THE NEED FOR NIGERIA TO DOMESTICATE THE AFRICAN CONTINENTAL FREE TRADE AREA AGREEMENT (AfCFTA)
By Peter Bahago, Abuja
In November 2020, Nigeria ratified her membership of the African Continental Free Trade Area (AfCFTA) Agreement which comes into take effect today, First January, 2021.
The ratification came more than one year after Nigeria signed the African Continental Free Trade Agreement in July 2019.
The Agreement establishes a single market for goods and services across 54 countries, allows for the free movement of business travelers and investments, and creates a unified customs union to streamline trade on the continent.
The take off of AfCFTA today is a clear indication that African nations are now more prepared to cooperate with each other to put their destiny in their own hands with a view to growing together.
The creation of the continental trade agreement started at the 18th ordinary session of the Assembly of Heads of State and Government of the African Union (AU), held in Addis Ababa, Ethiopia in January 2012 that adopted the decision to establish AfCFTA.
The free trade area is to include 54 African countries with the exception of Eretria, and a population of more than one billion people as well as a combined Gross Domestic Product (GDP) of more than 3.4 trillion US dollars.
At the 25th summit of the AU held in South Africa in June 2015, negotiations toward the establishment of AFCFTA were launched. The lack of intra-African Trade can however be adduced to the fact that many African countries are poor and can hardly produce anything their neighboring countries might want to trade in.
The Intra-African trade placed at about 18 per cent is relatively below average compared to Intra-Asian trade that stands at 59 per cent and 69 per cent of intra-European trade. In essence, about 82 per cent of exports by African countries are to other continents of the World.
The AfCFTA is a market access mechanism expected to deliver several benefits to the continent. Nigeria as the biggest economy in Africa has many advantages to derive from the investment and trade opportunities that AfCFTA offers.
With the largest economy in Africa of more than 500 billion dollars GDP and population of over 200 million, Nigeria’s market size allows her manufacturers to expand into other African countries. This will enable Nigerian investors to benefit not only from the Nigerian market but from other countries of the continent as well.
AfCFTA has the potentials of improving Nigeria’s supply chain infrastructure. In expanding their operations to other markets, producers and retailers would depend on distribution network that can effectively deliver goods and services to their intended markets.
This would give rise to increased investments in the distribution and logistics supply chain to ensure the infrastructure for transportation of goods are available.
Increased employment opportunities for the teeming Nigerian youths, professional and artisans will also be enhanced when AfCFTA takes off fully.
AfCFTA seeks to create a single liberalized market for trade in services in the continent. Countries like Nigeria which has abundant supply of professionals in various service industries like construction, engineering, technology, financial services and even labour-intensive trades for artisans will witness increased movements to countries with demands for their services.
Before ratifying her membership of the AfCFTA, Nigeria had expressed initial reluctance and concerns to join the bloc for fear of exposing her local industries to dumping by countries outside Africa.
The AU has the duty to address these concerns and ensure that measures are taken against any Regional Economic Community (REC) whose policies and programmes are incompatible with AfCFTA objectives.
Where a member state or REC has deliberately or by omission fails to comply with set targets and timelines, and such non-compliance is brought to the notice of REC and nothing is done to address it, then the AU should impose sanctions on the defaulting state or REC to protect the agreement against abuse.
Another pertinent issue is the need for continental trade dispute forum resolution mechanism to be very clear and agreed to by member nations. The effectiveness of the dispute settlement mechanism will play a major role in sustaining the market and the envisaged regional integration process.
It is critical because it provides a conducive and predictable environment for traders, individuals, corporations and investors. Issues of jurisdiction, independence of the court and respect for the rulings or judgments of the court are important issues that should be looked into. The existence of regional courts and the use of their rules and protocols will go a long way in accelerating the discharge of justice under the AfCFTA.
It will also be the duty of member states to ensure that AfCFTA is domesticated into their national laws as soon as possible to enable all investors know and play by the rules of engagement.
Valid as Nigeria’s concerns may be, the government can also address them by putting in place safeguards to ensure that vulnerable industries are adequately protected.
The Nigeria government should take steps to ensure that the coming into force of the AfCFTA is not detrimental to its economy through safeguards that will ensure that goods from other African nations would not flood its market even as it remains an open economy.
Such safeguards include improving transportation and electricity infrastructure and enforcing policies which would see a reduction in the cost of production. This would make Nigerian products export friendly.
It is gratifying to note that Nigeria has not only embraced AfCFTA, she has also declared January 2021 for the campaign, promotion and enlightenment on the importance of the trade bloc to the country as part of the programme to domesticate AfCFTA.