US tariff threatens Nigeria’s AGOA gains, diversification – NACC president

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This policy shift threatens to negate the preferential trade advantages offered by AGOA and intensifies concerns regarding Nigeria’s ongoing efforts to diversify its export base.

In an exclusive interview, Alhaji Sheriff Balogun, President of the Nigerian-American Chamber of Commerce, provided crucial insights into Nigeria’s global trade strategy and the potential ramifications of this new tariff.

Since its inception in 2000, Nigeria has exported an estimated $277 billion worth of goods to the United States under the AGOA framework. However, Alhaji Balogun highlighted a critical imbalance:

“The vast majority of this value has come from crude oil shipments. In fact, petroleum products have overwhelmingly dominated Nigeria’s AGOA exports each year – oil alone accounts for practically all of Nigeria’s exports under the programme by value.”

This over-reliance on oil signifies that for over two decades, Nigeria’s engagement with AGOA has been overwhelmingly tied to a single commodity. Non-oil exports, including agricultural and manufactured goods, have constituted only a minor fraction of the total export value.

Nigeria’s annual average AGOA exports to the US hover around $10–$12 billion. Yet, Alhaji Balogun pointed out that this average masks considerable fluctuations.

During the mid-2000s oil boom, Nigeria’s exports to the US under AGOA soared, reaching over $35 billion in 2008. However, after 2010, a decline in US demand for Nigerian crude, spurred by increased US oil production, caused Nigeria’s AGOA exports to plummet, dropping dramatically from $17.2 billion in 2009 to a mere $1.4 billion in 2015.

While exports have since rebounded somewhat, this volatility underscores Nigeria’s vulnerability due to its dependence on oil.

Alhaji Balogun explained the detrimental impact of the new 14 per cent US tariff: “A blanket 14 per cent tariff on Nigerian goods would undercut the duty-free access that AGOA currently provides.”

He elaborated that AGOA’s core benefit, allowing eligible Nigerian exports to enter the US tariff-free and gain a price advantage, would be significantly eroded.

The imposition of a 14 per cent import tax would make Nigerian products more expensive in the US market, leading to higher costs for Nigerian exporters and US importers, reduced competitiveness against tariff-free AGOA nations, and potentially lower export volumes as US buyers seek alternative suppliers.

“In essence, the 14 per cent tariff effectively nullifies much of Nigeria’s AGOA advantage, putting its exporters at a disadvantage and potentially shrinking Nigeria’s U.S.-bound exports if it remains in effect,” he summarised.

Despite the substantial overall export value, Alhaji Balogun revealed that “relatively few Nigerian companies have taken part in AGOA trade, aside from the oil sector.”

He estimated that the total number of Nigerian firms exporting to the US under AGOA since 2000 is likely less than a hundred. Alarmingly, annual participation is also exceptionally low, with roughly 20–40 Nigerian firms (excluding oil) exporting to the US via AGOA in a typical year.

This underutilisation of AGOA by Nigerian businesses highlights a significant missed opportunity for economic diversification.

Alhaji Balogun reiterated that “oil is by far the biggest beneficiary” of AGOA in Nigeria, accounting for over 95 per cent of the export value. While some non-oil sectors, such as agriculture (cocoa beans, sesame seeds, cashew nuts, shea butter), have seen modest growth, their volumes remain small compared to Nigeria’s potential.

Notably, Nigeria has failed to significantly capitalise on AGOA’s benefits for textiles and apparel, unlike several other African nations. Exports of manufactured or value-added products have also been negligible.

Comparing Nigeria’s AGOA performance to other top beneficiaries, Alhaji Balogun noted that while Nigeria’s export value has been high due to oil, other nations like South Africa and Kenya have achieved more diversified export portfolios, including manufactured goods and apparel, leading to job creation in those sectors. This comparison underscores Nigeria’s underutilisation of AGOA’s potential for industrial and export diversification.

Looking ahead, Alhaji Balogun stressed that “Nigeria has yet to truly use AGOA as a tool for diversification.” While AGOA boosted oil exports when US demand was high, it has not transformed Nigeria’s non-oil export sectors.

He acknowledged encouraging signs in agricultural exports but emphasised the need for Nigeria to scale up these efforts by improving product quality, meeting US standards, and investing in processing. With AGOA set to expire in September unless renewed, Alhaji Balogun urged Nigeria to maximise its benefits in the short term and proactively exploit any future similar programmes.

He warned that the new US tariff “blunts the incentive for firms to invest in exporting to the US,” making it crucial for the Nigerian government to intensify policies supporting non-oil exports to ensure more businesses can benefit from trade initiatives.

https://punchng.com/new-14-tariff-against-us-nigerias-agoa-duty-free-trade-nacc-president/