• Thursday, December 07, 2023
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First quarter trade statistics shows progress in AfCFTA

AfCFTA: A strategic framework for business (2)

Trading has become a major necessity for survival across the world. It is a fundamental concept that involves the exchange of goods and services at a fixed or agreed price. Africa, as the second-largest and second most populated continent, after Asia, has made contributions to both domestic and foreign economic development, by simply exporting and importing useful commodities. However, these contributions may not seem substantial.

The World Trade Organization (WTO) stated in a report dated on the 29th of March 2021 that: “While African trade in goods and services has gradually risen from 2005 to 2019, its global share has remained consistent at just 3 per cent of global imports and exports.”

According to the National Bureau of Statistics (NBS), in the first quarter (Q1) of 2021, Ghana and South Africa were amongst the top ten countries that contributed to the percentage of total exports from Nigeria. The country’s crude oil export to Ghana was valued at N13.5 billion and its non-crude oil export value was valued at N107.2 billion, making the total value of exports to the West African neighbour summed up to N120.8 billion. South Africa’s crude oil import from Nigeria value was N97.7 billion and its non-crude oil export value was N564 million.

Ghana and South-Africa accounted for 4.3 per cent and 3.4 per cent of the total exports respectively bringing the total percentage contribution to 7.7 per cent. The continent that accounted for the highest percentage share of export value in the first quarter of 2021 is Asia. India led the list with 16.8 percent and China had 6.5 per cent.

As surprising as it may seem, African countries hardly play big on the international trade market. This is because their areas of production are similar. They deal with mainly agricultural products and therefore they export these products in their raw form, which makes it hard for them to generate enough export value since these agricultural products can be perishable and once it is perishable, it loses value. It has to be sold on time and unfortunately, with a low price most times.

Read also: Shrinking market discourages cotton production by Nigerian farmers

Major traded agricultural products include; sesame seeds, Nigerian cocoa beans, cashew nuts, ginger, palm nuts and kernels, Shea cake and coconuts. Nothing new is produced that has not been produced in another African country.

Due to such reasons and also the fact that regional trade has always been a priority, Africa came up with a landmark trade agreement known as the African Continental Free Trade Area Agreement (AfCFTA), which was founded and signed in March 2018 but came into effect on January 1st 2021. The goal of the agreement, if successfully implemented, will create a unified African market of more than a billion consumers with a total Gross Domestic Profit (GDP) of over $3 trillion which will make Africa the largest free trade area in the world.

Comparing the export value of the first quarter of 2020 and the first quarter of 2021 in the data given by NBS, it is noticeable that the agreement’s goal seems to be coming to reality because the import and export value increased.

The import value on live animals and animal produce was N108 billion as at January to March 2020. It increased to N221 billion as at January to March 2021. The same goes for other agricultural produce such as vegetable products which had an export value of N172 billion in 2020 but increased to N359 billion in 2021. Also, animal and vegetable fats and oil increased from N22 billion to N131 billion in first quarter of 2020 and 2021 respectively.

The export value on vegetable products was N63 billion in Q1 2020 and it increased to N82 billion in Q1 2021. The export value on animal and vegetable fats and oil increased from N58 million to N4 billion in first quarter of 2020 and 2021 respectively.
It may not be easily determined if it was truly the aid of the AfCTA that resulted in the increase or the fact that the pandemic disrupted a lot of things, including exporting and importing of certain goods, that caused the 2020 export value to be low.

However, it would be understandable as to the reason why the AfCTA may not have fully worked. The first reason being that the first quarter of 2021 still experienced minimal pandemic restrictions. Also, everything traded cannot be fully free between inter-African countries. It will surely take a gradual process that may take few years to eventually actualize.

Before the AfCTA was founded, Africa had certain regional trade blocs that guided trading activities between African countries and other countries. They are called the Regional Economic Communities (REC) and are recognized by the African Union (AU). They are the Economic Community of West African States (ECOWAS), Inter-Governmental Authority on Development (IGAD), Economic Community of Central African States (ECCAS), EAC, Arab Maghreb Union (AMU), Community of the Sahel-Saharan States (CEN-SAD), Southern African Development Community (SADC) and Common Market of Eastern and Southern Africa (COMESA).

In the first quarter of 2021, the import value ECOWAS generated for Africa was N20 billion and other regional trade blocs generated N162 billion. The total amount summed up to N183 billion. Africa had the lowest, after Oceania which had N48 billion. It is relatively low for a continent that is the second largest. The continent with the highest import value was Asia with N1 trillion.

In the same first quarter, that is, 1Q21, the export value ECOWAS generated for Africa was N282 billion and other regional trade blocs generated N167 billion. The total amount for exports summed up to N449 billion. Africa fell at the third lowest, after Oceania (N10 billion) and America (N316 billion) while continent with the highest was Asia with N1.1 trillion.

Nigeria is a large part of ECOWAS and its main trade partners are Brazil, US, China, Japan, India and European Union. In Africa, Nigeria’s total merchandise trade value for imports for first quarter of 2021 was N6.7 billion representing 70.21 per cent. Exports value was N2.9 billion representing 29.79 per cent. The total resulting to N9.7 billion which represents 14.13 per cent increase from the first quarter of 2020. Although, the trade balance become a negative figure as it fell to a deficit of N3.9 billion because of the higher level of imports over exports.

Crude oil export value was at N1.9 billion which represents 66.38 per cent of the total export while non-crude oil export accounted for 33.62 per cent of the total export in the first quarter of 2021.
Even though agriculture still rules about 70 per cent of Nigeria’s import and export, yet oil remains its driving force. The only major problem is the lack of equitable distribution of the oil which will help Nigeria have a good trading relationship with other countries, both in Africa and abroad.