The commencement of African Continental Free Trade Agreement (AfCFTA) is expected to improve intra-African trade, enhance economic growth and sustainable development. OLUSHOLA BELLO writes.
Trading under the African Continental Free Trade Area’s (AfCFTA), which commenced on January 1, 2021 is a laudable development as it builds on existing initiatives for regional integration and laying the groundwork for more, even as immense support from countries and leaders across the continent is merited.
The AfCFTA was established in 2018 with the sole aim of creating a single market for goods and services in Africa. The agreement was ratified by 32 AU countries and Nigeria signed the agreement in Niamey, Niger on July 7, 2019 to promote intra-African trade with other African countries. On November 11, 2020, the Federal Executive Council(FEC) approved the ratification of the agreement demonstrating Nigeria is on course to participate in trading under the AfCFTA.
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. The AfCFTA, if properly implemented and executed across the continent, could boost Africa’s economy to $29 trillion by 2050 from the current size of $2.6 trillion.
The agreement will also be facilitated by movement of persons to expand economic integration of the continent, under the Pan African Vision of ‘An integrated, prosperous and peaceful Africa’. 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.
Stakeholders in the industry highlighted the benefit of AfCFTA for Africa to include; improvement in intra-African trade and export structure. Intra-African trade could increase by over 50 per cent as it currently accounts for less than 20 per cent of exports in Africa, compared with about 60 per cent in Asia and 70 per cent in Europe; create a sound global economic impact; foster specialization and boost industrialization, an enlarged regional market could lead to an increase in FDI inflows for several countries; strengthen regional and inter-state cooperation; increase employment and investment opportunities, as well as technological development. Real wages for both skilled and unskilled workers could increase especially manufacturing and agricultural sectors; provide the opportunity to harness Africa’s young demography; and export diversification and structural transformation
Speaking, the president of Lagos Chamber of Commerce and Industry (LCCI) Mrs Toki Mabogunje said: “the Lagos Chamber considers the operationalisation of AfCFTA as a step in the right direction in deepening economic integration in Africa. The agreement requires participating countries to remove tariffs from 90 per cent of goods, thereby, allowing free access to commodities, goods, and services across the continent.”
She said, the agreement provides the opportunity for manufacturers, traders, service providers, SMEs, among others to tap into African market with combined Gross Domestic Product and population of around $3.4 trillion and 1.3 billion persons, respectively.
According to Mabogunje, “for Nigeria, the trade agreement serves as avenue for local industries to penetrate new markets and establish strong cross-border supply chains with other African countries. We believe the benefits and costs of the agreement will not be evenly distributed among participating countries and only countries with open, friendly, and enabling operating environment stand to benefit materially from the agreement. This underscores the need for policymakers to expeditiously create an enabling environment that would enhance the country’s economic competitiveness in the AfCFTA framework.”
However, she said while the take-off of AfCFTA should be lauded, much work remains undone as critical parts of the agreement are yet to be finalised, saying, “several key issues including schedules of tariff concessions, schedules of service commitment, rules of origin, investment, competition policy and intellectual property rights have not been concluded.
“There is still lack of clarity on the type of value addition that must occur within an AfCFTA State party for a product to benefit from tariff reduction. We call on the AfCFTA Secretariat and the African Union to expeditiously finalize pending negotiations for effective AfCFTA implementation. There is still a great deal of sensitisation and enlightenment that need to be done on the implementation modalities,” she pointed out.
The president of Manufacturers Association of Nigeria (MAN), Engr. Mansur Ahmed, commended the government on the decision to reopen the land borders for ease of trade engagements, particularly, under the implementation phase of the African Continental Free Trade Area (AfCFTA) which took effect from January 1, 2021.
According to Ahmed, the AfCFTA has the potential to build Africa’s capacity to manufacture and change the narrative of African economy and give Africa a stronger voice and positioning in the global economy as we go on.
“We are confident that there will be a tremendous opportunity for growth and development for each and every one if the countries that signed this agreement are willing to come together to make it a success. But this cannot come without challenges,” he stated.
Meanwhile, the National Action Committee (NAC) on AfCFTA flaged off nationwide awareness and sensitisation tour in line with its mandate to prepare Nigeria to take advantage of the AfCFTA Agreement while mitigating its threats to the Nigerian economy.
The secretary, the National Action Committee on AfCFTA, Francis Anatogu, said: “our mandate at the National Action Committee is to coordinate the activities of private and public sector at Gederal and Sub-national levels to implement AfCFTA for benefit of Nigeria and Nigerians. Our strategy is to work with the states based on their areas of comparative advantages and priorities as a way of building up our national export trade and creating jobs at grassroot level.”
According to him, the core objective of the AfCFTA is to create a single market for goods, services, and free movement of persons in order to deepen the economic integration of the African continent.
To him, “it is expected to deliver an integrated continental market of 1.27 billion consumers with aggregate GDP of $3.4 trillion. Nigeria constitutes a significant portion of these figures largely spread across our states.”
For the AfCFTA to achieve its goal of unlocking economic growth and enhancing competitiveness on the continent, experts said, there has to be sustained political will to bolster competitiveness through structural reforms and investment in infrastructure and human capital.
