What Adesina, Abdu, others say on benefits of world’s largest trade zone – AfCFTA

As Nigeria finally signed on to the continental $3 trillion-size Intra African trade market, the African (Finance) Development Bank (AfDB) and some economic experts have pointed out the best measures to adopt by the country to optimize the benefits of the African Continental Free Trade Agreement (AfCFTA) that is equally envisioned to shore up Intra African trade in the region.

President of the AfDB, Prof. Akinwumi Adesina and the Bank’s Director, Industrial and Trade Development, Dr. Mukhtar Abdu recently at the AfDB Annual General Meetings (AGM) of the Bank in Equatorial Guinea spoke of the benefits of the AfCFTA to Africa in general and to Nigeria in particular and the need for her to get on board.

According to Adesina:” The newly minted Africa Continental Free Trade Area will make Africa the largest free trade zone in the world, with a combined GDP of over $3.3 trillion. Pulling down tariff barriers alone will spur trade by at least 53%, and with the elimination of non-tariff barriers, trade could potentially double. To help accelerate regional integration in Africa, the Bank has been at the forefront in the development of critical infrastructure.”

As a result of the importance of the initiative to Africa, he listed the investment the AfDB has made to fast-track intra trade.

“Let me share with you, some of our results. At the end of the day, it is action and results on the ground that counts. Here in the Central Africa region, the African Development Bank is financing the Natchigal dam in Cameroon, supporting the development of the INGA dam in the Democratic Republic of Congo and will support the Corridor 13 road that will link Congo Brazzaville with the Central African Republic and Chad. These are all part of the African Development Bank’s vision to ‘Integrate Africa’.

Through the African Development Fund, we financed the construction of the amazing Senegambia Bridge – a dream come true for Senegal and The Gambia. We are doing a lot to interconnect Africa and drive investments to the continent. The Bank is right at the heart of making the African Continental Free Trade Area a success. Trade finance will be crucial for that success. The Bank has already invested over $1b to support trade finance, which in turn has also helped support 111 transactions in 43 countries and leveraged $7 billion worth of intra-regional trade,” the AfDB President added.  

Speaking in a similar tone, Dr. Abdu who declared that the Nigerian private sector stands to benefit a lot from the ACFTA, said his Industrial and Trade Department at the AfDB was partnering with the industrial firms on the Continent with a view to boosting their productive capacities.

His words: “We have supported Indorama Train 2 road capital, we have also done a lot of PPP projects about 100m dollars, supported private equity funds in Nigeria and we are looking at a whole lot more. I think the bank is really positive about Nigeria and the Nigerian entrepreneurs and business people. So we encourage them to take advantage of the bank and see it as their own bank, come to us whenever they have good projects that they want financing, especially in the private sector side. Other people think the AfDB only works with the government but the key message I will like you to pass on is that we do a lot of private sector business as well, and we’ll like to work more with the private sector business and support their expansion. 

“ When you talk about integrating countries through trading, you have to look at various things. One obviously is policy, you have to have the right policies. Policies need to be consistent and we are working on that, we are having a lot of advisory services that we are providing to countries in their trade policy agenda. The second is infrastructure.

For trade, you know when you integrate countries with the trade you have to look at wide infrastructure, so we are looking at issues like customs reforms, we are looking at issues like basic infrastructure, building the right roads and so on. We have signed a memorandum of understanding with the Korean customs service to come and work with a number of countries to help them orgarnise their customs services because customs are a very important part of the trade, these are some of the areas. We are still in the process of finalizing the selection but in the first phase, we are looking at six countries. I will be in South Korea in about a month’s time to finanlise that discussion on which country will benefit from this,” Dr. Muhtar Abdu further hinted. 

Meanwhile, back home, a flurry of reactions greeted the decision by Nigeria to sign on to the continental trade initiative, with some experts commending the country for taking the bond step 

Former Deputy Governor of the Central Bank of Nigeria (CBN) in charge of Economic Policy, Dr. Obadiah Mailafia described the decision thus: “The ACFTA is a potentially great opportunity for Nigeria to boost her exports to other African countries. This is the time to launch a massive agriculture-based industrial revolution in Nigeria and to prepare to create market niches within and outside our glorious continent. The future is bright,” he added.

Mailafia gave a further perspective: “Nigeria makes up 20percent of the total GDP of the continent and 75percent of ECOWAS. So our absence would have cast a cloud of doubt on the viability of the project. The ACFTA promises to boost intra-African trade, which currently hovers around 16 percent, as contrasted to 80percent within the European Union. Ever since David Ricardo, the economic theory makes it clear that when countries trade with each other, everybody, in the end, is the winner.

When countries exchange goods and services based on comparative advantage, they save on costs of production and there is a general rise in incomes and welfare. Regional integration promises to boost intra-regional trade while promoting growth and development. But there are potential pitfalls. Steps must be taken to prevent the dumping of goods, especially from third parties. For example, the North African countries have free trade agreements with the EU. There is a danger that goods from the EU may be dumped on our markets through the back door. We must, therefore, be vigilant in enforcing Rules of Origin to ensure that the goods that enjoy free tariffs are strictly those originating from our member countries, rather than from third parties, he stated. 

In his own intervention, a Development Economist and Entrepreneur, Mr. Odilim Ebwegbara, listed ways the country can benefit from the opportunity.

He said: “If Nigeria failed to sign, Nigeria would have become a minority in Africa’s economy where she is number one. It has to negotiate trade with 54 African countries in the manner of one versus the rest. Two, non-African countries will treat her slavishly in trade negotiations. It is unfortunate that we went into this unprepared. No competitive edge. No trade shock absorbers. Dumping ground will become like America became a member of the WTO and as a member of the North American Free Trade Agreement. Our infrastructure cannot support manufacturing competitively. So, manufacturers from EU, China, India, etc. eyeing Nigerian consumer market will just relocate their factories to neighboring African states to produce and dump in Nigeria since our African customs union is only against fully imported goods from outside Africa.

“But it is now a wake-up call. We will either do things right going further or we economically become subordinated to countries like South Africa. Nigeria will discover that its only option is to industrialize. But for that to happen, economic regions must emerge from the present political regions. This way, healthy competition will begin to emerge among Nigerian economic regions.

Also, our Igbo traders will have no border problems again. They can now set up their factories in neighbouring countries since no nation within the new trade union will obstruct them. The only major problem is the social disharmony it will bring in such a race to the bottom, where countries will no longer have more taxable revenue to spend or should they impose high VATs, companies will migrate to where they enjoy social and environmental free rides. It is important for us to know that unless we replace grazing with ranching by attracting large scale investors in the livestock industry, South African and Ethiopian beef will invade our consumer market, sending the Fulani herders to instant extinction because there is no way they can compete with world-leading companies in bovine business. It also means that our monetary policymakers should be pro-business in their MPC meetings. The fiscal policymakers too should come up with fiscal expansionary measures, rather than the present fiscal prudential measures.”

Mr. Tope Fasua, Development Economist and Chief Executive Officer of Global Analytics said not joining AfCFTA would have meant goods produced locally in Gabon, Guinea, and Zambia being dumped here via porous borders. He thinks it would have meant economic collapse because no country in Africa can be an island and already to itself.

He said: “The alternative is what we have done. Now we are going into a disciplinary era. We must keep inflation low if we are to compete with our goods within Africa. We must show discipline and not continue with our profligate myopic ways if we are to save ourselves from ruin. This means we must organise ourselves and become productive. We must get up to the level of Ghana when it comes to packaging. You’ll be shocked how advanced and meticulous they are. And North African countries are a different ball game entirely. South Africa is at European standards. The tussle and the war is among Egypt, Algeria, Morocco, Kenya, Ghana, South Africa, and Nigeria, but lookout for a few other ambitious and strategic ones like small Botswana, Rwanda, Uganda, Cote D’Ivoire who can leverage some of their key products and get their people prosperous while we are sleeping. I’ve heard it said that we shouldn’t have signed because we have nothing to sell.

Yes, we don’t presently, but now is the time for a change in economic policy. We may not have had anything to sell but trust us; we are ready to buy anything from anywhere to satisfy our curiosity and the constant quest for comfort and convenience by our few elites who don’t care that we now have the highest levels of inequality in the world. The underbelly of the Nigerian economy will now be exposed if we don’t buckle up and act fast. But it is also the greatest opportunity we could ever have. We should study what happened between Greece and Germany to understand the impact of laziness and slothfulness when a country enters a free trade agreement and what focus, strategy, discipline, hard work, unity, and self-motivation can achieve,” Fasua advised.

For another Development Economist and Lead Consultant to ECOWAS and NEPAD, Prof. Ken Ife, for ratifying the treaty within time, Nigeria has already escaped accession, which will require members each considering their joining and forcing us to accept all Negotiable instruments as a condition of entry if she was out of time.

And to fully optimize the benefits in the package, Ife prescribed the following action by Nigeria: “We need to develop AfCFTA regional strategy as part of our regional integration and trade facilitation Strategies Incorporate into our ERGP with specific Cross-sectional action points. We need to Avail of the AfCFTA dispute resolution mechanism to call to order SA and Angolan Xenophobia attacks and Ghana’s investment enforcement actions on Nigeria. 

“We also need to capitalize on the Presidential Directive on 10 items and CBN compliance action against smuggling and dumping of goods, as well as fully implement presidential order 003 on made in Nigeria/trade. We should also see the extension of the LAMU-Cameron Railway corridor to PH/Lekkk deep seaport as well as the Democratic Republic of Congo INGA power pool extension axis to Nigeria,”‘ he advised.