The African Continental Free Trade Area (AfCFTA) is expected to open up Nigerian businesses to a market of over 1.2 billion people and a GDP of $2.5trillion.

The Nigerian Government ratified the agreement on November 12, ahead of the December 5 deadline issued by the African Union to its 55 member states, as AfCFTA is expected to commence January 2021.

READ: AfCFTA: States should take advantage of continental free trade – FG

Despite this welcome development, some stakeholders are still concerned with the border closure policy of the Federal Government and dumping of substandard goods in the Nigerian market, with the recent disclosure by the FG that the borders will be reopened soon.

Key stakeholders spoke to Nairametrics on the significance of the ratification to Nigeria, the highly anticipated border opening, and the necessary steps that should be taken by the FG to fully maximize the trade agreement.

READ: AfCFTA: Ratification demonstrates Nigeria’s economic leadership position in Africa – Trade Minister

Importance of the ratification

Mr. Muda Yusuf, the Director-General of Lagos Chamber of Commerce and Industry (LCCI), opined that the ratification has addressed the uncertainties within the Nigerian business circle concerning the FG’s stance on AfCFTA.

He said, “The ratification of the AfCFTA is good news. This decision has cleared the uncertainty and anxiety over Nigeria’s stance on the agreement. The truth is, we have seen a great deal of equivocation and prevarication over the agreement in the last two years.”

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Mr. Cheta Nwanze, Partner and Senior Analyst at SBM Intelligence, said the move is in Nigeria’s best interest since trade has historically been a pathway to prosperity.

He said, “Nigeria’s agreement to ratify is a good move, which is ultimately in the country’s best interest. Now, the country must position itself to make the best of it. Trade has historically been a pathway to prosperity, and this should be no different.”

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After the ratification, what next?

Mr. Yusuf said, “The next step is to support the Nigerian private sector to take advantage of the 1.2billion market and $2.5trillion GDP, which offers tremendous opportunities. We need to strengthen the competitiveness of our domestic firms, especially those in the real sector.

“We need to liberate them from the shackles of constraints putting pressure on their costs and inhibiting their competitiveness. The quality of our infrastructure needs to improve, our policies need to facilitate competitiveness, our regulations need to support business growth, and our institutions need to demonstrate a better appreciation of the value of investment and investors in the economy.”

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However, he emphasized that the competitive nature of the agreement would create ‘winners and losers’ and urged Nigerian businesses to review their business models.

“The AfCFTA will produce winners and losers across sectors. The vulnerability risks vary from sector to sector. Investments in the real sector are more vulnerable than those in the service sector. It calls for a review of the business models of many firms and industries in the light of new competitive forces that will emerge.

“The business landscape will change and many investment assumptions would have to be reviewed to ensure sustainability,” he added.

The anticipated border reopening

Mr. Nwanze believes the FG has taken the right step with the planned reopening of the border. But, believes that the borders will not be opened, with the perceived contradiction that exists amongst government agencies on the border closure issue.

Nwanze said, “The Finance Minister already said that the borders will be reopened. However, her disclosure, which is in the right direction, has been contradicted by the Agriculture Minister.

“Ideally, what should come next is for the government to put things in place for an export driven economy. That’s the way to take advantage of the AfCFTA. Unfortunately, the signal that we are seeing indicates major opposing views within the government.”

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“If I were to bet on this, I’d say that the borders will remain shut beyond 1st of January, and this attitude to trade will continue as long as Customs remain under the current leadership.

“It is quite contradictory, especially as a Nigerian, Ngozi Okonjo-Iweala, is set to become WTO DG and as a result, one of the world’s leading advocate for trade. This represents a major irony,” he added.

Mr. Yusuf said, “The border closure is not consistent with the ratification of AfCFTA, which is why the FG has considered reopening the land borders ahead of its commencement in January 2021.”

The fear of dumping from neighboring countries

Mr. Nwanze said, “There are already a number of bodies who are tasked with ensuring that certain goods are of the required quality.

“Customs, the Standards Organization of Nigeria, NAFDAC, and others should do their jobs and stop harassing business people. The final arbiter of course is the consumer, who decides where and on what to spend his hard-earned money, rather than just settling for substandard goods.”

What you should know

• Vice President Yemi Osinbajo disclosed in a conference with the Chartered Institiute of Personnel Management of Nigeria (CIPM) on Thursday, November 26 that quicker implementation of ratification protocols will ensure free movement of services, goods, and persons.
• Yewande Sadiku, CEO of Nigerian Investment Promotion Council (NIPC), said in September that Nigeria is more ready for the African Continental Free Trade Area (AfCFTA), due to her domestic market manufacturing value addition capacity, which is 7 times the average of the top 20 economies in Africa and others.
• The Nigerian trade office also disclosed that the Instrument of Ratification will be deposited with the AUC at Addis Ababa on Tuesday, December 1, 2020.

Bottom line

Nigeria has the potentials to benefit from the trade agreement in the areas of agriculture and service exports. However, Nigerian companies should be strategically prepared to compete with other African countries for the 1.2 billion market share.

Summarily, just like the EU and ASEAN trade bloc has produced some ‘winners’, the same is expected to happen when AfCFTA commences next year.

Operators in the Nigerian hospitality industry have created opportunities for themselves amid the Covid-19 pandemic, in order to redefine value propositions and keep their heads above water.

To survive the negative impacts and ensure that they give their patrons reasons to continue patronizing their services, some of these hotels came up with initiatives like drive-in events, outdoor events, promotions, guest engagements, and group conference events, amongst others.

Transcorp Hotels

During its Q3 2020 Investors Call, the Managing Director of Transcorp Hotels, Dupe Olusola, told Nairametrics that though the revenue of the hotel, dropped by 54% year-on-year due to the lingering negative impact of Covid-19; Through the various initiatives implemented to reduce the impact of the pandemic, over 237% increase was recorded in Q3 revenue compared to that of Q2.

She said, “Drive-In Events product, launched in May, is for ‘top of mind’ awareness for the hotel amongst our targeted audience. It has also driven sales in the restaurant and other business areas within the hotel.

“Continuous promotion of our meetings, simplified product offerings like the Weekend Staycation, Work-From-Hotel package, amongst other initiatives, and have increased leisure business at the hotel.

“With the launch of EventReady and the CleanStay program, we have seen an increase in meetings.”

She added that the hotel had witnessed improvement in room revenue, majorly driven by the transient and group segments, as well as its continuous marketing campaign of hotel offerings.

(READ MORE: As Hotels resume operations, how prepared are they?)

She said, “Our Weekend Staycation is to attract both Abuja residents and potential guests from other states, in order to drive local and leisure demands.”

Ikeja Hotels Plc

Ikeja Hotels Plc also adopted some initiatives across its hotel chain to survive the pandemic. A staff of Sheraton Hotel Ikeja, who preferred anonymity, as she was not permitted to discuss on behalf of the hotel, told Nairametrics that the hotel had adopted some initiatives like outdoor events and promotions to attract more patrons.

She said, “As part of our strategy to improve operational efficiencies, we have put in place cost-cutting and recovery measures, including negotiating vendor contracts, energy conservation, and optimizing our workforce to the required manning at different occupancy levels.

“Our Food and beverage revenue has improved, driven mainly by the conference and event businesses. We recorded a week on week increase in the month of October.”

(READ MORE:COVID-19: Hotels.ng partners others to provide self-isolation centres for Nigerians)

L’eola Hotel

In the case of L’eola Hotel, formerly known as Protea Hotel, surviving the challenges created by the pandemic is key and this made the hotel to introduce some initiatives.

In an interview with Nairametrics, its Deputy General Manager, Tunde Oduyoye, explained that the hotel had to invest more on social media tools to reach out to its clients and also to meet the needs of some patrons, who wanted to hold social gatherings despite the social distancing rule.

He said, “We just did a photoshoot, which we shared with our existing and potential clients via our social media tools, to remind our patrons that we are back and fully compliant with the Covid-19 protocols.

“We now host weddings and other occasions and Zoom to other guests that cannot attend physically due to social distancing rules. We also host occasions on our open field to guarantee the safety of our patrons.

“We deliver food to our clients and also engage Jumia for deliveries. The hotel has also started baking bread for lodging guests and others within and outside the community.”

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Radisson Blu Anchorage Hotel

Like other hotels earlier mentioned, Radisson Blu also adopted several measures to remain relevant to its patrons.

In an interview with Nairametrics, a source at the Hotel, who preferred anonymity, as he was not permitted to speak on behalf of the hotel, disclosed that it had adopted an outdoor catering service for both corporate clients and individuals.

He said, “Continuous promotion of our product offerings and other initiatives, has boosted patronage in our hotel. We now offer outdoor events and new discount rates for using our facilities. With this development, we have seen an increase in meetings at the hotel, compared with when the lockdown was eased few months back.”

What the future holds

Hotels in Kenya, Egypt, and South Africa rely on local tourism to drive occupancy rates. In contrast, locals in Nigeria prefer smaller mushroom hotels that are cheaper and often well-furnished to meet their needs, especially the short-stay apartments.

Hence, hotels in Nigeria rely on commercial room sales, driven by the influx of business and leisure travels into the country.

With several airlines yet to be fully operational due to reciprocal bans and lockdowns in some countries, it is highly unlikely that things will improve anytime soon.

(READ MORE: FG reopens the financial sector, hotels as bars and nightclubs remain closed)

What you should know

The lockdown effect on the revenue of these hotels is reflected in the 2020 Q2 results of the main listed hotels.

According to the data, Ikeja Hotels (Sheraton), Tourist Company of Nigeria (Federal Palace), Capital Hotels (Abuja Sheraton), and Transcorp Hilton Hotel Plc all lost 90% of their revenue in the three months preceding June 2020.

• The hotels earned a combined revenue of N1 billion in the quarter, compared to N10.2 billion in the corresponding period of 2019.
• They lost over N4.7 billion for the quarter alone.
• Combined, they had about 3,502 employees as of 2019.

The Nigerian banking sector has consistently been one of the most profitable sectors in the Nigeria Stock Exchange market. However, in 2020, Deposit Money Banks (DMBs) have faced a flurry of impediments, which may have affected their solidity.

With reduced income from fee and commission implemented at the start of the year by the Central Bank of Nigeria, the paucity of foreign currency for international transactions, the resulting economic contraction from dire effects of the coronavirus pandemic, and the consequent operational constraints of keeping employees safe, 2020 is obviously fraught with numerous disorders for banking institutions.

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