According to analysis by the African Export- Import Bank (Afreximbank), one of the main reasons why intra-African trade is low at around 15 per cent compared to Europe (59 per cent), Asia (51 per cent ), and North America (37 per cent ) is because of lack of access to trade and market information.
Access to information across African economies, according to the bank has been hindered by the fragmented nature of the respective markets, and was currently threatening a $400 billion intra-Africa trade potential.
The bank also said the present transactions value at $170 billion remained due to wide gap in market information, which now needs to be closed to foster accelerated trade integration, adding that the size of intra-African trade could be doubled from the current level of about $170 billion per year to almost $400 billion by addressing the issue of availability of market information on the continent.
President of Afreximbank, Dr. Benedict Oramah, at a recent meeting with the Advisory Group on Trade Finance and Export Development in Africa, said the potential was high to reach the $400 billion mark.
Oramah added that lack of knowledge of the continent and limited access to trade information among African businesses constituted major constraints to cross-border trade.
Already, a study on the regional value chains for leather and leather products, jointly commissioned by Afreximbank, UNCTAD and the Commonwealth Secretariat, found that Australia was the main source of tanned hides and skins for Southern Africa, including South Africa. Although Zambia exported the same products at lower costs, its exports were higher than South Africa’s imports.
The report said South Africa imported leather that had been further prepared after tanning from India at double the price at which Ethiopia exported such leather, while Mauritius and Nigeria imported leather products from Italy and Belgium at much higher costs than what South Africa and Botswana exported them for.
Kenya imported raw hides from New Zealand, while Burundi exported the same product to the world at a much lower price and West African countries, on average, imported meats worth more than $3 billion per annum from Argentina and Australia even though Mali, Chad, and Sudan could supply all the meats required by the region.
But Oramah argued that if Europe, with a population of 550 million people in 28 countries and a land area of 10.2 million square kilometres, could have intra-Europe trade of about $6 trillion, It was possible for Africa, which has double that population, nearly double the number of countries, and three times the land size, to achieve the same level, if not multiples, of such trade.
To address this challenge, Afreximbank, he said, was convening the Intra-African Trade Fair every two years to provide trade and market information and connect buyers and sellers from across the continent.
The first-ever Intra-African Trade Fair (IATF2018), promoted by the bank and organised in collaboration with the African Union, would take place in Cairo, Egypt, from 11 to 17 December 2018.
The 7-day trade show would provide a platform for sharing trade, investment and market information and enabling buyers and sellers, investors and countries to meet, discuss and conclude business deals, in addition to providing an opportunity for exhibitors to showcase their goods and services, engage in Business to Business (B2B) exchanges and conclude business deals.
At the third engagement session of the IATF in Abuja on Tuesday, Oramah said IATF would provide a platform for entry into a single market of over one billion people joined together under the African Continental Free Trade Area.
According to him, the current composition of intra-African trade is heavily skewed towards commodities, particularly oil and precious minerals such as diamonds and gold, which have made commodity exporters and importers gain a larger share of intra-African trade. Countries like South Africa, Nigeria, Namibia, Côte d’Ivoire and Egypt are among the largest intra-African exporters.
“In addition to large corporations who already have the market presence in Africa, small-scale farmers, traders and businesses could benefit hugely from an up-to-date market information that enables them to negotiate with buyers from a position of greater strength. It could also help buyers have an idea of the quantities and varieties of a raw material available in another country to aid buying decisions,” he explained.
He further stated that the IATF would enable Afreximbank and other financial institutions, to share information about their trade finance and trade facilitation interventions that would support intra-African trade; and deploy multi-country and multi-company pavilions that would serve as one-stop shop for intra-African trade and investment opportunities in Africa.
This is also in addition to contributing towards the bank’s objective to increase intra-African trade from $170 billion in 2014 to $250 billion and by so doing, ensure that intra-African trade share of Africa’s total trade reaches 22 per cent by 2021.
Oramah also said the African Continental Free Trade Agreement (AFCFTA) has the potential to boost intra-African trade by 53 per cent if import duties were eliminated as well as reducing non-tariff barriers.
According to him, AFCFTA would progressively eliminate tariffs on intra-Africa trade and make it easier for businesses to trade within the continent.
He therefore urged the African Government to create more space for the private sector to play an active role in the integration process instead of leaving the sector to act as a passive participant.
The IATF session in Abuja also presented Nigeria with the opportunity to become the second country to announce plans to take a country pavilion at the Intra-African Trade Fair after South Africa.
Speaking at the event, Vice President Yemi Osinbajo said Nigeria would participate effectively in the trade fair and would use it as an opportunity to showcase its trade and investment opportunities.
“We believe that the trade fair will provide an opportunity for Nigeria to engage with other countries and investors who are interested in partnering with Nigeria to support the “Zero Oil policy” to reposition the Nigerian economy,” he said.
Managing director of Intra-African Trade Initiative at the African Export-Import Bank (Afreximbank), Kanayo Awani said at the meeting that Nigeria stands to gain a lot by participating at the trade fair.
She emphasised that the fair would be an avenue to build trade information and open up investment opportunities within the continent, adding that trade would go smoothly within the continent when buyers and sellers know the rules of trade in the various African countries – an opportunity the fair would create.
“People don’t know which market they are in Africa, where the sources of raw materials are, what are the various standards and requirements and that is at the heart of the trade fair. That is a way to build information.
“When you bring buyers and sellers, you build information and you know where to buy your material from. Which are the markets? Who are the buyers in Africa? What are the rules of trade in various African countries and as a way to do that so that different people can trade.
“We did a study with UNTAD which shows that countries like Nigeria and Mauritius imports a lot of products from Italy. But Botswana, for instance, exports globally. You will see that there are opportunities by the time you look at what we import as Africans and what we import as Africans. We are exporting as much as we can buy internally.
“There is the need to make information available or build trade information not just for trade alone but investment opportunities from Africa into Africa,” she said.
Awani’s argument is that trade flourishes when countries produce what their trading partners are eager to buy. But statistics showed that with a few exceptions, this is not yet the case with Africa.
The continent produces what it doesn’t consume and consumes what it doesn’t produce.
Experts argue that it’s a weakness that often frustrates policy makers; it complicates regional integration and is a primary reason for the low intra-regional trade, which is between 10 per cent and 12 per cent of Africa’s total trade.
Comparable figures are 40 per cent in North America and roughly 60 per cent in Western Europe.
But what does this development signal and what could change?
A key objective of the AfCFTA is to boost intra-African trade. It is designed to do so by forging a single continental legal regime for all relevant trade disciplines.
This will include lower tariffs, simplified rules of origin and customs procedures, regulations for trade in services and remedies available to affected private parties.
Experts described it vital for advancing Africa’s economic development and capacity also to integrate more effectively into the 21st century global economy.
Nigeria Commits To AfCFTA
During a visit to Nigeria this month, South African president, Cyril Ramaphosa had urged the federal government to sign the African Continental Free Trade Area (AfCFTA) agreement. This is after South Africa announced that it would sign the agreement after it, and Nigeria had held out when more than 40 other countries signed at a gathering in Rwanda, in March.
President Muhammadu Buhari at the time said Nigeria would soon sign the agreement, once it had concluded consultations with key stakeholders
But Mr Segun Awolowo, executive director of Nigerian Export Promotion Council (NEPC), at the meeting reinforced the country’s commitment to the agreement.
Awolowo assured that Nigeria would sign the African Free Continental Trade Agreement (AfCTA).
“Nigeria is not skeptical about it. The president has explained that he wants more consultation. Nigeria is a federation of many states, you don’t just jump into it. When you going into something like this it is a new marriage. He has told you he is going to sign. Nigeria is going to sign it, Nigeria is going to drive it.
“The challenge that many other countries have is that Nigeria will dominate their markets. We don’t want any country to come and dump goods on us and in the agreement there is anti-dumping. There is the process of anti-dumping that guards against that.”
He also said the trade fair would afford the country an opportunity to connect to Africa.
“It is a big platform to connect to Africa. Most of our exports go to Africa in informal trade. It is largely recorded or undocumented but now we are having a platform that will showcase Nigeria goods to Africa. It is going to be a big advantage to all our manufacturers particularly our SMEs and MSMEs and connect them to our business partners.
“We are used to exporting raw materials. The fact that we want to do manufactured and process goods means it is a delicate step,” he said.
Afrexim has described the signing of the AfCFTA agreement as a major step towards regional integration and said that it was expected to result in a 52 per cent increase in the volume of trade among African countries and to lead to the elimination of 90 per cent of tariffs by 2022.It remains to be seen what next after the fair.
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