President Muhammadu Buhari signed the African Continental Free Trade Area (AfCFTA) agreement on Sunday 7 July 2019 at the African Union summit in Benin Republic. Making Nigeria the 54th of the 55 country to agree to join what is regarded as the ‘Largest free-trade area since the creation of the World Trade Organisation (WTO) in 1994’.
Here are the key facts about the AfCFTA
- The free-trade area is the largest in the world in terms of participating countries since the creation of WTO
- The agreement went into force on May 30 and entered its operational phase on July 7 following an extraordinary African Union (AU) summit.
- Nigeria signed on to agreement on July 7 2019.
- The combined market covered by the AfCFTA will be 1.2 billion people with a combined Gross Domestic Product (GDP) of N3.4 trillion.
- The agreement requires members to remove tariffs from 90% of good allowing free access to commodities, good and services across the continent.
- The United Nation Economic Commission for Africa estimates that the agreement will boost intra-African trade by 52% by 2022.
- The AfCFTA secretariat will be domiciled in Ghana.
As interesting as the potential in the African free-trade may seems. Nigeria needs to be cautious as the benefit of membership of AfCFTA may not be even among member countries.
- Nigeria is a mono-economy which heavily depend on oil and still trying to rejuvenate its ailling agricultural sector. Thanks to CBN’s many interventions. An African free-trade will ensure dominance of Nigerian market with good from developed producer nations like South Africa and Egypt.
- Nigerian consumer market is the largest in Africa with estimated 200 million consumers and largely unmatured manufacturing sector. Thanks to moribond infrastructures. Countries like Benin Republic with better infrastructures will find it convenient to encourage their citizen to produce with Nigerian market in mind. that off course will be to the detriment of local producer already constrained with poor infrastructure.
- With available infrastructures and production capacity already in place in other African countries. Nigeria could be flooded with low-priced good at the detriment of local moribond manufacturing plant
In a Reuters report on the African Continental Free Trade Area
“Economists say significant challenges remain, including poor road and rail links, large areas of unrest, excessive border bureaucracy and petty corruption that have held back growth and integration in Africa”.
Members have committed to eliminate tariffs on most goods, which will increase trade in the region by 15-25% in the medium term, but this would more than double if these other issues were dealt with, according to International Monetary Fund (IMF) estimates.
The IMF in a May report described the free-trade zone as a potential “economic game changer” of the kind that has boosted growth in Europe and North America, but it added a note of caution.
“Reducing tariffs alone is not sufficient,” it said