By Azubike Nnadozie
Finally, and after months of persistent refusal, the Federal Government of Nigeria has signed the African Continental Free Trade Area agreement.
Of the 55 countries that make up the African continent, Nigeria and hosts, Benin Republic, became the 53rd and 54th members of AfCFTA respectively; while the 55th country, Eritrea, is speculated to still be holding out because the deal may not support its best interests.
The much-talked-about African Continental Free Area agreement is an initiative of the African Union that is geared towards creating one boundless continent- wide market for its 1.2 billion people, and it is worth around $2.5trillion, making it the largest of its type ever in terms of member states. The AfCFTA was signed in Kigali, Rwanda, on 21 March 2018, during the 10th Extraordinary Summit of the AU.
In his remarks, shortly after signing the agreement, on the sidelines of the 12th Extraordinary Summit of the African Union, President Muhammadu Buhari declared that Nigeria’s commitment to trade and African integration had never been in doubt nor was it ever under threat.
He told the gathering, made up of African Heads of State and Government, delegates and representatives from the private sector, civil society and the media that Nigeria would build on the event by proceeding expeditiously with the ratification of the AfCFTA, and emphasised that “free trade must also be fair trade.”
“As African leaders, our attention should now focus on implementing the AfCFTA (agreement) in a way that develops our economies and creates jobs for our young, dynamic and hardworking population. I wish to assure you that Nigeria shall sustain its strong leadership role in Africa, in the implementation of the AfCFTA. We shall also continue to engage constructively with all African countries to build the Africa that we want,” he added.
INITIAL BARRIERS
Among the initial complicating factors in the negotiations for AfCFTA was that Africa had already been divided into eight separate free trade areas and/or customs unions, each with different regulations. These regional bodies will continue to exist. The African Continental Free Trade Agreement initially sought to reduce trade barriers between the different pillars of the African Economic Community, and eventually use these regional organisations as building blocks for the ultimate goal of an Africa-wide customs union. There is also the language difference issues and lack of common currency. But the AfCFTA spirit, the enthusiasm and the gains that accrue from its membership, experts say, far outweigh these barriers.
WHY AfCFTA?
Once implemented, the AfCFTA agreement is expected to boost intra-Africa trade by immediately removing all tariffs on 90 per cent of goods, while the remaining 10 per cent of tariffs on “sensitive goods” will be phased out gradually.
Currently, only 18 per cent of exports from African countries are traded within the continent, whereas by comparison, intra-regional trade accounts for 69 per cent and 59 per cent of total exports in Europe and Asia, respectively.
WHAT EXPERTS SAY
Speaking at the AU Summit, the Deputy Secretary-General, United Nations, Amina J Mohammed, pledged the UN’s full support for AfCFTA.
She said the landmark pan African body was expected to unleash the continent’s all-inclusive economic potential.
She described AfCFTA as a tool to unleash African innovation, drive growth, transform African economies and contribute to a prosperous, stable and peaceful African continent, as foreseen in both Agenda 2063 and the 2030 Agenda for Sustainable Development.
In his reaction to the signing for the AfCFTA by Nigeria, an Economist and Director-General of the Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf, described the move as a welcome development.
He said, “LCCI welcomes the decision of the Federal Government to sign the African Continental Free Trade Agreement, following the recommendation of the presidential committee on impact and readiness assessment of the African Continental Free Trade Area. We believe that the country stands to gain more than lose from signing the Free Trade agreement. There will be access to larger market of 1.2 billion population and a $2 trillion economy. This offers tremendous opportunities for economies of scale for our firms.
“Not signing before now has denied us opportunity to put our views on the table to shape the structure of the agreement. But the reality is that the agreement is work in progress and we can always revisit the gaps in the agreement that may not be favourable to us.”
He cautioned that while this would improve trade among African countries and provide opportunity for Nigeria to export to other African countries; appropriate safeguard measures should be put in place to protect vulnerable sectors of the economy.
According to him, it is also critical to ensure that there is effective enforcement of the Rules of Origin.
“Meanwhile, we are of the opinion that, in the long run, we should focus more on building an economy that is competitive rather than having a disproportionate focus on protectionist approach to industrialisation. We need to fix infrastructures to bring down operating and production costs in the economy. Our policies and institutions must also be in consonance with the quest for a competitive economy,” he added.
On his part, a renowned professor of Economics and Public Policy at the University of Uyo, Ekpo, Hogan Akpan, told our correspondent that with the joining of the AfCFTA, Nigeria would be able to take advantage of the large African market, while Nigerian businessmen and women could now buy and sell in a wider market because “goods and services from Nigeria can compete with products from other African countries and beyond.”
What’s in it for me?
– A single continental market for goods and services worth $2.5trillion
– Free movement of business people and investment.
– Increase in employment opportunities.
– Improved standard of living.
– Economic growth.
– Increase in Gross Domestic Product.
Akpan added, “The African Free Trade Area is the largest in the world, hence it has a strong bargaining and negotiation power with other free trade zones. AfCFTA provides enormous opportunities for Nigerian entrepreneurs to be creative and innovative thus exploring and exploiting the African market comprising of about 54 countries. The free trade area would generate employment for Nigerians based on the expansion of businesses at home in other to meet the increased demand for Nigerian goods and services.
“The countries’ GDP would increase, especially if our exports exceed imports from the other countries in the free trade area.”
Asked if the initial hesitation by the Federal Government in signing the treaty was justified, the professor noted that the fears raised by the Federal Government were justified.
According to him, there are downsides to the free trade arrangements.
He said, “Nigeria could become a vent for re-export of goods and services from other countries, particularly emerging economies like China. There could be job loss if Nigeria becomes a dumping ground for either similar or inferior goods from other countries. It may slow the country’s industrialisation process, hence the need to consult various stake holders.
“Furthermore, Nigeria itself is a large market, hence would there be additional benefits from AfCFTA? The free trade area may discourage innovation and creativity from Nigerians based on the availability of various products from other countries, If our exports exceed imports within the free trade zone, our GDP would improve, all things being equal. There must be a positive trade balance (surplus) for the GDP to increase.”
What is next for Nigeria after joining AfCFTA? The Executive Chairman, Foundation for Economic Research and Training, Lagos, and immediate past Director-General, West African Institute for Financial and Economic Management, Lagos, stated, “AfCFTA will not solve all our economic problems. It is yet to be implemented because it must go through several processes and be ratified by the World Trade Orgabisation. We need to continue to build our economy to solve the problem of unemployment and reduce dependence on the oil sector.
It is a strong and vibrant domestic economy that can benefit from AfCFTA.”
