The African Continental Free Trade Area (AfCFTA) agreement is the culmination of many years of efforts to deepen intra-African relations, socially, politically and, in particular, economically through unhindered movement of people and goods. Although trade is known to be fundamental to the integration of nations, and has been at the heart of current increasing trend towards regional trade associations, many are still not convinced that Africa has much to gain from free trade, give her antecedents in that area. Before we dismiss such views, due probably to their seeming incongruence with the runoff ideas, let us see some of their underpinning arguments. We may likely see that they have enough, even if arguable grounds, to take such a stand.
First, the world is acting more protectionist now than before. Recent developments, even among the biggest proponents of free trade and globalization, do not point to a hunger for free trade. The European Union, the mother of all economic unions, is going through a cracking of its walls. Brexit, the shocking departure of Britain from the Union just happened. The UK voted to leave the EU in 2016 and officially left the trading bloc, which was its nearest and biggest trading partner, effectively on January 31, 2020. Although, its Prime Minister, Boris Johnson, says he is now building a more fleet-footed or agile “Global Britain, that will have stronger ties with the United States and other leading democracies, it first had to break ranks with a trading bloc to which it has belonged for over half a century, to embark on what many consider “the biggest overnight change in modern commercial relations”.
Second, the United States, a major partner in the North Atlantic Free Trade Area (NAFTA),which was the world’s largest free trade agreement when it was established on January 1, 1994, is now talking “America First”. Although NAFTA accomplished lot through the elimination of tariffs among the United States, Canada and Mexico, it was replaced by a new agreement tagged United States, Mexico and Canada (USMCA), signed the on July 1, 2020. Much of the campaign to renegotiate NAFTA was fueled by President Trump’s protectionist tendencies that saw him start a trade war with China. We therefore find that recently, many key proponents of Globalization tend to favour protectionism.
Third, and coming down to Africa, there seems to be strong grounds to strengthen the position of those who ask why AfCTA at a time such as this.To start with, an average African country belongs to at least one Regional Economic Community (REC), while 31 African nations belong to at least two of such RECs.Indeed, the African Union was forced to trim the number of economic groupings in the continent down to eight.Africa is probably the most integrated continent in the world. The question: how have these many groupings helped intra-African trade? Nigeria is Africa’s largest economy but its biggest trading partners is not in Africa. In fact, Africa has the lowest intra-continental trade in the world, at 18 per cent.Comparatively, intra-continental trade for other partsof the word is much higher. Intra-US trade is up to 50 per cent and for Intra-Asian, it is 58 per cent while Intra-Europe is 67 per cent. Intra-Latin American trade is 20 per cent.
Evidently, Africa, which is the most integrated continent, has the lowest intra-regional trade. Clearly, this means that Africa trades more with Europe, Asia, and North America than itself. These facts while sharpening the push against AfCFTA, and constituting strong argument against it, may have informed the hesitation of many countries, including Nigeria, to sign the agreement. Other arguments against the agreement include the wide macroeconomic divergence among the integrating members, which guarantees that the costs and benefits of integration may not be equitably distributed. Ironically, some of these shortcomings have also provided the argument for signing the agreement. In particular, low intra-African trade has becomean argument both for and against the launch of AfCFTA.
The Nigeria economy is predominantly informal, meaning that its substructure is based on Micro, Small, and Medium Enterprises (MSMEs) How this free trade agreement will impact operators in the sector should be of interest to us. In attempting to postulate on the likely outcome, it is also important to examine some facts about trade in Africa. Intra-regional trade in Africa is not only low, it is also largely informal and poorly documented. More trade seems to be carried out below the official line than formally. It is also dominated by agricultural commodities and staple food items with little or no manufactures. In Nigeria, only 19 per cent of the small firms engage in export business, while 29 per cent of the medium-scale firms engage in export. Clearly, for AfCFTA to benefit Nigeria, she must effectively manage the relationship between her import and export, with unabashed sentimental attachment to exports. Sadly, while SMEs’ in the advanced economies account for between 34 to 65 per cent of exports, Nigerian SMEs’ contribution to exports grew poorly from 7.27 – 7.70 per cent of total non-oil exports between 2013 – 2017.
