues AND implementation

of prescribed guidelines on US development

assistance

• to the named countries. (The Forum is held in

alternate years in US and Africa 2015 Forum

was held in Gabon.

– Validity: Expired September 30, 2015. Now

Extended by the US Congress and President Barack

Obama to 2015.

AGOA RULES OF ORIGIN (ROO)

• Product must be exported directly from the SSA country and imported directly into the US.

• Minimum of 35% of the appraised value of the article must be the “growth, product or manufacture” of the SSA country, defined by the total of:

– Value / cost of materials produced in the SSA country (or any two or more SSA countries being members of the same association or SSA countries that are treated as one country under US Legislation); and

– The direct cost of processing the article in the SSA country.

AGOA RULES OF ORIGIN (ROO)

(CONTD)

• Note:

– A maximum of 15% of the prescribed 35% of

the appraised value could be of US origin;

and

– Any amount of production in another

beneficiary SSA country could contribute to

the value – added requirement called

“regional cumulation”.

US GOVERNMENT DEVELOPMENT

ASSISTANCE TO SSA COUNTRIES AS

PRESCRIBED UNDER AGOA LEGISLATION – Consists of technical assistance and trade capacity building

(TCB)

– Targeted to encourage SSA country governments to:

• Liberalize Trade Policy; engage in fiscal and financial restructuring, harmonize legislation and regulations with WTO membership commitments; and promote greater agribusiness linkages.

– Other Targets:

– Assistance for developing OPS associations and networks among SSA and US operators;

US GOVERNMENT DEVELOPMENT

ASSISTANCE TO SSA COUNTRIES AS

PRESCRIBED UNDER AGOA LEGISLATION

(CONTD)

– Increasing number of reverse trade missions;

– Increasing trade in services,

– Addressing critical agricultural policy issues; and

– Building the capacities of SSA countries to participate

generally (and specifically in services) in the WTO.

– Implementing Agencies: USAID, OPIC, EXIM

Bank, USTR, US FCS.

– Tracking: In FY2013, US TCB assistance to AGOA

countries rose to $209 million, up from $191 Million in

2012.

US IMPORTS UNDER AGOA

– US Imports from SSA AGOA beneficiary countries represent a minute share of aggregate US imports.

– In 2014, of $2.3billion imports into the US from SSA, only $25.6billion – 1% - came from AGOA beneficiary countries.

– Of this $25.6billion, 56% ($14.2billion) enjoyed duty free status either under AGOA or GSP (with crude oil accounting for the lion share).

– Excluding crude oil imports, 35% of American imports from SSA countries under AGOA were non – oil products (about $4.4billion

– representing a three fold increase – from $1.3billion – since 2001, the first full year of AGOA implementation).

- US apparel imports from AGOA countries in 2014 totalled

$1billion. This is a decline from 2004 peaks.

US IMPORTS UNDER AGOA (CONTD)

S/

N

Imports Item 2001 2003 2004

Vehicles (mainly from

RSA)

$289M $2.2billion $1.4billion

Agricultural and Food

products – Nuts,

Cocoa, Fruits, Sugar,

beverage, tobacco

$139million $467million $487million

US Imports from SSA beneficiary countries are concentrated in very few

countries.

Import of vehicles and other manufactured goods such as chemicals

come exclusively from RSA.

Others Statistics:)

US IMPORTS UNDER AGOA (CONTD)

– AGOA and GSP grant duty – free status to US Crude oil imports,

and the key exporters to US are Nigeria, Angola, Gabon, Chad

and Republic of Congo.

– In 2011, number of SSA countries exporting non – energy

products to the USA under AGOA rose to 22.

– Non – Energy products are mainly exported to the US from the

following countries in 2014.

US IMPORTS UNDER AGOA (CONTD)

Country2014 2014

RSA 70% $3.1billion

Kenya $423m

Lesotho $289m

Mauritius $227m

Swaziland $77m

Cote d’lvoire $70m

Malawi $60m

US crude oil imports from SSA have declined by over 80% between 2011

and 2014 (USD40billion decrease) due primarily to increased shale oil

production in USA.

For over half of the 41 AGOA beneficiary countries, US imports under

AGOA in 2014 were less than $1m.

Nigeria is the only AGOA – eligible oil exporter that is not considered an

LDC under GSP.

IMPACT OF AGOA

– Only a handful of countries utilize AGOA.

– Most diverse is South Africa. Other key exporters include Lesotho, Swaziland, Kenya and Madagascar.

– Rise in employment in the manufacturing sector in Lesotho rose from 19,000 in 1999 to 45,700 in June 2011.

– More foreign exchange earnings and foreign direct investment for beneficiary countries

– Increased regional integration through the creation of regional value – chairs with resultant rise in intra – African partnerships.

– Balance of trade is positive for AGOA countries. In FY2008, US exports to the 41 AGOA countries was $17,125,389million; and the US imported $81,426,951m – a balance of $64,301,562 in favour of AGOA countries.

Current Nigerian Government Initiatives

to Promote AGOA – Establishment of National Supplementation and Advisory

Committee that developed strategic export plan for Nigeria’s economy, working with American consulting firm – Manchester Trade Ltd.

– Development of AGOA Product Profiles from market surveys

– AGOA sensitization workshops / seminars

– Capacity Building workshops – NEPC/USTR

– Establishment of TIFA Council, Nigeria – US Joint Economic Partnership Committee (JEPU), Nigeria – US Bi – National Commission.

– Opening of direct airlink and seaport links between Nigeria and US.

– Trade Missions/Reverse Trade Missions.

Current Nigerian Government Initiatives

to Promote AGOA (CONTD)

– Product Adaptation Programmes by NEPC for various agricultural products.

– Additional measures by NAFDAC, SON and FIIRO for standards/quality improvement for Nigerian products – introduction of MANCAP and 180 standards.

– Production of export manual by NCS to ensure increased regulatory compliance to secure AGOA benefits.

– Design of new National Trade Policy and Industrial Masterplan (NIRP)

– Collaboration with WTO to introduce Standards and Trade Development Facility (STDF) for some selected products (eg. Shea butter and sesame seeds).

Current Nigerian Government Initiatives

to Promote AGOA (CONTD)

– Infrastructure development via NSIA/IFC Collaboration; National Integrated Infrastructure Masterplan (NIIMP); and establishment of Infrastructure Bank.

– Intra – Regional Cooperation – Urban Development Bank

– Human Capital Development Initiatives

– Establishment of Nigerian International Financial Centre to create African’s Financial hub in Nigeria.

NIGERIA FACT SHEET ON AGOA

– Nigeria yet to take full advantage of AGOA, with many Nigerian businesses unaware of the AGOA programme

– Agricultural products exports to US in 2012 = $80.83m – a 20% increase from $58.78m in 2010

– Other Nigerian products exported to US include textiles, apparel, transportation equipment, electronic products, forest products, chemical and related products, minerals/metal.

– US FDI into Nigeria increased from $5.2m in 2000 to $8bn in 2012 – with US actively diversifying into non – oil sectors (Hospitality, Agriculture, Housing, Healthcare, etc).

NIGERIA FACT SHEET ON AGOA

(CONTD) – Nigeria’s economic reform measures expanded her economy’s

growth rate to over 6.5% - well above the subsaharan average of 5.6%, with Nigeria accounting for 10% of US oil imports in the last decade.

– The new Local content Policy/Legislation is opening up new opportunities in the upstream/midstream and downstream oil/gas sector in Nigeria.

NIGERIA – COUNTRY CHALLENGES

– Need to develop national and States level AGOA promotion strategies – working with OPS (NACC in the driving seat).

– More support for economic diversification into non – oil sectors – solid minerals, agriculture, ICT

– Shift from export of raw materials commodities in primary state to add value to the products.

– Concerted efforts to improve the ease of doing business in Nigeria

– Need for more concerted SME capacity building initiatives.

• – Single digit interest rate for loans / easier access to finance for

SMEs.

SOME CHALLENGES OF AGOA

IMPLEMENTATION

– Criticized for contravening WTO rules

– Seen as one – sided agreement with little or no African involvement in its preparation.

– Need for US Government strategy to catalyze utilization of AGOA by the 41 beneficiary countries.

– Need for AGOA states and US Government to establish a joint evaluation and monitory mechanism to track AGOA implementation/progress based on AGOA Forum outcomes.

FINAL PUSH FORWARD

• The US Embassy in Nigeria should be more proactive in

working closely with the Nigerian – American Chamber

of Commerce and the relevant MDAs at National and

Sub-National levels to increase advocacy / sensitization

on AGOA benefits.

• SMEDAN and BOI to play a vital role in mobilizing SMEs

on AGOA implementation.

THANK YOU.