With a kick-off date set for the AfCFTA, here are some items that should be in our front burner as an economy as we await January 2021.
Ideas.memo | Basit Kolapo Saka
On the 22nd of August, 2020 the Secretariat of the African Continental Free Trade Area (AfCFTA) officially opened in Accra, Ghana, a milestone that indicates the biggest free trade agreement will be in the full implementation soon. You will recall that trading under the AfCFTA was originally slated to begin on the 1st July 2020, but was delayed, no thanks to the COVID-19 pandemic.
The African Union announced that the new date for implementation of the most anticipated free trade agreement on African soil will now be January 2021. This was confirmed by the Acting Chief Trade Negotiator/Director-General, Nigerian Office for Trade Negotiations, Mr.Victor Liman on Thursday, 20 August 2020. With a kick-off date set for AfCFTA, which is roughly five months away, a lot of questions have clouded my mind as to the readiness of Africa’s largest economy, Nigeria.
With the onset of the pandemic, the trading capacity of many developing countries, Nigeria included, has dwindled significantly. It would behoove the government to access the extent of the damage and lend support to worst-hit sectors to stimulate trading in time for the AfCFTA. Enhanced trading capacity just might be the key to success to boost the economic recovery for the country. Should things go as planned, this free trade agreement will be a gold mine for both Nigeria and Africa. Here is a list of items I believe should be in our front burner as an economy as we await January 2021. This list, of course, is not exhaustive.
Ease of Doing Business Index
Under a Free Trade Agreement, the biggest winners may just be those countries that have made it easy for businesses to start, as well as thrive. Every venture capitalists want to invest in a conducive and well-regulated ecosystem that allows for growth and stronger protection of its property rights. Nigeria is currently ranked at 131 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. Morocco is the highest-ranking African Country and it stands at 53. If we really want to attract more business into our economic space, then our regulatory system must serve as a fertile ground for businesses to grow.
The State of our Infrastructure
One of the major drivers of modern-day trade is good infrastructure, for production as well as for transportation, with billions of dollars at stake, the winners under the AfCFTA would be those who can make this possible, that is seamless production and transportation. This goes beyond trade in goods, as it also affects trade in services, and with Nigeria gunning to be the manufacturing and production powerhouse of Africa, we have a lot of work to be done in this regard especially because Nigeria currently ranks 24 under the Africa Infrastructure Development Index (AIDI) out of the 54 African countries.
Small and Medium Business Empowerment
The role small to medium scale enterprises play in increasing productivity and employment cannot be overemphasized, the facts show for it. SMEs in Nigeria contributed 48% of the country’s gross domestic product (GDP), accounting for 96% of businesses and 84% of employment in the country. SMEs also accounted for about 7.27% of goods and services exported out of Nigeria in 2018 alone. You would agree with me that there is a need to capacitate this sector with the requisite awareness and sensitization on their roles and interplay under the AfCFTA. This should not be restricted to just SMEs in the cities, we need to reach out and help scale those in rural communities.
Public and Private Partnerships
We need to create a better structure that allows this relationship to strive, the current trend of government making policies that hamper business without adequately consulting and liaising with business practitioners is unacceptable. While the government cannot and will not create employment for everyone, the government can partner with the private sector to create this and to ensure that the private sector is able to compete under a liberalized African market.
Economic Diversification Index
The pandemic has taught us that diversification is the only valid option for economic sustainability. We saw how the price of oil fell below to zero, and all-time lowest. Due to the poor export capacity in the non-oil sector and low industry capacity, there is a need to review trade agreements and policies at this time, to fit our current realities, as well as expand capacity to become less oil-reliant.
Nigeria's unemployment rate came in at 27.1 percent in the second quarter of 2020, the highest on record. To further buttress the concerns above, we have to ensure that we do not expose already struggling local manufacturing/production sectors to undue competition. When the economy is not dependent on one item, wealth is distributed across the board as such more people would be gainfully employed and the standard of living would be scaled upwards.
Channels of Information and Data
Much of the history of Intra-African trade is not known because of the inadequacy of data in this regard. Data, they say is the new oil, as such money moves where the data is. In research and analysis, we need to be informed on how the African market works, while it is true that there would be similarities with the Nigerian market, it is also true that there would be peculiarities, as such we need to find these peculiarities and milk them. Some of the biggest FinTech startups in Africa are Nigerian, we can bank on this by encouraging increase in their capacity to expand and serve Africa more, intra-Africa payment systems will be developed at our pace, which will ultimately, boost foreign direct investment into Nigeria.
A free trade agreement can create opportunities; it is left for countries to seize them.
Having said this, all hands must be on deck to ensure that Nigeria gets the best deals off this free trade agreement. We have the labour, the technical know-how, and the market which has strategically placed us at a vantage position. A free trade agreement can create opportunities; it is left for countries to seize them.
For reference purposes, know that the AfCFTA Agreement consists of three (3) Protocols vis: Protocol on Trade in Goods, Protocol in Services, and Protocol on Rules and Procedures on the Settlement of Disputes. These Protocols contain provisions on tariff concessions, customs co-operation, mutual administrative assistance, elimination of technical barriers to trade amongst other provisions, and are binding on signatory countries.
The United Nations Economic Commission for Africa (UNECA) estimates that if signatory countries follow through with policies that spur local productivity, the free trade argument could boost intra-African trade by 52% by 2022. Thus, with free trade under attack in much of the developed world, Africa is forging a new path for itself to foster sustainable wealth and development for the continent and a vital $10 billion decrease in imports from outside Africa.
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