AFCFTA And Its Trade Benefits

What is AFCFTA?

AFCFTA is a single market for goods and services that allows free movement of business travelers and investments across 54 countries. It was established to create a seamless environment for trade across the Africa Union member nations . It is the largest free trade area in the world since the World Trade Organization was established in 1995.

Its aim is to deepen economic integration and according to the United Nations Economic Commission for Africa, lift intra-African trade.

HISTORICAL FACTS OF AFCFTA

• AFCFTA talks started in 2012 by all Heads of State and Government of the African Union (AU) at their 18th Ordinary Session
• The Negotiations were in two Stages: Stage 1, covering Trade in Goods and Services; and Stage 2, covering intellectual property, competition policy and investment.
• During the Summit of African Union Heads of State and Government held on 21st March 2018 in Kigali, Rwanda, The Agreement establishing the AfCFTA was signed by 44 Member States.
• The signed Agreement establishing the AfCFTA launches the Single Liberalized Market for Trade in Goods and Services.
• The AfCFTA was negotiated rules-based system, to establish the rule of law in trade, deepen, and expand intra-Africa trade.

BENEFITS TO AFRICA

• A bigger Market: With about 1.2 billion Africans, AFCFTA opens up a borderless trading across different countries in Africa. This will improve seaming less access to trans-border trade of a continent with a combined GDP of US$2.5 trillion.
• Increased Exportation: Over 75 per cent of Africa’s exports outside the continent were extractives from 2012 to 2014 while 40 per cent of intra-African trade were extractives during this time frame. AFCFTA aims at diversifying Africa’s trade away from extractive commodities e.g. oil which have traditionally accounted for most of Africa’s exports.
• SMEs Growth Scaling: A large junk of Africa business terrain are SMEs as they are strong indicator for the continent growth. Through AFCFTA, its will help SMEs tap into regional export destinations and can use regional markets as stepping stones for expanding and scaling.
• Expansion of Africa Economy: Through AFCFTA’s intra trade, it has been projected to increase Africa’s economy to US$29 trillion by 2050 as estimated by the United Nations Economic Commission for Africa.
• Increased Foreign Direct Investment [FDI]: One of AFCFTA goals is to targeted at attracting foreign investment into the continent, export diversification, stable growth and structural transformation.
• AFCFTA enables all Africa Union countries to share in the welfare gains which are estimated at around 2.64% of continental GDP which is roughly $65 billion in 2018 terms.

BENEFITS TO NIGERIA TRADE

• Expanded Export Market: AFCFTA eliminates barrier to entry and makes accessing market for Nigeria’s exporters of goods and services, spur growth and boost job creation.
• Regional Scaling: Nigerian manufacturers can provide their products across border and scale its offering within the continent through borderless distribution
• Trade Remedies: It establish rules-based trade governance in intra-African trade to invoke trade remedies, safeguard the Nigerian economy from dumping and unfair trade practices.
• Industrial Policy Support: With the “Exclusion and Sensitive category lists” to provide space for Nigeria’s infant industries.
• Nigeria Economy Advantage: An estimated 8.18% 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.

FUTURISTIC PREDICTION OF AFCFTA

A projected consumer population favoring Africa with a combined consumer and business spending projection of $6.7 trillion by 2030, one of the sectors I expect to grow and improve is;

• SPORT: Developing local sport talent and leagues across the continent with increase local investment in sports like football. For example, it can provide the required infrastructure to ensure that African athletes can thrive right here on the continent; This will help to reduce talent flight, a major challenge in the industry today. It could eventually place African leagues at par with the popular European leagues where so many players of African descent consistently perform excellently.
• Others are financial services, media and music, fashion and travel/tourism

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