It is no longer news that Nigeria was not among the 44 member countries of the African Union that signed the African Continental Free Trade Area agreement on March 21 in Kigali, the capital of Rwanda. What is perhaps topical is that the government is currently weighing the pros and cons of fully endorsing the agreement. It will be recalled that the decision to establish the AfCFTA was taken in 2012 by all Heads of State and Government of the African Union at their 18th Ordinary Session while actual negotiations were launched at the AU Johannesburg Summit in 2015. The agreement is meant to establish a common protocol that will make possible free movement of goods and services among member nations of the AU. Its main features include the removal of tariffs on 90 per cent of goods with 10 percent of “sensitive items” to be accommodated later, minimizing delays at borders and liberalization of trade in services.
Indeed, the AfCFTA treaty is one of the flagship projects of the AU Agenda 2063 which includes a Single African Air Transport Market, free movement of people and a common currency. It has been described as a ‘game changer’ due to its potential to impact positively on the welfare of the people and the economy of the continent at large. Under the agreement, African leaders seek to increase intra-African trade which would spur sustainable economic growth of member countries of the AU. The proposed single African air transport is expected to open and connect markets with airlines able to fly any intra-African route based on economic considerations. In spite of these possible benefits for member countries, prominent stakeholders in Nigeria such as the Organized Private Sector (chiefly the Manufacturers Association of Nigeria), the Nigeria Labour Congress as well as stakeholders in the Aviation subsector have taken the view that AfCFTA would undermine local businesses and therefore the economy would be worse off if Nigeria had signed the agreement.
That local industries will face a lot of competition as a result of market liberalization is not in doubt but this can be mitigated given that countries implementing trade agreements are normally permitted to develop their local industries through applying provisions on sensitive products that are subject to longer liberalization. Moreover, other trade remedies such as safeguards and anti-dumping measures are usually provided to deal with adverse impact of trade liberalization. In any case, as a key player in the African continent, membership of the AfCFTA would give the country a big voice in formulating trading rules. The Dispute Settlement Mechanism of AfCFTA promises to stop the hostile and discriminatory treatment directed against Nigerians doing legitimate businesses in other African countries. It will also provide a platform for Small and Medium Enterprises in Nigeria to connect to regional and continental value chains while consolidating the country’s position as the biggest economy in Africa.
In the medium-to-long term, AfCFTA will provide firms in Nigeria a veritable opportunity to access a large continental market and gain from economies of scale. This will boost job creation. In fact, increased competitive pressures could improve the efficiency of firms rather than undermine local manufacturers and entrepreneurs. Without a doubt, the likes of Dangote Group with presence in many African countries will leverage the huge opportunity provided by a single market of 1.2 billion people and over US$2.1 trillion in continental GDP. Therefore, it goes without saying that AfCFTA offers substantial opportunities for industrialization and job creation in Nigeria.
At another level, there is the fear of significant losses in government revenue if tariffs on imports from within the continent are reduced or eliminated. Again, any potential loss in tariff revenue can always be offset from increases in internal revenue collections that will result from trade expansion. While immigration into the country is likely to rise on the back of AfCFTA, leading to pressure on housing and services provision, Nigerians stand to benefit from an equivalent right to live and work anywhere else in Africa. Given the country’s huge population, the net effect could be positive from increased Diaspora remittances. Therefore, free movement of people across the AU promises to open up job opportunities for Nigerians seeking to work elsewhere in Africa at reduced risk of xenophobia. Besides, freedom of movement could also attract the brightest of the continent to Nigeria especially in the education and health sectors.
To draw a parallel, the economic fallout of Brexit is a lesson for skeptics of AfCFTA. Late last year, the European Central Bank disclosed that ‘’some 50 London-based banks have approached eurozone banking regulators about relocating key services within the revised bloc amid concerns that Britain may exit the European Union in 2019 without a new trade deal’’. It is estimated that as many as 75,000 banking and insurance jobs could leave Britain as a result. In fact, a study by Open Europe, a think-tank, revealed that ‘’the worst-case Brexit scenario is that the UK economy loses 2.2 per cent of its total GDP by 2030’’. However, it says ‘’GDP could rise by 1.6 per cent if the UK is able to maintain the current trade setup’’.
Indeed, it is not for nothing that, although Britain has since June 2016 (with just 52 per cent of votes) opted to leave the European Union, currently on the negotiating table is a middle-ground option that would see the UK remain a member of the single market only quitting the political aspects of the European Union comprising justice and home affairs. That would mean Britain will still seek membership of the European Free Trade Area. Even Brexit campaigners admit it would be in the interest of UK to negotiate a free trade deal with Europe without jeopardizing sovereignty. This fact was not lost on South Africa’s Cyril Ramaphosa. Although he did not sign the actual agreement at the African Union Extraordinary Summit in Rwanda due to delay in ‘’consultation process’’ – only signing the declaration on the establishment of the AfCFTA, he left no one in doubt that his government welcomed the “historic moment” and that South Africa was totally committed to free trade in Africa.
For Nigeria, not signing the Continental Free Trade Agreement should never be an option not least because the country’s status as one of Africa’s biggest investment destinations will be diminished if she is not seen as playing a dominant role in AfCFTA. Much as the decision to allow for more consultations is commendable, these ‘’stakeholders’’ being consulted should actually see AfCFTA as a tailwind for sustainable economic growth. They should recognize that not signing the treaty is tantamount to Nigeria giving up its economic influence in Africa. On a similar score, The Economist had noted before the Brexit referendum that ‘’Brexit would bring some clear-cut advantages, but the most likely outcome would be that Britain would find itself a scratchy outsider with somewhat limited access to the single market, almost no influence and few friends”. In relation to Nigeria holding out on AfCFTA, this consequence surely leaves a creepy feeling for the economic management team.
Uche Uwaleke is the Head of Banking & Finance department at Nasarawa State University Keffi