Trade Performance And Policies Of Nigeria And Angola Economics Essay

In order to analyze Angola ‘s trade public presentation and policies, Nigeria will be chosen as a benchmark, because features of Nigeria is really similar to Angola. Both of them have petroleum-based economic system, and they are members of the Organization of the Petroleum Exporting Countries ( OPEC ) and the World Trade Organisation ( WTO ) . Furthermore, both of them experienced civil wars that had negative impact on their development. Angola had 27-year civil war until 2002 ; likewise, before 1999, Nigeria had been through political instability, corruptness, unequal substructure, and hapless macroeconomic direction caused by 32-year military absolutism ( U.S. Department of State, 2010 ; USAID, 2010a, 2010b ) .

Harmonizing to Central Intelligence Agency ( CIA, 2010a ) , Angola covers an country of 1.25 million km2 on the Atlantic seashore of Africa, with a population estimated at about 13 million in 2009. Angola is reconstructing its state after the terminal of a 27-year civil war in 2002. In the one-fourth century of combat, up to 1.5 million lives might hold been lost, 4 million people have been displaced, and the socio-economic substructure has been massively destructed.

Since the terminal of the civil war in 2002, Angola has made advancement in stabilising the macro-economy, consolidating peace, and get downing the Reconstruction of the economic substructure. However, economic growing still mostly trust on the public presentation of the oil and diamonds sectors ; comparatively small advancement has been made in the rebuilding of agribusiness and industry, and there is a big informal economic system. Additionally, there is still a serious deficit of accomplishments ; many markets are still distorted by subsidies, monetary value controls, and large-scale authorities or parastatal engagement ; and tonss of the substructure is still destroyed or damaged, with landmines staying a important jeopardy ( WTO, 2006 ) .

2. MICROECONOMIC ENVIRONMENT & A ; TRADE PERFORMANCE

Angola ‘s overall economic growing rates which measured by addition in estimated GDP have varied well after 2002, falling from 14.4 per cent in 2002 ( the twelvemonth the civil war ended ) to 3.4 per cent in 2003, so speed uping to 11.2 per cent in 2004. In the past three old ages, the rates are 21.1 per cent in 2007, 13.2 per cent in 2008, and -0.6 per cent in 2009 ( Figure 1 ) . Almost all of these alterations were due to fluctuations in the value of oil end product ( CIA, 2010a ) . In 2008, 9.6 per cent, 65.8 per cent and 24.6 per cent of GDP were contributed severally by agribusiness, industry and services sector ( Figure 2 ) . Even though consumer rising prices declined from 325 per cent in 2000 to below 13 per cent in 2008, the stabilisation policy proved unsustainable and Angola abandoned its currency nog in 2009 ( CIA, 2010a ) .

Beginning: CIA ( 2010a, 2010b ) .

Angola ‘s exports make up approximately 77.2 per cent of its GDP in 2008, and are to a great extent dependent on oil and diamonds ( Europa, 2009a ) . These two merchandises have amounted to an norm of about 93 per cent and 6 per cent of entire merchandize exports, severally, harmonizing to the World Bank ( 2009 ) and Integrated Framework ( 2005 ) , and points such as rocks, sand, fish, etc history for the staying 1 per cent. With limited refinement capacity, about all exported oil is rough oil. China, US and France are three chief export spouses of Angola, they accounted for, severally, 32.9 per cent, 28.7 per cent and 6 per cent of Angola ‘s export in 2008 ( CIA, 2010a ) .

Angola imports about every sort of ware, including merchandises that the state has a possible comparative advantage in bring forthing. Its chief imports spouses are Portugal, China, US and Brazil who provide, severally, 17.1 per cent, 15.2 per cent, 11 per cent and 10.2 per cent of Angola ‘s imports ( CIA, 2010a ) . Merchandise imports accounted for about 22.6 per cent of GDP in 2008, therefore trade history creates a big excess averaging 55 per cent of GDP ( Europa, 2009a ) . This is offset by payments for services related to investing in the oil industry and involvement charges on big short-run external debt. The current history generates a shortage or excess chiefly depending on the monetary value of oil ( World Bank, 2009 ; Integrated Framework 2005 ) .

On the other manus, comparing with Angola, Nigeria seems to hold comparatively steady existent growing rate in GDP ( Figure 1 ) . After 1999, the rates for Nigeria rose from 0.94 per cent through 5.44 per cent, 4.60 per cent and 3.48 per cent, severally in 2000, 2001 and 2002 to 10.24 per cent in 2003. In the past three twelvemonth, the Numberss were 6.4 per cent in 2007, 5.3 per cent in 2008 and 5 per cent in 2009 ( CIA, 2010b ; WTO, 2005 ) . This comparatively steady rate is chiefly due to better GDP composing by sector. For Nigeria in 2009, agribusiness sector contributed 33.4 per cent of GDP, and industry and services sector contributed 34.1 per cent and 32.5 per cent of GDP, severally ( CIA, 2010b ) . As show in the Figure 2, the mean cross-sector public presentation resulted in the limited impact on GDP growing rate, which caused by drifting monetary value of oil monetary value in the planetary market. Therefore, the method for Angola to cut down dependence on the booming sector and to do the state less vulnerable to external dazes is to advance variegation of exports. Nigeria ‘s exports accounted about 36.0 per cent of GDP in 2008, while imports made up 25.4 per cent ( CIA, 2010b ) . The better trade public presentation is besides owing to more diversified exports.

Beginning: CIA ( 2010a, 2010b )

3. Trade Policy

In Angola, protection of domestic production is foreseen during the stage of reconstructing the economic system ; it can assist developing states nurture domestic industry, but a protectionist policy is non considered by the governments as valid in the medium-term.

The governments note that this policy is designed as a response to the state of affairs predominating following the civil war, and to the passage from a mostly Collectivist economic system to a more unfastened market economic system. Angola has to get the better of the effects non merely of the civil war but besides of attendant troubles in pulling foreign investing, engineering, and aid ; and inadequate fiscal and economic policies, particularly for widening those industries other than the oil and diamond sectors.

3.1 Import duties

Harmonizing to WTO ( 2010 ) , Angola ‘s trade government has been greatly liberalised since May 1999, and is still in the procedure of reorganization and modernization. The imposts duty is Angola ‘s major trade policy instrument. All of Angola ‘s imposts duty is bound at ceiling ad valorem degrees under GATT 1994 agenda. Applied duties remain greatly under the ceiling degrees bound in the WTO. A revised operational Customss Duty was introduced in February 2005, cut downing the simple mean most favoured state ( MFN ) applied rate from 8.8 per cent to 7.4 per cent, by major sector, the mean duty on agricultural merchandises is 10 per cent ( a edge norm of 52.6 per cent ) , and that on non-agriculture merchandises 6.9 per cent ( a edge norm of 60.1 per cent ) . The maximal applied responsibility rate has been reduced to 30 per cent, with a six sets: of 2 per cent, 5 per cent, 10 per cent, 15 per cent, 20 per cent and 30 per cent. A maximal rate of 35 per cent was removed in 2005 ( WTO, 2006 ) .

The governments ‘ short-run end is to promote import permutation and development of local industry. Therefore, some responsibilities have been imposed in 2005 ; more, many duty grants are using for investors and industries, extenuating the effects of the duty construction and increasing effectual protection ( WTO, 2006 ) .

Nigeria has comparatively higher duty for the importing. Since 2003, its mean applied MFN duty has reduced from 29 per cent to about 12 per cent in 2008, with applied MFN duty rates on agricultural and non-agricultural merchandises averaging 15.2 per cent and 11.5 per cent, severally. In general, tariff rates are widely dispersed, runing from a upper limit of 150 per cent to a lower limit of 2.5 per cent ; a sum of 19 sets are applied ( WTO, 2005 ) .

The overall duty construction shows assorted escalation, owing to the high duties on agricultural goods. However, a figure of industries are protected through positive escalation. Similar to Angola, several industries besides benefit from duty freedoms and grants on imports of inputs and natural stuffs, that conducted by governments. Within the context of its subregional integrating attempts, Nigeria has expressed its committedness to convey important liberalisation and simplification to Nigeria ‘s duty government ( WTO, 2005, 2006 ) .

3.2 Import prohibitions, licencing & A ; eventuality steps

Both Angola and Nigeria claims no quotas, duty quotas, or duty penchants, and their import prohibitions and licencing under “ particular import governments ” are using for some peculiar merchandises to be in topographic point for wellness, security and safety intent. Nevertheless, Angola has no anti-dumping, safeguard, offseting or competition statute law, while Nigeria has. It has non submitted any presentments on anti-dumping or offseting responsibilities until 2004 ; mention was made to the demand to protect local industries from dumping and unjust competition within the model of redresss provided for by the WTO and regional trade understandings. A measure on anti-dumping and countervailing steps is presently under readying. Nigeria was reported to hold been in the procedure of ordaining statute law on precaution steps. However, there are no formal domestic legislative processs for safeguard actions as provided for by the WTO Agreement on Safeguards. In January 2002, Nigeria notified the WTO Committee on Safeguards that import prohibitions on wheat flour, sorghum, millet, and china claies were in topographic point for precaution grounds ( WTO, 2005 ) . In this instance, it is still a long manner to travel for Angola to better its trade government, so they can avoid the hurts cause by inappropriate trade Acts of the Apostless, such as dumping, export or domestic subsidies which can do deformed international monetary values.

3.3 Export revenue enhancements, charges and levies

As WTO ( 2006 ) , Angola ‘s export revenue enhancements are levied on: raw/tanned fells and teguments ( 20 per cent ) ; and worked tusk, bone, etc ( 10 per cent ) . The governments claim that these revenue enhancements are levied for intents of environmental protection, peculiarly of vegetations and zoologies, although Angola is non a signer to the Convention on International Trade in Wild Species of Endangered Fauna and Flora ( CITES ) .

In Nigeria, the export amendment edict of 1992 prescribes that all natural stuff or unrefined trade goods, whether mineral or agricultural, may be capable to the payment of an export levy as may be prescribed, from clip to clip, by order of the Export Promotion Council ( NEPC ) . In this instance, an administrative levy of US $ 5 per metric ton is applied to exports of chocolate, and of US $ 3 per metric ton to exports of other natural stuffs ( WTO, 2005 ) .

3.4 Export prohibitions, limitations, and licensing

In Angola, there are a assorted export prohibitions and licensing processs for specified goods under particular export governments, including the Kimberley procedure for diamond. Export responsibilities of 10 per cent and 20 per cent are taxed on exports of unrefined tusk, and fells and teguments, severally. It does non forbid import or export of endangered species ( WTO, 2006 ) .

Under Nigeria ‘s Export Prohibition Act, certain exports are banned for intents of domestic nutrient security, value-added considerations, and saving of cultural heritage. Nigeria ‘s nutrient safety ordinances require export licenses for unrefined nutrient merchandises ; in certain instances, the Minister for Agriculture is empowered to order classs and criterions of quality for these merchandises ( WTO, 2005 ) .

3.5 Export publicity

There are no export-processing zones ( EPZs ) in Angola, and it has no export subsidies every bit good as no official export publicity organic structure ( WTO, 2006 ) .

In contrast, there is assorted incentive strategies available to exporters in Nigeria might cut down the anti-export prejudice ensuing from the protection of domestic markets by high duties and import prohibitions. They reflect the governments ‘ consciousness of the incompatibility in the aim of advancing processed exports based on extremely protected local natural stuffs. Export inducements can be a really effectual step for Angola to advance development and variegation of exports, together with the import permutation by domestic production.

The Export Expansion Grant Fund strategy ( EEGF ) offers hard currency incentive to eligible exporters who have exported a certain sum of processed merchandises. The purpose of the strategy is to excite domestic manufacturers to spread out the volume of exports, and diversify their export merchandise and market coverage ( Manufacturers Association Of Nigeria, 2005 ) . The chief support to exporters through Bankss is the Re-discounting and Re-financing Facility ( RRF ) strategy. It is designed to help Bankss supply pre- and post-shipment finance in local currency for non-oil exports. The installation provides exporters entree to the expanded export portfolio of Bankss at discriminatory rates.

Additionally, the Tax Relief on Interest Income Scheme provides for revenue enhancement freedom on involvement accruing to Bankss from loans for export activities. A drawback strategy allows for levies charged on natural stuffs used in the industry of merchandises to be refunded upon the export of the concluding goods. The aim of this strategy is to promote fabrication for exports. The jurisprudence enabling EPZs was enacted in 1992 and supports the constitution of industries and concerns within demarcated zones, chiefly for export intents. EPZs are besides being used to turn to the infrastructural and regulative lacks suppressing export-oriented companies in Nigeria ( Manufacturers Association of Nigeria, 2005 ) .

4. Trade Agreement

4.1 Multilateral understanding

( I ) World Trade Administration

Angola became a Member of the WTO on 23 November 1996, measure uping as an original Member of the WTO, and agreements MFN intervention to all its trading spouses ( WTO, 2006 ) . It reiterates its committedness to the liberalization of trade and the Multilateral Trading System, which is deemed to be good for development, growing and well-being. It deems that the WTO could play an cardinal function non merely in bettering the repute of the trade liberalization procedure by doing it more organized, flexible, and diversified but besides in transporting out a program based on the regulations of universe trade.

Agribusiness sector is basically of import for Angola ‘s economic development. Harmonizing to Integrated Framework ( 2005 ) , in footings of the dependance of the economic systems of the developing states on both exports of primary merchandises and imports of nutrient goods, as in the instance of Angola, it is necessary to guarantee the fulfillment of the committednesss undertaken in favor of the developing states ( DCs ) and least developed states ( LDCs ) in order to ease duty-free market entree without quotas for LDCs merchandises and greater moderateness and flexibleness in the execution of healthful and phytosanitary understandings ( SPS ) and other understandings associating to proficient barriers to merchandise ( TBT ) .

For non-agricultural market entree ( NAMA ) , Angola is seeking greater freedom of tactic to prosecute its development aims, in visible radiation of the demand to make the right conditions for its variegation and the industrialization of its economic system ( Incorporate Framework, 2005 ) .

The service sector is an of import economic portion in most of state, either developed states ( OEDCs ) or LDCs. Angola is be givening to spread out its services sector, since it realised that service can efficaciously do a positive part to its economic. Therefore, Angola is in the current dialogues associating to the service sector ( Integrated Framework, 2005 ) .

( two ) Other many-sided understandings

As WTO ( 2006 ) stated that, since Angola is a member of the United Nations ( UN ) , it joined the United Nations Conference on Trade and Development ( UNCTAD ) , Food and Agriculture Organisation ( FAO ) , and other relevant UN bureaus. It is besides a member of the Community of Portuguese-Language Countries ( CPLP ) , International Coffee Organisation, Common Fund for Commodities, and International Commission for the Conservation of Atlantic Tunas ( ICCAT ) .

Angola, as a LDC, benefits from those understandings in peculiar in UNCTAD: as a member, it is eligible for discriminatory conditions under the Generalized System of Preferences ( GSP ) , which is, with the OEDCs, and the Global System of Trade Preferences ( GSTP ) , among DCs ( WTO, 2006 ) .

4.2 Regional understandings

( I ) Southern African Development Community ( SADC )

Angola is a co-founder of the SADC that aims to make a common market among the member States by 2015, harmonizing to SADC ( 2010 ) , it has accepted the SADC Trade Protocol, and is actively prosecuting in dialogues for an EPA both within SADC and in broader dialogues with the European Communities ( EC ) . Besides, Angola is actively take parting other trade-related countries of SADC – like substructure ; trade and investing ; and agribusiness, nutrient security and natural resources. It has approved the SADC Memorandum of Understanding on Standardization, Quality Assurance, Accreditation and Metrology ( SQAM ) . The SADC secretariat has assisted Angola to set up a agenda for implementing the commissariats of the Trade Protocol.

( two ) African Union

Angola is a member of the African Union ( AU ) that is expected to be an economic and pecuniary brotherhood. Ongoing AU activities are including: increased sub-regional integrating programmes, peace maintaining, the constitution of an African standby force, and harmonization of instruction policies ( WTO, 2006 ) .

( three ) Other regional understandings

Angola is a co-founder of the Economic Community of Central African States ( ECCAS/CEEAC ) , but has non signed any regional trade understandings yet. However, it has had single understandings with some members of the Community, such as Congo-Brazzaville, Gabon, etc ( WTO, 2006 ) .

4.3 Bilateral trade understandings

Angola has signed bilateral trade understandings with several other states, peculiarly, those states use the same linguistic communication ( e.g. Brazil, Mozambique, Portugal, etc. ) or with which it has territorial ( e.g. Namibia, Zambia, etc. ) or political ties ( e.g. Cuba ) . However, beside primary trade goods such as fish, oil, lumber, it has little to offer in exchange. A specific understanding signed between the European Community and Angola in 1987 has promoted the sustainable development of piscaries ( WTO, 2006 ) . It is of import to detect that either regional or bilateral trade understanding might make trade recreations which make a state less efficient in footings of international trade.

5. Trade POLICY DIRECTION

As noted above, Angola ‘s international trade is necessarily really much influenced by two chief factors. The first 1, besides the individual most of import one, is that Angola is a major oil exporter and these exports will necessarily rule non merely export public presentation but besides the public presentation and stableness of full economic system. Oil-induced macro-economic deformations are besides the cardinal factor conditioning the public presentation of non-oil exports that, though comparatively less of import in footings of per centum of value of trade, are really of import in footings of poorness decrease. The 2nd factor is that there are monolithic disruption, decease and devastation within the state after the decades-long civil war ( Integrated Framework, 2005 ) .

Looking frontward, in Angola, the indispensable end of economic policy is to speed up growing and cut down poorness by reconstructing the diverseness and dynamism the economic system had before independency. This would necessitate a well-planned and phased trade scheme that aims ab initio for import-substitution in sectors where Angola has proven comparative advantage and in sectors where Angola used to be a chief manufacturer before independency. Food security will be on the top of import-substitution docket given Angola ‘s position as a low cost nutrient manufacturer is capable non merely of efficient satisfaction of domestic demands but besides as a competitory manufacturer of nutrient for the international market. It has to be noticed that Angola ‘s current demand to prosecute in import permutation stems from the all non-economic grounds for its loss of domestic production capacity in the first topographic point – the decennaries long civil war and its attendant devastation ( Integrated Framework, 2005 ; WTO, 2006 ) .

Looking frontward, in Angola, the indispensable end of economic policy is to speed up growing and cut down poorness by reconstructing the diverseness and dynamism the economic system had before independency. This would necessitate a well-planned and phased trade scheme that aims ab initio for import-substitution in sectors where Angola has proven comparative advantage and in sectors where Angola used to be a chief manufacturer before independency. Food security will be on the top of import-substitution docket given Angola ‘s position as a low cost nutrient manufacturer capable non merely of efficient satisfaction of domestic demands but besides as a competitory manufacturer of nutrient for the international market. It has to be remembered that Angola ‘s current demand to prosecute in import permutation stems from the all non-economic grounds for its loss of domestic production capacity in the first topographic point – the decennaries long civil war and its attendant devastation ( Integrated Framework, 2005 ) .

In add-on, the trade policy need to aim at bit by bit reconstructing the capacity in non-oil exports one time efficient import permutation takes clasp. In Angola, the accent on eventual export-led growing is really of import since with still big figure of the population populating under the poorness line ( WTO, 2006 ) . Angola ‘s domestic market is excessively little to prolong high growing in production and employment necessary to do a important poorness decrease. Hence, export growing and variegation must be the focal point for making growing in the medium to longer-term in Angola.

Since Angola has monolithic natural resources, it has significant potency to implement the scheme that ab initio emphasises on import permutation with the purpose of finally traveling towards export-led growing within a diversified economic system. Particularly, chances exist in agribusiness ( e.g. java, farm animal, rice, cotton, etc. ) , piscaries, light fabrication ( e.g. wood merchandises, leather merchandises, etc. ) , and services ( e.g. theodolite trade, touristry, etc. ) . This scheme could supply an effectual poorness decrease plan due to all possible import permutation and export-oriented activities, particularly in the rural countries where about 75 per cent of the population live, are labor-intensive activities ( WTO, 2006 ) .

In order to efficaciously implement this scheme, important betterments are required in trade policy. A comprehensive reform is besides needed which might include extinguishing overestimate of the exchange rate, stabilization of the macro economic system, rehabilitation of substructure, beef uping of policies for specific sector, and the betterment in the private sector enabling environment to promote private investing in import permutation and export oriented sectors and a more effectual supply-side response to merchandise policies.

All policies with a major consequence on trade, either direct or indirect, should be evaluated in the position of their ability to advance the wide based trade oriented and private sector-led growing that is needed.