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What noodles can teach us about Nigeria's reluctance on free trade

Nigeria recently declined to join a pan-African free trade deal. But closing its markets gives Africa's largest economy little incentive to improve business conditions and may ultimately leave it behind.听

By Ryan Lenora Brown, Staff writer
Abuja, Nigeria

If you want to understand why trade is such a contentious topic for Africa鈥檚 largest economy, just consider the noodles.听

The instant noodles, to be precise.听

Over the last three decades, those iconic bricks of dried wiggly dough 鈥 known locally as听Indomie after a popular brand听鈥 have become a staple of the Nigerian diet. Today, in fact, the country has the 12迟丑听largest instant noodle market in the world, wi迟丑听1.76 billion servings听of the starchy stuff sold here each year.听And thanks to a government ban on noodle imports, almost all is locally produced 鈥 a rarity in a country that听imports many of its staples.听

But the noodle industry also highlights the incredible challenges of doing business in Nigeria.听Building a noodle factory here听meansmore than setting up an assembly line and hiring a few workers.听

It also means finding your own sources of electricity to supplement erratic government-provided supplies.听It means scoping out the cheapest providers of imported wheat for flour, since Nigeria doesn鈥檛 grow its own. And it often means building the roads听to your factory, because asking the government to do it probably won鈥檛 get you anywhere anyway.听

鈥淲e have a lot of challenges,鈥 says Olumi Ezekiel, a spokesperson for Royal Noodles in Abuja, where the air outside smells faintly of powdered chicken seasoning. 鈥淲hen you have all these costs, the margin of profit becomes that much lower.鈥澨

In March, most of Africa鈥檚 presidents gathered in Kigali, the Rwandan capital, to sign a historic free trade deal designed to eliminate the tariffs and red tape that have听made doing business across Africa a massively complicated undertaking. Less than a fifth of听exports from African countries听currently go to other African countries, while in Europe that figure is 70 percent.

But faced with the option of opening its markets to a regional trade deal with 49 other African countries,听Nigeriahas, at least for now, chosen to protect its local industries.听It鈥檚 doing so based in part on its recent experience with open trade, and in part on the calculation that, as Africa鈥檚 largest economy, its domestic market is big enough to support its businesses.

The problem is that by walling off foreign competition, Nigeria has little incentive to eliminate the internal roadblocks that make it hard to dobusiness here.

鈥淥ur industries, in many cases, simply can鈥檛 compete internationally,鈥 says听Mma Amara Ekeruche, the founder of Your Nigerian Economist, an Economics blog.鈥淚n the short term, a deal like this won鈥檛 really benefit us.鈥澨

Mr. Ezekiel agrees: 鈥淲e need these protections [from government]. Otherwise how can local industry survive?鈥

Nigeria鈥檚 government says it didn鈥檛 sign the deal because it simply needs听more time to consult with the country鈥檚 businesses and labor unions. And in the months since, it鈥檚 been doing exactly that, crisscrossing the country for conversations with workers and business associations.听

鈥淲e had to make sure we consulted all the stakeholders,鈥 said Okechukwu Enelamah, Nigeria鈥檚 minister of industry, trade, and investment, at a recent panel discussion in Abuja. 鈥淚f you don鈥檛, they have every reason to question what you do.鈥 (The Nigerian government did not respond to repeated requests for direct comment.)

But the country鈥檚 ambivalence to free trade also has deeper historical roots.听

In the late 1980s, after a global crash in the price of oil, Nigeria鈥檚 main export commodity, Nigeria was broke. The World Bank and International Monetary Fund were willing to give loans,under the condition that African countries听tighten their belts and open their markets.

In the mid-1990s, Nigeria joined the World Trade Organization, further pushing it to open its markets to goods from the outside. At the same time, a rise in cheap manufactured goods from east and south Asia made it increasingly difficult for many African countries to compete.

鈥淧retty quickly, we were overwhelmed by cheap goods from overseas,鈥 remembers Issa听Aremu, a longtime trade unionist here. At the time, Mr. Aremu worked in textiles, a booming industry in Nigeria that employed half a million people. Within years, as textiles from China and other overseas markets poured into Nigeria, that number plummeted. Today, despite a revival of import prohibitions on textiles, you鈥檇 be hard pressed to find a single Nigerian-made fabric among the hundreds of samples dangling from stalls in Abuja鈥檚 main market.听

鈥淲e used to have them, but the factories have all gone overseas,鈥 says Yakubu Muaze, a trader at Abuja鈥檚 Wuse market, apologetically, explaining that he last sold Nigerian textiles about 10 years ago. Around him, bolts of bright fabric bear 鈥渕ade in鈥 tags that read Cote D鈥橧voire, Ghana, and China.听

鈥淲e became a dumping ground,鈥 Aremu says. 鈥淪o it鈥檚 guided by this background that we鈥檙e suspicious now when government comes to us with the proposition of this new trade deal.鈥澨

Indeed, one of the biggest questions around the negotiations for the continental trade deal, which Nigeria鈥檚 government worked closely on, was how the deal would protect African manufacturers from dumping. Critics warned that the deal鈥檚 鈥渞ules of origin鈥 provision had to be exacting so that international manufacturers couldn鈥檛 bring near-finished products into an African country, make superficial changes, and then say they were 鈥渕ade in鈥 that country.听

Rather than clamor for protection, Nigerian manufacturers should push for government support that would make them more competitive, says Femi Boyede, a former adviser to several ministers of trade and industry.听

鈥淭here鈥檚 this lazy thinking among Nigerian industrialists that the size and population of Nigeria means they don鈥檛 need outside markets,鈥 he says. 鈥淏ut now the continent is moving ahead with free trade, and there鈥檚 only so long it will wait for Nigeria to catch up.鈥

Corruption, meanwhile, continues to play an outsized role in trade, he notes. The country鈥檚 often-porous borders mean that even when the government does attempt to restrict goods from moving in and out, it often fails. The local textile industry, for instance, estimates that the country听loses more than $300 million annually听in tariffs from imported fabrics, since most of the goods enter the country illegally.

Back at Royal Noodles, Ezekiel ponders what impact the trade deal might have on his own business. It could open up new markets, he says, but then again, it wouldn鈥檛 eliminate any of the challenges that already make noodle production here so taxing.听

鈥淭o build this factory, we had to bring the road here. We had to bring the electrical grid here. And we had to bring generators for when that grid fails,鈥 he says. 鈥淚t鈥檚 hard to compete. But you have to start somewhere.鈥澨

Soji Bamidele contributed reporting to this story.