The African Continental Free Trade Agreement (AFCFTA):A Boost To Nigerian Commerce?

Abstract

In recent times, there have been more intra-African trade, socio-economic activities, and this time with fewer modalities/complexities. This is because The African Continental Free Trade Agreement (The AFCFTA) has come to the rescue hence creating a single market for freedom of movement of people/goods between African Countries.

Nigeria’s ratification of the Agreement stands to open a window of commercial opportunities for Nigerian Technological, energy, and industrial sectors by allowing a free flow of technological and industrial innovations, ideas, and manpower from Nigeria to other African Countries; thereby allowing access into a unified new market. The agreement is also a starting point for more detailed negotiations on trade in goods and services and other trade-related issues including competition, investment, and intellectual property. This paper seeks to examine the strengths and weaknesses of the African Continental Free Trade Agreement and how it can boost Nigerian commerce.

1.0 INTRODUCTION
Before the African Continental Free Trade Agreement, there was the African Economic
Community, an organization that promoted the development of free trade areas, customs
union, an African Central Bank, and an African Common currency union, to minimize reliance upon the west, thereby also promoting intra-African Trade. After the African Union succeeded the OAU in 2002, more steps were taken to accelerate the economic integration of the continent, hence the AFCFTA.

1 It has been said that the African Continental Free Trade Agreement has the potential to boost intra-Africa trade by 52.3% by eliminating import duties. and to double trade if non-tariff barriers are also reduced.

2.0 THE AFRICAN CONTINENTAL FREE TRADE AGREEMENT(AFCFTA)
The African Continental Free Trade Agreement (AFCFTA) launched in 2019 and now in its
operational phase is a landmark agreement with the ultimate aim of establishing a single
African market for goods and services, accompanied by the free movement of people and

1] Taiwo Oyedele, ‘African Continental Free Trade Agreement: The Real Issues For Nigeria’
(Pwcnigeria.typepad.com, 2020) https://pwcnigeria.typepad.com/files/african-continentalfree-trade-area_what-you-need-to-know-and-real-issues-for-nigeria_taiwo-oyedele.pdf accessed 7 January 2021.capital.2

It is a single market for goods and services for over 1.2 billion people with an
aggregate GDP of over $3 trillion. The African Continental Free Trade Agreement, signed by
all but 1 of Africa’s fifty-five nations, establishes the largest free trade area in the world since the creation of the world trade organization in 1995.

The AFCFTA came into effect on the 1st of January, 2021. Article 3 of the Agreement outlines the objectives of this agreement.3 The major aim of AfCFTA is to create a single continental market for goods and services, which will ensure free movement of business persons and investments, as well as create an avenue for the establishment of the continental and the African Customs Union.

AfCFTA will enhance the Intra-African trade through trade liberalization. It will also lead to a much larger market which will improve competitiveness and encourage manufacturing activities within the African Borders and also improve the standard of manufactured goods. The emergence of AfCFTA will bring about a boost in trade, welfare gains, foster a vibrant and resilient African economic space, promote economic diversification, structural transformation, technological development, and enhancement of human capital. Also, it will go a long way in fostering peace, security, and also political stability in Africa.4 The promotion of AfCFTA will be

2]Hasiya Nagode, ‘AFCFTA: A BLESSING OR A CURSE TO NIGERIA’ (Templars-law.com, 2019)
https://www.templars-law.com/wp-content/uploads/2019/12/Templars-Thought-LeadershipAfCFTA-A-Blessing-or-Curse-to-Nigeria-Hasiya-Nagode-Final-Draft-Thoughts-LeadershipArticle.pdf accessed 8 January 2021.

3] Hasiya Nagode, ‘AFCFTA: A BLESSING OR A CURSE TO NIGERIA’ (Templars-law.com, 2019)
https://www.templars-law.com/wp-content/uploads/2019/12/Templars-Thought-LeadershipAfCFTA-A-Blessing-or-Curse-to-Nigeria-Hasiya-Nagode-Final-Draft-Thoughts-LeadershipArticle.pdf accessed 8 January 2021.

4’The African Continental Free Trade Agreement (ACFTA)’ (Tralac.org)
https://www.tralac.org/documents/resources/cfta/1963-agreement-establishing-the-afcftaconsolidated-text-signed-21-march-2018.html accessed 7 January 2021.
fundamental for sustainable industrial development, diversification, employment creation,
and poverty eradication.5

3.0 THE AFRICAN CONTINENTAL FREE TRADE AGREEMENT (AFCFTA): A BOOST TO NIGERIAN COMMERCE?

The African Continental Free Trade Agreement stands to benefit the Technology sector, the
entertainment sector, the service, and the human capital sector as well as the manufacturing sector by bringing prospects to these sectors. The influx and exchange of goods, services, innovations, and ideas would cause the country to gain from its exposure in the Intra-African trade. Indeed, the AFCFTA would boost Nigerian Commerce. Nigeria signing this agreement on the 3rd day of December 2020 agreed to support free trade. The President had stated unequivocally, that trade is important for us as a nation and to all nations. Economic progress is what makes the world go around. Our position is simple, we support free trade as long as it is fair and conducted on an equitable basis.6 This shows the concern of the nation as to how the agreement would benefit it amidst its promising possibilities.

I believe the African Continental Free Trade Agreement (AFCFTA) would boost the Nigerian Commerce in the following ways:

1. Job Creation and Increased Revenue – In 2015, Nigeria was reported to have a labor
force of 74 million with a high unemployment rate of 10.8%. I believe the AFCFTA would
help address this issue. The AFCFTA seeks to establish a single liberalized market for
trade in services for the continent. Nigeria has a lot of professionals from various
service industries would have an increase in demand for their professionals, hence,
decongesting the labor market and reducing the level of crime rate in the country.
Besides, labor-intensive trade across borders would require the services of low skilled
workers and the free movement of persons guaranteed by the AFCFTA will bring with
it the free movement of services these persons would render.

2. Economic Diversification -The ratification and commencement of the Africa
continental free trade Agreement (AFCFTA) have been dubbed a major economic
breakthrough for the African continent. The agreement is expected to boost intraAfrican trade and regional economic development. This indeed presents a unique
opportunity for Nigeria to diversify its exports and economic base. The impact of
5 Onwuka Ifeanyi Onuka and Ozegbe Roseline Oroboghae, ‘African Continental Free Trade AreaAgreement – Does The Facts Support the Benefits for Nigeria?'(2020) 13 Internationa lBusiness Research, p. 239. 6 https://iclg.com/alb/10078-nigeria-embraces-a-free-trade-future . Accessed on 11th January 2021.

AFCFTA will be beneficial to Nigeria’s economy and its businesses. Stating the
importance of the agreement to the country, Mr. Kunle Ajagbe of Aidan Partners, a
commercial law firm in Nigeria said “there is in particular, the likelihood of Nigerian
business having a greater space to scale up their continental ambition and reach.
Hence, AFCFTA is absolutely a good thing. Although there have been concerns as to
Nigeria becoming a dumping ground for other countries, the potential opportunities
and benefits outweigh these concerns. We must also recognize that the reality is that
the Nigerian economy is stronger than most African countries and we expect many of
the same industry sectors to be able to increase their exports rather than be diluted
by imports.
3. Increased Global Visibility -The decision of the African Union heads of state and
Government Assembly in February 2020 for E-commerce to be included in the AFCFTA
is a welcomed decision. This decision could potentially lead to expanded market space
for E-commerce players on the continent. This is an opportunity for Nigeria to have a
spot on the global market. Following the outbreak of the Covid-19 pandemic, and the
increasing reliance on E-commerce channels in a range of sectors, there have been calls
for the AFCFTA E-commerce negotiations to be brought forward. Liberalization in the
AFCFTA takes the form of the progressive elimination of tariffs and the removal of nontariff barriers. Nigeria can use this as a great platform to not just increase exports of
products but also increase global visibility that can lead to more foreign investments
and the growth of the economy.

4. Open Market for Competition – Where an opportunity is given for an open trade
market, there tends to be high competition between these African countries and once
there is competition, there would be an inflow of income and this would boost the
economy. The trade liberalization that would lead to the free movement of goods and
movement of people would cause a country like Nigeria to sit up, adjust her
infrastructure, and fine-tune her trade strategy.

5. Other benefits of the agreement to the Nigerian Commerce include: To support the
industrial policy of Nigeria through the negotiated and agreed “Exclusion and Sensitive
category lists”, to provide space for Nigeria’s infant industries, to improve
competitiveness, and the ease of doing business, to provide a platform for Nigeria’s
continued leadership role in Africa. It would also consolidate and expand Nigeria’s
position as the number 1 economy in Africa. It would stimulate, specifically, an
estimated 8.18 percent increase in Nigeria’s total exports, with a small structural shift
in Nigeria’s economy towards manufacturing and services. This is expected to lead to
a total increase in Nigerian economic welfare by 0.62% – equivalent to around US$2.9
billion in 2018 terms. Changes would result from tariff reduction, ease of doing
business and, trade facilitation.7

4.0 POSSIBLE IMPEDIMENTS TO THE LONG TERM ENJOYMENT OF THE AFCFTA BY NIGERIA AND THE WAY FORWARD.

Although there are numerous benefits of the AFCFTA to the Nigerian Commerce, I believe that the problem with export and trade as a whole in Nigeria is not the lack of a trade market primarily but the lack of manufacturing capacity, lack of standardization of production that creates consistent quality assurance on export products, etc. A lot of African countries are fixed on solving trade problems through the implementation of the AFCFTA but they ignore the fact that there needs to be manufacturing capacity within the said African Countries. Yes, indeed the agreement would expand intra-Africa trade through a single market of trade liberalization, better allocation of resources, and accelerating the establishment of the customs union but certain changes need to be made. The agreement can cause an increase in trade activities within African countries but for this to be a lasting effective agreement, there has to be the focus on industrialized goods to promote African industrialization and the advancement of its manufacturing sector, providing more employment opportunities for the continent’s booming youth population.
Also, for the agreement to be so effective and for Nigeria to gain its huge benefits, Nigeria
has to upgrade and adjust its administration, legal, and business infrastructure. There has to be a change in the legal market both within Nigeria and throughout the continent. To tackle the fear of domestic firms losing to foreign competition, the nation must first work on local industrialization, domestication, and standardization of domestic products.
7 Aderonke Alex-Adedipe and Olawale Atanda, ‘Afcfta And Trade Benefits To Nigeria –
International Law Nigeria’ (Mondaq.com, 2020)

https://www.mondaq.com/nigeria/international-trade-investment/1007942/afcfta-and-tradebenefits-tonigeria#:~:text=Nigeria%3A%20AfCFTA%20And%20Trade%20Benefits%20To%20Nigeria&text=T
he%20Agreement%20establishes%20a%20single,streamline%20trade%20on%20the%20continen
t. accessed 8 January 2021.

5.0. CONCLUSION
The drive towards trade integration is based on the need to improve the Continent’s trade
performance and consequently its economic development. AfCFTA will consequently enable
Nigeria to gain global access. The success of the AfCFTA in Nigeria lies with the country
displaying a strong commitment to implement the same. However, the benefits of the
agreement to Nigeria is more than the concerns.