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AfCFTA, Africa development and governance in Africa

African govt, banks, SMEs to benefit as $10bn AfCFTA Adjustment Fund debuts

According to the founding fathers of the Organization of African Unity (OAU), the greatest obstacle in the way of true African development was the lack of cooperation amongst African countries in the area of regional trade and collaboration. For many years the big regional powers in Africa have maintained steady trading relations with Europe, North America and Asia than with fellow African countries. Francophone countries remained glued to France after independence and it’s the same for Anglo and Lusophone countries.

The countries in Africa for many years have remained consumption centers mired in poverty in the midst of plenty. The economies of many countries on the continent have been designed as service economies to the prosperous economies of Europe . This is an unpalatable development that must be reversed or the continent would continue to regress instead of progressing. It is difficult to understand why shipment of a typical container from the RORO port in Lagos to London would cost $2,500 while same shipment from Lagos to Accra would cost $5,000. Such unfavourable pricing policy would make the cost of inter – regional trading more expensive and un-interesting with the attendant consequence of negative impact on the (Gross Domestic Product) GDP and overall regional prosperity.

With over 1.3 billion people and a trade potential of about $3 trillion, Africa should be speaking with one voice via a respected and well managed regional organization instead of the different countries negotiating unfavourable individual deals and treatises . Between 1980 – 2000 Africa pushed the Lagos plan of Action for inter African trade with very limited head way. Under the auspices of the Africa Union (AU) the continent is back with its newest development initiative which is the African Continental Free Trade Area (AfCFTA). AfCFTA could boost Africa’s economy to $29trillion by 2050 if properly implemented and executed across the continent. Is Africa ready for the challenge ?

Read Also: AFCFTA seen as game changer for manufacturers

According to The FDC Afriscope Volume 2, Issue 6, December 23, 2020” published by the Financial Derivatives Company Limited, the African Continental Free Trade Area (AFCFTA) is expected to commence in January 2021. The African Continental Free Trade Area (AFCFTA) is capable of boosting Africa’s economy to $29 trillion by 2050 from the current size of $2.6trn if properly implemented and executed across the continent.

Sound governance practice and proper management of human and material resources has remained a major challenge for the development of the continent either at the regional , country or corporate levels. This challenge must be adequately addressed for the full potentials of the AFCFTA to be realized. For instance there are immense opportunities in Africa’s $100 billion infrastructure deficit that is needed to make the regional initiative successful. Much is not been done to address this deficit instead we are giving the Chinese freedom to build these infrastructure and own them thus starting another journey in neo imperialism.

“The agreement has a huge potential as it would create the world’s largest single market of about 1.3 billion consumers and workers, thereby increasing opportunities for African manufacturers and businesses, especially those constrained by the size of their domestic markets. Is Africa ready for the challenge ?

“Integrating Africa into one trade area provides significant opportunities for entrepreneurs, businesses and consumers across the continent. It could also rapidly support sustainable development in the world’s least developed region.”

With a COVID-19 ravaged economy like ours in Nigeria and the declining relevance of oil we should welcome the African Continental Free Trade Area (AfCFTA) with open arms however it is doubtful if Nigeria is ready for this new continental challenge. According to Obadiah Malafia, an economist and former Central Bank Deputy Governor “Poor governance is one of the key drivers of poverty. Poor governance as manifested in corruption entails robbing the public of budgetary resources that could have been channelled into infrastructure and economic development.” Regional integration would remain a dream except if there is proper governance, accountability and openness in our public and private sectors across the continent. Is Africa ready for the challenge ?

In the opinion of Doyin Salami, Chairman, Presidential Economic Advisory Council, “Where we are today in Nigeria is a mentality of poverty. We are managing demand, whereas we should be looking at expanding supply . Nigeria must increase the supply side of her economy,” this is germane for two reasons . We have a population of 200 million that is yet to be well serviced in terms of supply and we also possess the human and natural resources to dominate regional trade in West Africa.

Unfortunately the manufacturing sector in Nigeria is not competitive due to high cost of power, lack of infrastructures , supply of finance and poor competitiveness of the port system. To compete on the continent and at home, companies must be innovative and explore opportunities through backward integration . In the words of Ike Ibeabuchi, a manufacturer “Nigerian firms must produce for export, rather than for just the local market. This would make them to rethink the quality of their products and, perhaps, price,” Again I ask . Is Africa ready for the challenge ? Are our leaders ready to up their game ? 1.3 billion people are counting on them.