….AfCFTA Implementation Will Take A Long Time, Says AfCFTA Secretariat
SAN FRANCISCO, January 01, (THEWILL) – The African Continental Free Trade Area (AfCFTA) agreement will unlock significant growth opportunities on the continent but the benefit derivable from the single large market initiative will depend largely on how well individual member nations position themselves.
Nigeria, on account of productivity deficit, does not stand a good chance of reaping more benefit than cost from the project, at least for now. But the government, not oblivious of the reality, is making efforts to step up production of goods and services in terms of quality and quantity, though with no clean-cut timeframe.
Besides, the huge population and large economy that give Nigeria advantage over other member nations, ironically, also makes it vulnerable to the downsides of the agreement.
The January 1, 2021 commencement date of the implementation of the free trade agreement will mark the beginning of a single continental market for goods and services, with free movement of business, persons and investments across participating African countries.
Established on May 30, 2018, the agreement has been signed by 54 African Union (AU) member countries and ratified by 31 member countries, including Nigeria. President Muhammadu Buhari, had on Sunday, July 8 2019, signed the AfCFTA, making Nigeria the 53rd African country to join what is now seen as the largest free trade agreement globally, in terms of number of participating nations.
It had taken the president over six months to ratify the deal after wide consultations suggested that it could have varying implications for millions of businesses around the country.
The agreement is expected to encourage trade relations in Africa by removing tariffs for over 90 per cent of goods traded between member countries. It is also expected to lead to the free movement of people within the continent, thereby enabling a single market for air and road transportation.
The deal is seen as critical for growth and job creation for Africa and its 1.27 billion people. Intra-Africa trade has been historically low. Intra-African exports were 16.6 per cent of total exports in 2017, compared with 68 per cent in Europe and 59 per cent in Asia, pointing to untapped potentials.
According to ‘The FDC Afriscope Volume 2, Issue 6, December 23, 2020’ published by the Financial Derivatives Company Limited, the AfCFTA is capable of boosting Africa’s economy to $29 trillion by 2050 from the current size of $2.6 trillion if properly implemented and executed across the continent.
The report reads in part: “The agreement has a huge potential as it would create the world’s largest single market of about 1.2 billion consumers and workers, thereby increasing opportunities for African manufacturers and businesses, especially those constrained by the size of their domestic markets.
“Integrating Africa into one trade area provides significant opportunities for entrepreneurs, businesses and consumers across the continent. It could also rapidly support sustainable development in the world’s least developed region.”
Minister of Industry, Trade and Investment, Adeniyi Adebayo recently stressed the need for Nigerians, especially industrialists to take advantage of opportunities inherent in the economic bloc to promote Made-in-Nigeria goods.
The minister, in a statement by his Special Assistant on Media, Ifedayo Sayo, stressed that AfCFTA would form a $3.4 trillion economic bloc, which Nigeria must play a leading role in.
“The journey started on July 8, 2019, when Nigeria became the 53rd African country to sign the AfCFTA treaty”, the minister recalled.
“Long before then, it has always been the dream of Nigeria and Africa’s founding fathers to unite the continent in one, shared prosperity.
“The African Continental Free Trade Area agreement will form a 3.4 trillion dollars economic bloc, which Nigeria cannot afford to be left out of.”
The Organised Private Sector (OPS), has consistently charged the federal government to address the poor state of infrastructural facilities in the country if Nigeria is to benefit from the AfCFTA.
At the third edition of the AfCFTA Dialogue Series with OPS, the Director-General, Manufacturers Association of Nigeria (MAN), Segun Kadir, explained that if Nigeria must benefit from the agreement, greater attention must be geared towards improving the operating environment and infrastructure for locally-produced goods to compete with foreign goods.
Represented by the Director, Corporate Affairs, MAN, Segun Oshidipe, Kadir added that countries that have control over their value-chain would benefit from the agreement. He, however, admitted that the government is so far taking the right step towards implementing the agreement paying attention to the recommendations of manufacturers.
“The fund allocated for new projects can be diverted to develop infrastructure that will connect economic hubs in Nigeria and connect Nigeria’s economic hub to economic hubs within the West African region and connect Nigeria’s economic hub within the ECOWAS region to the continental region”, he suggested.
“We can do this by partnering with economies within the corridor to improve infrastructure to ease businesses and reduce the cost of doing business.
“We must shun politics to ensure that whatever infrastructure we are developing now is developed along with economic hubs. This is the time to take steps that would enable us to benefit from AfCFTA, otherwise we might not”, Kadir said.
Similarly, the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf believes that the only way Nigeria could maximise the benefits of AfCFTA is to increase the total value and volume of non-oil exports by scaling up productivity in the real sector of the economy.
“If you look at the structure of our export, it is about 95 per cent oil and gas, the remaining five percent is for agriculture and manufacturing, most of which goes to the neighbouring countries.”, Yusuf observed.
“If we are going to trade internationally, it is not just about import, it is also about export. What exactly are we going to put on the table if the only thing you have is oil and gas? How will that benefit the economy?
“We need to scale up very rapidly, especially on issues of productivity in the real sector of the economy. If we don’t strengthen that, we will not be able to get the right kind of value that we need.”
Meanwhile, the African Continental Free Trade Area (AfCFTA) agreement Secretary-General, Wamkele Mene, has disclosed that it might take a while to reap the meaningfulness of the project.
Mene, in a report published by Financial Times, said that the full implementation of the AfCFTA will be a long journey as Africa needs the right equipment for customs authorities at the border to facilitate the fast and efficient trade which goes into effect on January 1.
Mr. Mene said while 31 nations have agreed to ratify the agreement, many lack the customs and infrastructure to fully implement continental free trade.
“It’s going to take us a very long time. If you don’t have the roads, if you don’t have the right equipment for customs authorities at the border to facilitate the fast and efficient transit of goods, if you don’t have the infrastructure, both hard and soft, it reduces the meaningfulness of this Agreement,” he said.
Mr. Mene revealed that the purpose of the Agreement is to move Africa from the “colonial commodity export economic model” and use tariffs as a tool for industrial development.
“We want to move Africa away from this colonial economic model of perpetually being an exporter of primary commodities for processing elsewhere,” he said, adding, “We want to stop approaching tariffs as a tool for revenue. We want tariffs to be a tool for industrial development.”
He cited bureaucratic challenges in the continent that might hinder tariff-free trade, noting Ethiopia’s decision to ban foreign investors from its financial services, which he said contravenes AfCFTA rules.
“I am not saying countries must rush to dispute settlement. All I am saying is that, if they do, the jurisprudence will bring clarity to the body of trade law that we have developed in the form of this agreement,” he said.
He added that AfreximBank is working to implement a continental trading platform to enable smaller businesses to trade efficiently in the continent without currency difficulties.
Mr. Mene warned that the AfCFTA created some losers and not enough winners and said there might be backlash to free trade in the continent.
“Often in trade agreements the big winners are the already industrialised countries and the big corporations who can access the new markets literally overnight,” he said.
Nigeria became the 34th African country to fully ratify and submit its Instrument of Ratification of the African Continental Free Trade Area (AfCFTA).
In November, Customs officials in the continent agreed to draft continental guidelines to enable the movement of goods, services and people for the agreement.
SBM Intel – an Africa focused geopolitical research and strategic communications consulting firm, said the ratification of the AfCFTA agreement, expected to take off in January 2021, can potentially shape the fortunes of the international trade dynamics in Nigeria in 2021.