Key developments and prospects for the African Continental Free Trade Area (November 2020)
The African Continental Free Trade Area (AfCFTA) aims to establish a single market in goods and services, the free movement of businesspersons and investment and to harmonise policy, thereby facilitating sustainable development across the region e.g. growth in regional supply chains, non-extractive industry exports and associated jobs. Last week (11 November), the pie got bigger – Nigeria added its name to the list of ratifying countries. This is noteworthy. So too is the considerable energy being applied right now to completing AfCFTA protocols by ministers from across the region. Still, to make this mammoth fifty-five nation free trade area a real thing, still more work will have to be done rallying domestic support, completing reforms and straightening out policy contradictions including, even especially, in Nigeria.
1. Market size - entering the big league
Nigeria, accounts for around 16% of the continent’s 1.3 billion population and 18% of the continent’s USD2.4 trillion economy. Ratification was not a surprise. It is nevertheless a significant milestone. However, it has happened despite the misgivings of groups like the Manufacturers Association of Nigeria (MAN), the Nigeria Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA) and the Nigeria Labour Congress (NLC). Their concerns about the competitiveness of local producers vis-à-vis other African producers and international competitors cannot be papered over. Indeed, the Buhari government has shared those concerns - land borders have been closed to trade since August 2019 partly to block food imports and boost local production. The question of competitiveness will have to be addressed for AfCFTA to reach its potential. This would entail the completion of infrastructural projects like the 3,000km railway which would connect ports in Lagos to the north of the country and the completion of power sector reforms. For example by World Bank estimates it takes 115 days to set up a power connection in Nigeria versus 78 in Ghana, 44 in Morocco and 30 in Rwanda.
2. Negotiations - essential items
Meanwhile, discussions continue apace. Trade ministers met for a 12th time in October, will meet again this month and racing to conclude on crucial matters like rules of origin, tariff and non-tariff barriers, and the digital payments and settlement platform. In sum, how to ensure that AfCFTA rules are properly enforced at the borders even in remote parts of member states, that benefits intended for African companies do not leak to other parts of the world, and the governments are not handicapped by drops in tax receipts despite trade liberalisation.
3. Timelines - multiple stakeholders
COVID-19 pushed the AfCFTA implementation start date from 07 July 2020 to 01 January 2021 and overall, in recent weeks, cases have ticked upward. Nevertheless, going by the flurry of high-level activity we are seeing, as well as recent statements and signals from ACFTA officials, the intention is to stick to the revised date. On plans and preparations for the new year: (a) Secretary AfCFTA Secretary General Wamkele Mene is quoted in the press stating that governments have already put in place the required trade and customs documents and “institutional readiness”[1], (b) a digital platform for SME market access/connectivity will be rolled out to coincide with the 2021 launch, (c) AfCFTA and Afrexim Bank are working toward an intra-African local currency payments platform, and (d) recruitment for positions at the ACFTA secretariat in Accra is expected to begin in earnest now.
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[1] https://www.modernghana.com/news/1036254/complete-outstanding-afcfta-negotiations-wamke.html