Optimism is very high among African governments that the African Continental Free Trade Agreement (AfCFTA) will promote the export of goods and services as well as contribute to the growth and development of their economies.
The main objective of AfCFTA is to create a single continental market for goods and services to promote trade and investment among African countries and with the rest of the world. African countries need huge investments to achieve the objectives of the AfCFTA.
Under the AfCFTA, Nigeria has the largest population. It can access cheaper goods and services from other African countries to provide enough and cheaper commodities for its increasing population.
At the close of 2018, Nigeria’s import from African countries relative to total imports was 3.2 percent. Nigeria’s export to African countries relative to total exports was 13.2 percent.
Following the establishment of AfCFTA and the determination to reap its benefits, Nigeria stands a better chance of expanding trade, employment, and economic growth in the long term.
Other African countries with smaller populations also stand to gain from AfCFTA as reductions in trade and non-trade barriers by one have implications for its partners, suppliers, and competitors.
Those implications spill over to the rest of the world through trade networks and other industries through supply chains. These implications lead to employment creation, poverty reduction, and economic growth on the African continent.
According to the African Union (AU), Africa hardly benefits from the boom in manufactured exports because its export comprises mainly of primary commodities, and its shares of intra-trade and with the rest of the world have been low. In world trade by continent, Africa’s share of exports and imports were 2.4 percent and 3 percent respectively in 2019. In intra-Africa, its exports and imports were 19.7 percent and 12.6 percent respectively in 2019. These statistics show that trade in Africa is still low. The above statistics can rise by exploring the possibilities of AfCFTA by African countries.
The World Bank has also expressed optimism that AfCFTA can increase Africa’s trade, employment opportunities, and incomes due to its large population. The bank stated that AfCFTA would lift about 68 million people from moderate poverty and make African countries more competitive. The successful implementation of the agreement and careful monitoring of its impacts on all workers will promote the maximisation of AfCFTA objectives.
African countries need to develop their export-related manufacturing capacities to make it easier for African businesses to integrate into the global supply chain. A robust manufacturing capacity will help African countries to produce durable products for consumption within the continent and sell to other countries of the world. These will enable African countries to achieve the objective of the AfCFTA and to withstand future economic shocks in the global market.
Manufacturing costs need to be reduced through viable economic policies to give African-made products a better front to compete favourably in the global market.
The provision of adequate infrastructure to support manufacturers to enhance labour productivity in African industries will reduce costs. Infrastructural development is a prerequisite for industrialisation and free flow of trade.
Read also: AfCFTA: Harnessing the opportunities for economic growth
It is vital to create awareness of the existence of the AfCFTA and its benefits among African citizens to enable them to seize the opportunities it offers. AfCFTA has the potential to broaden economic inclusion in the continent through campaigns.
The development of export-related industries can be achieved through access to bank loans and financing. The African government can make bank loans available to export-related manufacturers and other producers through the national banks of industry and development at relatively low rates. Such loans should be spread over the long term to reduce the impacts of loan servicing on manufacturers.
Industrial development is a precondition for the realization of the objectives of the AfCFTA as it stands to set African countries in a better position to produce and export manufactured commodities that can withstand competition in the global market. Inadequacy of industrial development will reduce African countries’ exports to primary commodities that are prone to price volatility due to supply shocks resulting from weather conditions and changes in demand.
Felix Ashakah is an Economics Lecturer at Western Delta University, Oghara
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
