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‘Nigeria contributed 7% to intra-African trade’

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An empty cart in a shopping mall. Source:securityfocusafrica

Despite ranking the third contributor to intra-African trade, Nigeria’s share of trade remains low considering its status as the biggest economy on the continent. This is even as raw commodities dominate items exported from the continent, the latest African Trade Report has shown.

From January to August 2020, Africa’s trade contracted by 12 per cent compared to the same period last year, with April and May emerging as the period witnessing the largest contractions.

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The report showed that the outlook for 2021 is positive and Africa’s trade is expected to rebound strongly in 2021 as global economic activity picks up and demand African exports increases.

The report by Afreximbank notes that informal cross-border trade (ICBT), which is a key component of intra-African trade, is wide-spread in its composition and estimates that in Eastern African ICBT is very high and could be worth as much as 80% of the value of formal trade in some countries.

South Africa was the biggest contributor to Intra-African trade, accounting for 23 per cent of total trade, in 2019.

The biggest jump came from DR Congo which became the second intra-African trading nation, accounting for 10.4 per cent of total intra-African trade and Nigeria was third with seven per cent. Despite declining by 4.7 per cent, Nigeria’s share of intra-African trade remained constant at about 7 per cent and Nigeria emerged as the third-largest intra-African trade country.

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The value of total intra-African trade fell by 5.23 per cent in 2019, reducing its overall contribution to overall African trade, from about 15 per cent in 2018 to 14.4 per cent in 2019.

The report showed that the continent remains overly dependent on the export of raw commodities, with oil and gas accounting for over 37% of total exports in 2019.

Despite regional variations, the report highlighted the importance of ICBT for generating employment and income. The report estimates that it serves as a source of income for about 43% of Africa’s population and is dominated by women. In Southern Africa (the SADC block), female traders account for about 70 per cent of ICBT while food and agriculture products accounted for 30 per cent of intra-regional trade In West Africa.

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According to Afreximbank, this year’s report examined trade and economic developments in Africa in 2019, a year dominated by trade wars and escalating tariffs that resulted in sharp deceleration of global trade growth.

Global trade has been compounded by COVID-19, and as a result, following a fall of 2.9 per cent last year, global trade is expected to shrink by 9.2 per cent in 2020.

Commenting on the report, Prof. Benedict Oramah, President of Afreximbank, said that: “Even though ICBT accounts for a significant proportion of domestic absorption and has become a major source of income for consumption smoothing, its contribution to GDP is hardly recognized.”

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The report highlighted the areas that can be targeted to grow intra-African trade and transition ICBT to formality to include the removal of technical and non-tariff barriers to trade, as well as simplifying processes, increasing access to finance, and creating payment systems that draw on digitalization to mitigate risks will help traders scale and move up the value chain. ICBT is currently a cash-only business.

The share of Africa’s exports to Asia increased to 30.79 per cent in 2019 while the EU’s share decreased to 24.6. China and India have been the main drivers of the rising trade relationships between Africa and Asia, with China and India accounting for 27 per cent of Africa’s total merchandise exports in 2019.

A similar pattern is also observed in the sourcing of imports by African countries. Even though the EU has historically been the largest market for Africa’s imports, its share of total African imports has been decreasing steadily and Asia has become as important as the EU.

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