Another European EPA hits a wall in Africa as Nigeria – the continent’s largest economy – continues to reject a West African deal.
Following more than ten years of negotiations, the final version of the EU’s Economic Partnership Agreement (EPA) with a group of West African states was confirmed in late 2014. Part of the broader engagement with so-called ‘ACP countries’, the EPA is a bilateral trade deal between the 28 EU members and the Economic Community of West African States (ECOWAS) alongside Mauritania, which left ECOWAS in 2002.
As with other EPAs, it is built on reciprocal, but uneven liberalisation of trade in goods, offering ECOWAS immediate tariff-free access to the EU in return for gradual liberalisation of 75% of the 300 million person African bloc (to take place over 20 years). Once ratified, ECOWAS is expected to open up its market in tranches every five years, focusing first on “basic and capital goods” then inputs and intermediate goods and finally finished consumption goods. Trade clauses are accompanied by the EPA Development Programme (PAPED), which is designed to provide financial and technical backing for ECOWAS states to adjust to competition from the EU.
The fly in the ointment
Of the sixteen African states involved, all but two have shown interest in ratifying the agreement. Given that the agreement requires signatures from all participating states to become effective, this is problematic for those endorsing the deal. The EU is courting Gambia’s new leadership, having emerged from 22 years of authoritarian rule under Yahya Jammeh who was exiled after a surprise electoral defeat in December 2016. However, the focus is almost entirely on Africa’s largest economy – Nigeria – which, much like Tanzania of the East African Community, cites a number of equity and industrialisation concerns as motivations for not signing the agreement. Despite continued pressure from the EU – which suggests Nigeria’s non-signature rests on misinterpretation of the agreement – Nigeria has maintained its position and, for the following reasons, will continue to do so.
Nigeria’s industrialisation drive
Since coming to power in 2015 in a landmark electoral victory, President Buhari of Nigeria has made the diversification of the economy his signature obsession, and understandably so. The region’s heavyweight economy relies on the export of oil for up to 90% of its foreign exchange reserves and crashing oil prices, which have continued to fall after a brief surge in January. In response, Buhari’s administration has embarked on an ambitious, but controversial, set of policies to ensure radical industrial adjustment.
Powerful lobbies within Nigeria have opposed the EPA, suggesting that it endangers this effort by the government. The Manufacturers Association of Nigeria (MAN) has raised concerns over the import liberalisation of manufacturing inputs and finished consumer goods. It argues that with the resurgence of Nigerian manufacturing in its nascent stages, the influx of cheaper European goods – even in fifteen to twenty years – would come too soon.
The EPA Development Programme, which has committed €6.5 billion to help West African states adjust to global competition, does little to allay these concerns. First of all, there is a lack of clarity in the official document of how this would look in practice. Secondly, Nigeria has pointed out that the financial sources of the programme (which include the EDF and EU state budgets) already provide assistance irrespective of the EPA. Finally, even if this fund was allocated to Nigeria in its entirety, it would barely make a dent in Nigeria’s funding gap – the country’s infrastructure gap alone is valued at $8 billion annually.
Lack of regional pressure
In July 2016, the EU lost a strategic lobbying partner in the form of Ghana when it signed off on an Interim EPA giving it, and Cote d’Ivoire, a watered down version of the regional deal. Discussions surrounding an interim solution concluded in 2007 as the unilateral free access of the Cotonou Agreement expired in 2008, but until July only Cote d’Ivoire had fully ratified it. With no sign of Nigeria coming to the table, and facing an impending October deadline, Ghana went ahead with the IEPA.
Prior to this, former Ghanaian leaders had been strong proponents of a regional EPA, putting pressure on successive Nigerian administrations. Since Ghana’s President Akufo-Addo was elected in December 2016, there have been no signs of renewed pressure from Nigeria’s regional ally, and with the administration’s desire to attract European interest for its ‘One District One Factory’ urbanisation plan – something provided for under the IEPA – this is unlikely to come soon.
Other regional players will not do more. A vast majority are classified as Least Developed Countries and therefore already fall under the EU’s ‘Anything But Arms’ Act, providing unilateral free access to the EU. So long as this remains the case – which it will for some time as many ECOWAS members lag in various development indicators – there is no reason for them to step up their pro-EPA rhetoric.
Nigeria’s unrealistic expectations
Flipping the negotiations on their head, some of Nigeria’s complaints are unlikely to find much compromise from the EU, which will naturally stifle further discussions. For example, Nigeria has predicted it will lose $1.3 trillion in tariff revenues by 2026 if it commits to the EPA and is requesting firm indications that the EU would be willing to compensate some of this. Aside from there being no question that the EU would not reimburse any loss directly, EU officials have consistently suggested that PAPED development assistance is a sufficient counterweight to any loss in revenues.
It has also called for a clause compelling European companies to invest in Nigeria through joint ventures with local players or Private-Public Partnerships with the government. EU officials have indicated the agreement would encourage this to take place, but for obvious reasons it cannot force the hand of the private sector.
In the short term nothing will change: Nigeria will continue to defend its interests from what it perceives as a threat to its recovery and regional peers will push on with their respective EU-relations. In the long-term, as some West African states graduate from LDC classification, we could see an intensification of the debate, however specifics as to when this would occur are not reliable.