Delays, protectionist policies stall AfCFTA one year after
Prolonged documentation and protectionist policies are among the major challenges hampering the implementation of the African Continental Free Trade Agreement (AfCFTA) in Nigeria, BusinessDay has learnt.
When the AfCFTA was launched in January 2021, businesses across Africa were eager to tap from its offerings, which include the creation of a single continental market for goods and services with 1.2 billion people, as well as the free movement of business people and investments.
African leaders were also expectant as the United Nations Economic Commission for Africa projected that the trade agreement would boost intra-African trade by between $50 billion and $70 billion in monetary terms, with a 40 percent to 50 percent increase over the first 20 years of its implementation.
Nigeria signed the agreement for the AfCFTA on July 7, 2019 and then ratified it in November 2020, intending to achieve the African Union’s Agenda of 2063.
In anticipation of the implementation of AfCFTA on January 1, 2021, some firms reviewed production operations, expanded production capacity, and pursued intra-African partnerships with other businesses, among other things, while states concentrated on documentation.
However, the trade agreement has recorded little or no activity as implementation and documentation faced delays.
Experts highlighted a list of things said to be responsible for the implementation delay the trade agreement is experiencing and they include poor documentation, language barrier, logistics-related challenges, currency mismatch, poor base of trade exchange, and the COVID-19 pandemic.
According to the AfCFTA Secretariat, issues around currency mismatch in the African continent cost it $5 billion annually which the recently launched Pan-African Payments and Settlement System is expected to effectively address.
BusinessDay gathered that some state actors have not shown the political will for the implementation of AfCFTA as they maintained their protectionist stance.
For example, even though the platform aims to eliminate tariffs, Benin Republic imposed a transit duty that is estimated at an average of N9 million per truck on goods passing through the country by road, even though by law, transit goods are not supposed to be charged for import duties in the transiting country.
Following the directive, the country stopped 3,700 Nigerian-bound cargo-laden trucks from Ivory Coast, Ghana and Togo at Ilakoji border, the border between Togo and the Benin Republic, with claims that the goods were allegedly not produced in West Africa.
Frank Onyebu, chairman of Manufacturers Association of Nigeria (MAN), Apapa branch, said other than the prolonged documentation process, issues around boundaries, custom barriers, and restricted movement remained obstacles to trade.
According to him, local manufacturers are not ready to participate in the trade agreement as they lack the necessary policies and infrastructure to thrive amid such competition.
“We have a lot of problems in Nigeria including infrastructure deficit, unfriendly business policies, the almost inaccessible ports – all of which have caused us to increase our cost of production as we have to solve the problems ourselves, and we expect to thrive after opening our economy to other countries with greater advantage and better infrastructure,” he told BusinessDay.
Onyebu said in addition to the restricted border access on land, businesses that tried to use freight services for logistics faced problems as their goods were not allowed into some countries, especially Egypt.
Francis Anatogu, senior special adviser to the President on Public Sector Matters and secretary of National Action Committee on AfCFTA had told BusinessDay in an interview in January that trade under AfCFTA was yet to kick off in Nigeria because some protocols needed to be observed.
“The negotiation and the operationalisation will take years to finish. Several African countries have developed their schedules and have presented those products we plan to liberalise; due to COVID-19, the negotiations on Rules of Origin stalled but we have achieved it to about 87 percent,” he said.
Rosemary Enemuo, international trade economist at the Trade Law Centre, said since the trade agreement was signed, Nigeria had carried out different preparatory activities, including forming committees, holding workshops and training, as well as researching on technology and artificial intelligence. She, however, said those activities represented only a fraction of what the preparation and participation was all about.
“We have the Eastern African Community and the Southern African Development Community who are united, are stronger and have a larger market; the trade agreement is all about cooperation, maximising strengths and benefits. Unfortunately, Nigeria is just doing defence mechanism; also, there is no Nigeria-specific trade regulation,” she said.
According to her, Nigeria has the advantage of a large consumer goods market but it is yet to develop laws that stand as a form of agreement, which is very critical in order to avoid issues such as goods dumping by countries in the Asian continent.
According to experts, the trade agreement provides an opportunity for Africa to accelerate its economic recovery, but a caveat to this is that the provisions of the trade agreement should be effectively and efficiently implemented while participating countries take strategic positions with competitiveness.
Some stakeholders believe that the slow implementation of AfCFTA, especially in Nigeria, would provide an opportunity for Nigerian businesses to further increase their capacity and enhance their participation.
Enemuo said most of the players would be small and medium-scale enterprises and would need to develop capacity to participate effectively and efficiently.