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Assessing Nigeria-U.S. trade relations

By Thompson ABISOLA

By most accounts, Nigeria and the United States of America have had productive and mutually beneficial relations ever since Nigeria’s independence on Oct. 1, 1960.

The bilateral relations have steadily progressed from political engagements into the economic sphere, foreign affairs experts say.

This is because of certain factors: the U.S. is unarguably the world’s largest economy, with a Gross Domestic Product (GDP) of approximately 19.39 trillion U.S. dollars.

Nigeria, on the other hand, has been recognised as the largest economy in Africa, with a GDP of about 594.26 billion U.S. dollars.

In a nutshell, while the U.S. is the dominant economy on the planet, Nigeria also plays a central role in the economic matters of the African region and the world at large.

Going from the general to the specifics, the U.S. – a global economic power — has been supporting Nigeria with programmes aimed at strengthening the management and coordination of its economy, while encouraging private sector development and economic reform.

Such assistance has helped Nigeria to reap the benefits of African Growth and Opportunity Act (AGOA), improved agricultural technology, marketing, small-scale and micro enterprise development initiatives.

As far back as 2000, the U.S. and Nigeria signed the Trade and Investment Framework Agreement (TIFA), which serves as a mechanism for regular, high-level dialogue on how to enhance bilateral trade and investment ties.

Statistics from the Office of the United States Trade Representative, which is responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and overseeing negotiations with other countries, revealed that the value of the U.S.-Nigeria trade in 2013 stood at 18.2 billion dollars.

In 2013, Nigeria’s exports to the U.S. were valued at 11.7 billion dollars, with crude oil fetching 11.6 billion dollars.

Non-oil Nigerian exports to the U.S. under AGOA include leather, prepared vegetables, beans, cocoa paste, spices and cassava.

U.S. exports to Nigeria were valued at 6.5 billion dollars in 2013 and the exports include mineral fuels, vehicles, wheat, machinery and plastics, among others.

The total stock of U.S. Foreign Direct Investment (FDI) in Nigeria was 8.1 billion in 2012 – which is the latest available data — up by 53.6 per cent from the 2011 figure.

 Statistics from U.S.-Nigeria Trade Facts, published by the U.S. Department of Commerce in 2016, indicated that U.S. trade in goods and services with Nigeria totalled about 9 billion U.S. dollars. Exports amounted to 4.4 billion dollars, while imports came to 4.6 billion dollars.

However, the U.S. goods and services trade deficit with Nigeria in 2016 was 213 million dollars.

In 2017, when Nigeria was adjudged the 48th largest goods trading partner of the U.S., goods exports totalled 2.2 billion dollars, while goods imports grossed 7.1 billion dollars. Nevertheless, the U.S. goods trade deficit with Nigeria stood at 4.9 billion that year.

As regards services, U.S. trade in services with Nigeria grossed an estimated 2.9 billion dollars in 2016, according to the latest available statistics.

Out of the figure, services exports amounted to 2.5 billion dollars and services imports totalled 411 million dollars. The U.S. services trade surplus with Nigeria stood at 2.1 billion dollars in 2016.

The U.S. Department of Commerce identified Nigeria as the 58th largest goods export market of the U.S. in 2017, as U.S. goods exports to Nigeria in 2017 totalled 2.2 billion dollars, up by 14.5 per cent (276 million dollars) from the 2016 figure.

On the other hand, Nigeria was the 40th largest supplier of goods to the U.S. in 2017, as imported goods from Nigeria totalled 7.1 billion dollars; up by 69 per cent (2.9 billion dollars) from the 2016 total.

The U.S. goods trade deficit with Nigeria was 4.9 billion dollars in 2017, reflecting a 114.3 per cent increase (2.6 billion dollars) over the 2016 figure.

In 2017, U.S. Foreign Direct Investment (FDI) in Nigeria (stock) stood at 5.8 billion dollars in 2017, reflecting a 32.8 per cent improvement over the 2016 figure.

On the other hand, Nigeria’s FDI in the U.S. (stock) in 2017 was just 61 million dollars, up by 48.8 per cent from the 2016 figure but there is no information on the distribution pattern of Nigeria’s FDI in the U.S.

All the same, Nigeria and the U.S. started bilateral negotiations on April 30, 2018 on how to bring down the barriers limiting the growth of trade relations between the two countries.

U.S. President Donald Trump disclosed this in Washington, when he received President Muhammadu Buhari who came on a working visit.

Trump said that the plan to remove trade barriers between Nigerian and the U.S. was part of a larger strategy by his administration to expand trade and commercial ties with African nations in order to create jobs and wealth.

“The United States is currently working to expand trade and commercial ties with African nations, including Nigeria, to create jobs and wealth in all our countries,” Trump said at a joint news conference after a private meeting with Buhari at the While House.

“We hope to be the economic partner of choice for nations across the continent and all around the world. Nigeria is one our largest partners in the region; we look forward to growing our trade relations based on the principles of fairness and reciprocity.

“U.S. is committed to working alongside Nigeria as we seek a future of strength, prosperity and peace for both our countries,” he said.

Trump, who noted that the U.S. government had been giving Nigeria over 1 billion dollars in aid every year, pledged to do more.

Commending the Buhari-administration for its efforts to fight corruption and improve Nigeria’s business climate, the U.S. president emphasised that the efforts would facilitate tangible investments in the Nigerian economy,

Trump pledged that his administration would be committed to investing substantially in Nigeria if a level playing field could be created for the two countries.

Responding, Buhari gave an assurance that Nigeria would be ready to partner with the U.S. in efforts to remove all the barriers hindering trade relations between them and boost economic relations.

However, Mr Fred Oladeinde, the Chairman of AGOA Civil Society Organisation Network, said that Nigeria’s exports to the U.S. under AGOA plummeted between 2008 and 2016 because of weakening demand for crude oil.

He, therefore, underscored the urgent need for export diversification so as to boost Nigeria’s exports to the U.S., particularly in goods such as value-added agricultural products, leather, food, spices and beverages.

Oladeinde said that in efforts to achieve this goal, Nigeria, an AGOA eligible country, should strive to develop bi-annual country utilisation plans.

“Nigeria has yet to announce its AGOA Country Utilisation Strategy and it needs to do so as soon as possible. The venture, however, requires a public-private partnership.

“We are eager to see the Ministry of Industry Trade and Investment as well as the AGOA Civil Society Organisation Network desk at the African Leadership Forum (ALF).

“We also want to see AGOA Trade Resource Centre at the Nigerian-American Chamber of Commerce (NACC) and other stakeholders work together to accomplish this important goal; they should help create the badly needed, good paying jobs in Nigeria and the U.S.,’’ he said.

Nevertheless, Mr Ken Ukaoha, the President of the National Association of Nigerian Traders (NANTS), argued that Nigeria had not fully benefited from AGOA.

He stressed that Nigeria has not fulfilled the value addition requirement of the Act with regard to its raw materials utilisation.

“This entails that a country must get raw materials for the country to export goods that would be classified admissible under AGOA,’’ he said.

Besides, Ukaoha said that Nigeria had not developed the sectors that would generate specific value chains which were admissible under AGOA, citing the textile industry as an example.

“These textile industries that are dwindling would have gingered the capacity of our textile sector and export capacity; unfortunately, the production capacity is low and adherence to the raw material requirement is also low,’’ he said.

Moreover, Ukaoha noted that the infrastructure required for the production of the commodities by the industries had already collapsed.

He underlined the need for Nigeria’s trade policy and policymakers to examine how the country could benefit maximally from the opportunities provided by AGOA.

“Again, because of the quality and the substandard nature of our products, we need to look at our regulatory agencies.

“We should ensure a synergy between the private sector, producers, industrial producers and regulatory agencies towards achieving international standards in our operations.

“Therefore, if we can do all those things, we will begin to benefit from AGOA in a more pragmatic way,’’ he added.

All the same, Mr Ahmed Mansur, the President of Manufacturers Association of Nigeria (MAN), urged the Federal Government to be more proactive in exploring the opportunities in Nigeria’s trade relations with the U.S.

“The U.S. continues to be an important trading partner to Nigeria but the American trade policy has been somewhat protectionist.

“We should continue to trade with the U.S. because the opportunities are so significant but we also need to monitor this relationship and plan ahead, so that if there’s any change in the U.S. trade policy, we would not be taken by surprise or deeply affected,” he said.

Mansur recalled that the U.S. used to be Nigeria’s largest trading partner, particularly when it was importing a lot of crude oil from Nigeria, but over the years, the trade in oil had dwindled, as the focus was now more on capital and manufactured goods.

Sharing similar sentiments, Mr Muda Yusuf, the Director-General, Lagos Chamber of Commerce and Industry (LCCI), said that the Nigeria-U.S. trade relations were not as robust as they used to be in the past, adding that Asian countries had now taken over from the U.S.

He noted that there were diverse opportunities for collaboration across sectors to boost trade and economic activities between the Nigeria and the U.S.

Mrs Margaret Olele, the Executive-Secretary, American Business Council (ABC), nonetheless, said that the U.S. remained a natural business partner of Nigeria and one with a long-standing commitment towards the country.

She noted that the U.S. Foreign Direct Investment (FDI) of about 1.3 billion dollars flowed into the Nigerian economy in 2017.

She emphasised that there were abundant opportunities for Nigeria-U.S. partnerships to drive investment, boost trade and enhance knowledge transfer.

Olele said that over 100 U.S. companies were currently operating in Nigeria, adding, however, that their business operations were hampered by certain factors such as government policies, labour restrictions, specific industry regulations, local content, crime and security.

Beyond that, Mrs Joyce Akpata, the Director-General, Nigerian-American Chamber of Commerce (NACC), said that lack of infrastructure, policy inconsistency and regulatory bottlenecks were some of factors hindering trade between Nigeria and the U.S.

“Some American companies which wanted to establish their factories in Nigeria were discouraged with the business environment and they have gone ahead to set up their plants in Ghana.

“This means a deficit in the much-needed FDIs, government must do all within its ability to create the enabling environment that would attract and sustain investments in the country,” she said.

Akpata also urged the Federal Government to take full advantage of the opportunities presented by the U.S. government through AGOA to boost Nigeria’s exports and economic growth.

All in all, analysts believe that Nigeria should make tangible efforts to ensure the maximum utilisation of the existing schemes aimed at boosting its trade and economic relations with the U.S., the world’s dominant economic power.

 They also urge the U.S.-Nigeria Trade and Investment Framework Agreement (TIFA) Council to play a prominent role in improving Nigeria-U.S. trade relations so as to engender sustainable and inclusive development in the two countries

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