How Nigeria, others can increase intra-African trade by 33%

Nigeria and other African countries must drastically increase trading within the region to harness value from existing raw materials, and address unemployment and foreign exchange crisis, Chief Executive Officer of Maser Group, Prateek Suri has said.

Suri, in a statement obtained by the media, noted that Africa is lagging behind in intra-trading when compared to other continents of the world.

While the level of intra-African trading is pegged at 16 per cent at a time when that of North America stands at 30 per cent, Asia 69 per cent and Europe 75 per cent, Suri said the continent could increase the trading to about 33 per cent on the backdrop of the African Continental Free Trade Area (AfCFTA).

He said the narrative, which portrays Africa as a poor continent, is flawed when the continent is endowed with natural resources with a large market for products.

“What is even more attractive is that in the recent past, Africa has been attracting foreign direct investment (FDI), especially in the mining, construction and manufacturing sectors. However, intra-Africa trade has remained low compared to the other continents. Despite the existence of economic blocs such as the Economic Community of West African States (ECOWAS), East African Community (EAC), Common Market for Eastern and Southern Africa (COMESA and others, the trade has been so low,” he stated.

Noting that while Africa has the highest non-tariff trade costs globally, equivalent to tariffs of 250 per cent on traded goods, according to a 2015 World Bank study, such barriers, which he said are policy-related, could be addressed through further negotiations under the agreement.

Suri said the impact of the trade deal would depend on future negotiations and on its successful implementation in a region in which some past trade integration efforts have fallen short of their ambitions.

He said his company, which manufactures electronic goods with interest in the African market, sees this positive growth, as this would open new markets and create room for more trade in the continent.

Suri said bigger markets and more competition could also foster the development of new skills and productivity gains and therefore competition would be based on the quality of the end products.

“AfCFTA will open up new avenues while boosting our sales will allow room for the flow of technologies to Africa. Our products being affordable and of high quality, we expect our value-added product to compete favourably with those from other countries. We note that manufactured goods accounted for 40 percent of intra-regional trade. The large market envisioned under the AfCFTA could spur increased value-added production and trade within Africa, achieve economies of scale, and attract greater foreign investment.”

“So, increased trade flows resulting from the removal of trade barriers and the facilitation of cross-border trade could enable countries to develop and specialize in specific production activities, potentially fostering intra-African supply chains. This could particularly benefit smaller countries with limited global reach,” Suri said.

He disclosed that the elimination of tariffs alone could increase intra-regional trade by up to 33 per cent and add up to one per cent to annual GDP growth across Africa, once fully implemented.

“At the same time, African countries face diverse challenges. That 54 countries with divergent industrial capabilities and economic interests negotiated a framework for extensive trade reforms within three years highlights commitment across Africa to the idea of continental free trade,” Suri said.