Tuesday, March 27, 2018

Should Nigeria Sign Africa Continental Free Trade Area (AfCFTA) Agreement?

Here is my opinion on the Africa Continental Free Trade Area (AfCFTA) Agreement which Nigerian government refused to sign last week. 

We tend to forget that this agreement has protocol for rules of origin and there the argument suggesting that we will be dumping ground is baseless  because it is only products of African origin (wholly produced in Africa or with a high level of value addition on African soil) that will be allowed to enjoy the benefits of the free trade area. If most of the Nations who are even landlocked (with very low potential for trade) have signed, I am wondering what Nigeria is afraid of with numerous access to the ocean.

In my opinion, the fear that our market will become a dumping ground is too weak to be considered.

The intra Africa trade has grown from about 10% in 2010 to about 18% in 2014 and with Nigeria as a country selling 15% of its total export within the African Continent, this agreement is going to give it more potential for growth. It will be great for Nigeria to be part of this over $2Trilliion market and a colossal loss if we don't. 

If our fear is the fact that top exporters in Africa will dominate the market (as against Asian and EU), this is not really true because the major items of export of these countries will be beneficial to us. 

For example as at 2016, South Africa export was 22.6% of African total export. Nigeria was 10.8%, Algeria was 8.8%, Angola was 8.3%, Morocco was 7%, Egypt 6.9%, Tunisia 4%, Cote d'lvoire 3%, Ghana 3% and Botswana 2.2%

The major export of South Africa are metals 16%, Ore and slag 12.6%, mineral fuel 10.6%, vehicles 11%, iron and steel 6.8%

For Morocco, more than 50% of its export include machinery, vehicles, fertilizer, inorganic chemicals and fish

The major export of Angola and Algeria are oil which constitutes more than 90% just like Nigeria.

Apart from Algeria and Angola who are crude exporters, most export products from SA and Morocco will be beneficial to this economy if imported duty free especially machinery and raw materials for production.

Another school of thought says that many Asian and European will come and set up factories in Africa in order to be able to maximize the opportunity of this agreement. This for me is a good news because such factories will industrialise the African soil, create jobs, increase our GDP, create wealth etc

The question then is, what are we really afraid of? The data speak for itself, most African countries will need to begin to look inward, re-strategise to be able to start benefiting from these agreements in the long run.

This is my take on whether Nigeria should Nigeria Sign the Africa Continental Free Trade Area (AfCFTA) Agreement?

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