Commentary: Taking Maximum Advantage Of The African Free Trade Deal

By Prof Elis Idemobi

The African Continental Free Trade Agreement (AfCFTA) is in force among African Union member states. It was signed in Kigali, Rwanda on March 21, 2018. The goal of the Africa Continental Free Trade Agreement is to create a single market followed by free movement and a single-currency union.

The agreement functions as an umbrella to which protocols and annexes will be added. It involves Competition Policy, Investment and Intellectual Property Rights. AfCFTA entered its operational phase on July 7, 2019, at a summit in Niger, attended by African Countries, including Nigeria.

The shelves of most Supermarkets in Lagos, Abuja and other major cities in Nigeria boast a plethora of imported products, including toothpicks from China, toilet paper and milk from Holland, sugar from France, chocolates from Switzerland and matchboxes from Sweden. Yet many of these products are produced much closer in Nigeria, Ghana, Morocco, South Africa, and other African countries with an industrial base. The question is: why do retailers source them around the world? The answer lies in a patchwork of trade regulations and tariffs that make intra-African commerce costly, time wasting and cumbersome.

Thus, The African Continental Free Trade Agreement (AfCFTA) is meant to create a tariff-free continent that can grow local businesses, boost intra-African trade, rev up industrialization and create jobs. The agreement creates a single continental market for goods and services as well as a customs union with free movement of capital and business travelers. Countries joining AfCFTA must commit to removing tariffs on at least ninety percent of the goods they produce. If all 55 African countries join a free trade area, it will be the world’s largest by number of countries, covering more than 1.2 billion people

It is however pertinent to caution that Nigeria would lack the capacity to immensely benefit from the Africa Free Trade Agreement (AfCFTA) unless fundamental reforms are taken to drastically improve infrastructure deficit and security challenges that are seriously hindering business development in Nigeria. It is understandable that the free trade agreement offers the country a unique continental market access that could be supported with increasing focus on industrialization as a catalyst for growth and efforts of the government to shift away from over-reliance on the volatile oil exports to boosting Nigeria’s manufacturing sector and exports.

Under the trade pack, African countries are expected to look inward and make it easier to trade with each other by removing current barriers to increased trade on the continent, such as high tariffs. Having access to a larger market of around one point two billion Africans will surely trigger industrialization and manufacturing across the continent and, in turn, create vast employment opportunities on a continent that is seriously plagued by massive unemployment and migrant crisis.

Despite these mouthwatering advantages Nigeria stands to gain as Africa’s biggest economy, there is serious doubt on the competitiveness of the Nigerian manufacturing firms against their counterparts from other African countries with far better national factor conditions. There is therefore the fear that Nigeria may become a dumping ground for African goods and services just like Chinese imports. Since Nigerian manufacturers must first satisfy the domestic market before exporting the surplus, it is almost impossible to target the export market with the current capacity utilization falling below fifty-five percent. It is only in the cement and beer sub-sectors that Nigeria seem to have achieved some level of domestic market self sufficiency and minimal export capacity.

The government at all levels and the political class are thus advised to tackle infrastructure and insecurity of lives and property challenges. These critical issues have adversely affected economic growth for many years. It is sad to note that labour and capital no longer move freely and along location advantages within the country due to widespread insecurity.

Though the agricultural sector looks good to take advantage of the free trade deal but there is palpable fear about lower agricultural output in coming years due to frequent farmers-herders clashes in many parts of the country. Unless these challenges are tackled headlong, Nigerian manufacturing firms and agricultural products exporters cannot take maximum advantage of the African free trade deal.