Nigeria’s first shipment under the African Continental Free Trade Area (AfCFTA) after four years of signing on to the agreements has been widely lauded as a significant milestone, especially with the potential of driving economic growth, however, challenges still exist.
The concerns, according to those who spoke to BusinessDay include among others, competitive goods and services, and a robust manufacturing sector to keep pace with the expected high quality and volumes of products, to be exported under the Programme.
“We are the biggest economy on the continent, and we should play a leading role in promoting intra-African trade. This step will help open up numerous opportunities.
“The key to benefiting from AfCFTA lies in having something substantial to trade, Nigeria has the potential to dominate the market, but this requires a robust manufacturing sector and high-quality products,” Muda Yusuf, an economist and Chief Executive Officer of the Centre for the Promotion of Private Enterprise said.
According to Yusuf, one area with significant potential is agriculture. He said by focusing on the entire agricultural value chain, Nigeria can produce finished goods for export. He added that a backward integration strategy could help the country maximize its agricultural output and create high-value products for the continental market.
“The reality is that many African countries still import goods from powerful economies outside the continent, rebranding them as local products. These goods often have superior quality, making them more attractive to consumers. For Nigeria to compete, its products must meet high standards of quality and competitiveness.
“Countries in North Africa, like Morocco, often import superior goods from abroad, repackage them, and sell them as local products. Nigerian consumers often prefer these imported goods over locally made products, To change this, Nigeria must enhance its production capabilities and ensure its products can rival those from Europe and other powerful economies.”
The economist opined that although the shipment under AfCFTA is a step in the right direction, it highlights the need for Nigeria to up its game. He added that the country must invest in its manufacturing sector, improve product quality, and ensure its goods are competitive on the continental market.
“Only then can Nigeria fully benefit from the opportunities presented by AfCFTA and strengthen its position as a leading economic power in Africa.”
Nigeria’s first shipment which had eight companies participate was done under the Guided Trade Initiative launched as a pilot in Accra, Ghana in 2022 which seeks to allow commercially meaningful trading, and test the operational, institutional, legal and trade policy environment under the AfCFTA.
Yusuf explained that the Guided Trade Initiative is essentially a pilot scheme designed to identify and address practical challenges, which, will hopefully gain further traction and a broader impact.
He also highlighted the potential for export business to attract more foreign exchange, which is crucial for the country amidst current foreign exchange challenges.
“At a time like this, when we have foreign exchange challenges, this is the time to encourage as much as possible any initiative focused on exports. So from that point of view, I think this is a very good thing,” he noted.
He added that a successful pilot phase could incentivize other businesses to explore similar opportunities and reduce dependence on costly foreign exchange, as it creates more awareness and encourages businesses to generate their foreign exchange, which will be beneficial for the economy.
The AfCFTA is an ambitious trade pact to form the world’s largest free trade area by creating a single market for goods and services for almost 1.3bn people across Africa and deepening the economic integration of Africa. The trade area could have a combined gross domestic product of around $3.4 trillion, but achieving its full potential depends on significant policy reforms and trade facilitation measures across African signatory nations.
Nigeria’s first shipment under the Programme had about 10 exporters ship local products to five countries across East, Central, and North African sub-regions.
The companies include Dangote, Tolaram Group, Flour Mills Nigeria, and Hwani Industry Nigeria Limited, among others, which were expected to export various made-in-Nigeria products including bags, smart cards, black soap, alcoholic bitters, shea butter, native starch, and water closet sanitary.
Chinwe Ezenwa, Managing Director/CEO, of LeLook Nigeria Limited – one of the companies which participated in the programme said that LeLook was nominated to receive the African Free Trade Agreement certificate of origin on July 16 which would then enable it to trade across Africa and access the 1.3 billion market.
Speaking with BusinessDay, she explained that although people from other countries have been buying her products (bags), since it began production during the COVID-19 pandemic, the certificate of origin under AfCFTA will now open up the product to a larger market on the continent.
Ezenwa further explained that the journey has been rough and challenging, citing a lack of infrastructure, power and access to good roads as major impediments. She also stressed that her nomination was solely based on merit, basically due to the quality of her products – as she did not have to lobby anyone to be chosen to participate.
She was further optimistic that under AfCFTA, LeLook will be driving the market aggressively with partners in Kenya, Rwanda, in Ethiopia, and meeting with their craftsmen as well.
“For the challenges, infrastructure remains a great challenge because we don’t have power and the company runs on a generator, we have to generate our power to be able to produce, I had to do the road to drive through the academy.
“So the journey has been rough but I didn’t look at the rough road, I looked at the light at the end of the tunnel, I didn’t need to lobby anyone for this nomination under AfCFTA, They saw my efforts and the bags speaks for itself.”
“Also it will interest you to know that on the 16th of July, we have been nominated to be the first company in Nigeria to get the African Free Trade Agreement certificate of origin. So that we can trade all across Africa where you have 1.3 billion people and that market is huge.
“And Le Look is going to be driving the aggressive market with our partners in Kenya, in Rwanda, in Ethiopia. And we are going to be meeting with their craftsmen as well. So I’m proud to say that whereas many Nigerians are shying away from carrying many Nigerian products, we are very proud to say that we are one of the pioneers.
“And today, it is a different ball game. Everybody is carrying an Ankara Adire Ashoke bag or even an Akwete. And it will also interest you to know that the value chain we have created is huge.
“From the woman doing an Adire tie-dye to the one doing batik. She can see what I’m wearing. And to the woman selling the bags,”
Paul Alaje, Chief economist at SPM Professionals, highlighting the multiple benefits of this development for Nigeria and the broader African continent said that the move signifies further integration of Nigeria into the African economy.
According to him, this shift could herald a new era of economic interdependence among African nations, reducing the continent’s longstanding dependency on the West and other global powers.
“It means we are doing business with ourselves as Africans, which is crucial for our economic independence,” he stated.
One of the key advantages, according to Alage, is the conservation of foreign exchange, particularly US dollars, which would otherwise be spent on imports from Western countries. He added that this will, in turn, boost Nigeria’s foreign exchange earnings. He also noted that the nature of exported goods is critical to maximizing trade benefits.
Beyond national gains, Alaje stressed that AfCFTA is about the African picture as a whole. “Saving the entire African continent when we trade with ourselves, especially when this trade nature grows beyond agro into manufacturing,” he explained.
He also highlighted the potential for job creation, noting that increased exports will lead to more employment opportunities and promote peace in the continent, suggesting that enhanced economic ties could foster greater stability and cooperation across the continent.
“The more we export, the more jobs we create, When you trade with someone, you have to remain peaceful with such people,”
“It’s good news. It’s a welcome development, and it should be celebrated.
“This move is expected to bolster continental trade and allow Africa’s most populous nation to harness the opportunities presented by AfCFTA,” he said.
The AfCFTA aims to reduce tariffs among members and covers policy areas such as trade facilitation and services, as well as regulatory measures such as sanitary standards and technical trade barriers.
The agreement was brokered by the African Union (AU) and was signed by 44 of its 55 member states in Kigali, Rwanda on March 21, 2018. The only country still not signed on to the agreement is Eritrea, which has a largely closed economy.
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