After a long negotiation process that took more than four years, African country leaders reached an agreement to form 55-nation trade bloc in March. They have agreed to sign the African Continental Free Trade Area (AfCFTA) in order to achieve better economic growth. This so-called “economic game changer” is meant to unlock Africa’s true economic potential and it is the largest free-trade area since the creation of the World Trade Organization back in 1994. It will be also good for expediting the development of rural areas, strengthen the supply chains, as well as spread experience through all countries.
This decision will unite 1.3 billion people by creating $3.4 trillion economic blocs in the new era of development. It seems that this free-trade agreement comes at the right time for Africa’s economy, as they need a lot of catching up to do in order to reach Asia, Europe or America’s standards. Their intra-regional trade accounted for just 17% of exports in 2017, which is a very low amount compared to 59% in Asia and 69% in Europe.
Although they made a huge step forward with this decision, there is still plenty of stuff to be done before they could reach the full potential of this agreement. In the next couple of years, Africa should invest lots of resources in their infrastructure by upgrading their roads and rail links with remote places as well as some changes in the legal statement in countries with lowering corruption and border bureaucracy.
Lowering the tariffs on most goods, as the members agreed to, it will lead to increased trade in the region by 15-25% in medium terms, but this number could go a lot higher if they deal with all the issues mentioned before.
Plenty of countries have already signed this agreement that will increase the development in every country on the continent. However, the zone’s potential will receive a huge boost on Tuesday when Nigeria, which is the highest economic developed country in Africa, agrees to join the free-trade agreement.
Nigeria has a stable economy and huge potential in every sector. They are also home to some elite sports players like Alex Iwobi in soccer and Jeremiah Attaochu, currently playing in the NFL for one of the top favourites in the odds to win the World Series, Kansas Chiefs.
However, they seem to have other issues with joining this program as they already havea relatively developed economy based mainly on oil exports, and this will not bring any huge benefits for Nigeria. They are also concerned that by signing this agreement, Nigeria’s market would be flooded with low priced goods and it will impact local manufacturers and slow down the process for expanding farming.
This zone will balance the economic growth between countries and give chance to poorly developed countries. The vast difference in countries in terms of the economy is not good for any continent. For example, Egypt, Nigeria, and South Africa alone account for over 50% of Africa’s GDP. That is why these countries must join the agreement even if it does not bring them a lot of benefits.
This whole process will be backed up by digital payments systems, as well as other instruments that will help expedite the process and form better economic relations between countries.
In fact, this is not the first trade-free zone developed in Africa. They have many trading-zones but they are all in different places and usually do not cover more countries. They have ECOWAS in the west, EAC in the east, SADC in the south and COMESA in the east and south. However, the purpose of the AfCFTA is to liberalize trade between those countries that are not already in some free-trade zone and unite the African Union.
This is truly a remarkable step towards a brighter future for all African citizens by expanding the possibilities in every country. “The eyes of the world are turned towards Africa,” were the words of the Egyptian President Abdel Fattah al-Sisi at the opening ceremony. In order to achieve economic growth and improve the quality of life, the free-trade agreement must go into action as well as all the other improvements that every country must make.
