How Africa can leverage AGOA extension

The African Growth and Opportunity Act (AGOA) has been a significant trade initiative designed to provide duty-free access to American markets for several African nations. This incentive has aimed to drive the establishment of more factories in Africa and boost economic growth on the continent. However, the effectiveness of AGOA in benefiting African countries has been called into question, with challenges and opportunities needing to be addressed for the initiative to reach its full potential. Bamidele Ayemibo, an export consultant, recently discussed the performance of AGOA and the key issues facing African nations in a CNBC Africa interview. Ayemibo highlighted that while some countries like South Africa have benefited from AGOA, others, including Nigeria, have not fully utilized the opportunity. He used an analogy of a one-year-old baby given a turkey lap to illustrate that without the capacity and capability, the benefits of AGOA cannot be fully realized. Nigeria, despite being the second-largest beneficiary of AGOA at $1.4 billion, largely through oil exports, has not diversified its exports to take full advantage of the pact. The reliance on oil has limited the impact on GDP growth and job creation in other sectors like agro-allied products. One of the key challenges mentioned during the interview was the lack of awareness and capacity among businesses in African countries to participate in AGOA. Ayemibo emphasized the importance of sensitization and education to inform businesses about the opportunities available under AGOA and other trade agreements. Additionally, he highlighted the high cost of shipments to the U.S., which makes it less competitive for African exporters. Governments need to provide financial support and incentives to reduce these costs and support businesses in the export sector. Regarding the export volume of agro-allied products, Ayemibo estimated that non-oil exports make up about 10% of Nigeria's total exports. He stressed the need for a strategic shift towards increasing non-oil exports to improve the country's trade balance and diversify its economy. Structural issues at the foundational level, such as inadequate policies and lack of government support, have hindered the growth of non-oil exports in Nigeria and across Africa. In terms of recommendations for governments, Ayemibo called for a deliberate policy focus on export promotion. He emphasized the need for visible support and encouragement from the presidency to demonstrate the government's commitment to boosting exports. By replicating successful initiatives like the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NISAL) in the export sector, governments can de-risk export activities and attract more financing for exporters. Overall, a comprehensive and strategic approach is required to unlock Africa's export potential and maximize the benefits of trade agreements like AGOA. As African nations gather at the AGOA Summit to assess the impact of the trade initiative, the key takeaway is the urgent need for increased awareness, capacity building, and government support to facilitate greater participation and success in AGOA and other trade agreements. By addressing these challenges and seizing the opportunities available, African countries can leverage AGOA extension to drive sustainable economic growth and diversification in the region.