More than two years after the African Continental Free Trade Area (AfCFTA) kicked-off, Nigeria’s trade volume with other African countries has continued to decline. The trade value fell year-on-year (YoY) to N842.6 billion in the first quarter of 2023 (Q1 ‘23), 11.95 per cent down from N956.93 billion recorded in Q1 ‘22.
In stark contrast, trade volume between Nigeria and China rose to $5.4 billion during Q1 ’23 while the bilateral trade stood at a staggering $23.9 billion in 2022.
Dubbed a game-changer in theory, AfCFTA was designed to deepen integration, foster trade and investment, enhance the mobility of capital and labour, support industrialisation and develop a dynamic services sector for African players under the agreement. All these are, however, yet to materialise.
Nigeria’s trade value with other African countries about its total foreign trade remains low. At around three per cent, the share of Africa in global trade is insignificant. Intra-African trade stands at around 15 per cent compared to approximately 66 per cent, 44 per cent and 63 per cent intra-regional trade achieved by Europe, North America as well as Asia and Oceania respectively.
Experts have opined that AfCFTA could boost intra Africa trade by about 33 per cent and cut the continent’s trade deficit by 51 per cent. Data shows that Africa’s current untapped export potential amounts to $21.9 billion, equivalent to 43 per cent of intra-African exports and an additional $9.2 billion of export potential can be realised through partial tariff liberalisation under AfCFTA over the next five years.
The National Bureau of Statistics (NBS) Foreign Trade in Goods Statistics Report for Q1 ’23 showed that at N842.6 billion, Nigeria intra-African trade represented just 6.99 per cent of its total foreign trade (N12.047 trillion).
This is against the 7.4 per cent contribution to its total foreign trade (N13.001 trillion) in Q1 ‘22. On a quarter-on-quarter basis, Nigeria’s trade value with other African countries also declined by 24.87 per cent to N842.6 billion in Q1 ‘23 from N1.122 trillion in Q4 ’22.
Further analysis showed that the trade volume has been on a steady decline since 2021 when AfCFTA kicked off. In 2020, the percentage of Nigeria’s intra-African trade stood at 11.03 per cent and fell to 7.46 per cent in 2021 and went even further down to 6.5 per cent last year.
Although Nigeria ratified the AfCFTA Agreement in December 2020, its land borders have been mostly closed to neighbouring countries in the last three years, an aberration to the agreement, which seeks to simplify cross-border trade across Africa.
Nigeria has again pledged to join the second batch of the Guided Trade Initiative (GTI), which was launched in Ghana in October last year and seeks to allow commercially meaningful trading and test the operational, institutional, legal and trade policy environment under the AfCFTA. So far, just eight countries—Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia—are participating in the GTI.
According to the NBS, Nigeria’s top five export destinations in the first quarter of 2023 were the Netherlands (N837.65 billion or 12.91 per cent), the United States (N579.35 billion or 8.93 per cent), Spain (N488.17 billion or 7.53 per cent), France (N487.34 billion or 7.51 per cent) and India (N456.69 billion or 7.04 per cent) of total exports.
Altogether, exports to the top five countries amounted to 43.92 per cent of the total value of exports. No African country is in the top 10.
In terms of I\imports (CIF), China leads with a whopping 23.32 per cent or ₦1.296 trillion, followed by the Netherlands. Belgium is next, then the United States. The values of imports from the top five countries amounted to ₦3.101 trillion representing 55.78 per cent of the total value of imports. Imports from ECOWAS countries accounted for only ₦42.30 billion or 0.76 per cent of the value of total imports.
President, the Organisation of Women in International Trade (OWIT), Blessing Irabor-Oza, said poor infrastructure and connectivity across borders, bureaucratic hurdles, and customs delays have slowed the pace of trade integration for Nigeria, leading to increased costs and reduced competitiveness for businesses within the country.
AfCFTA’s objectives of boosting intra-African trade in goods and services are also being severely undermined by the instability that plagues many countries in Africa. As a basic requirement, the flow of goods, services and investment across borders requires stability, peace and good governance.
She added that regulatory barriers and non-tariff barriers continue to impede the exchange of goods and services across borders and differences in standards, rules, and regulations among African nations have made it challenging for businesses in Nigeria to access new markets and establish trade relationships with other African countries.
“Insecurity is also a major challenge to trade. It is discouraging that one may not just lose goods but even worse. Nigeria also shut its borders arbitrarily and traders are losing millions daily; these are some of the factors affecting intra-African trade, preventing it from reaching its full potential.”
Adding that Nigeria needs to adopt a more proactive and strategic approach to tap into the opportunities presented by AfCFTA, she said this includes diversifying the country’s export base, promoting domestic industries, and investing in innovative sectors to remain competitive in the rapidly evolving global market. She also said all intra-African non-tariff barriers, including costly non-tariff measures, infrastructure gaps, and market information gaps, need to be addressed.
Suggesting long-term cooperation in investment and competition policies which may help address some structural and regulatory barriers to market entry, she said regional integration is key as it fosters cooperation and leapfrogs barriers to trade currently impeding the movement of people, goods, services and expertise.
