Nigeria recently ratified the African Continental Free Trade Area Agreement (AfCFTA), signalling its intention to be legally bound by the trade agreement. We look at the journey so far and what the ratification could mean going forward.
On Wednesday, 11th November 2020, the Federal Executive Council of Nigeria formally assented to the ratification of the African Continental Free Trade Area Agreement (AfCFTA) and solidified the country’s participation in the world’s largest regional trading bloc. The AfCFTA is a comprehensive regional trade agreement signed by 54 African countries, which regulates trade and investment between these countries. It aims to reduce trade barriers, import quotas and tariffs, and increase the trade of goods and services on the continent.
The AfCFTA represents the African Union’s (AU) Agenda 2063 dream to create a continental market with the free movement of persons, capital, goods and services. In early 2019, Africa’s dream towards an integrated trading area seemed much further away when Nigeria, who had been a leading figure in the negotiations, stalled in signing the AfCFTA to become a Member. At 397 billion dollars, Nigeria stands as Africa’s largest economy and also accounts for its largest population, making her absence stand out and raising concerns on the relevance of the Agreement.
The Nigerian Minister of Foreign Affairs did, however, state that the lack of signatory was a delay and not a withdrawal from the Agreement. The Manufacturing Association of Nigeria and the Nigerian Labour Congress raised concerns that the Agreement did not safeguard them against unfair trade practices – mainly dumping and trans-shipment regulations, thus, what was needed was further consultation with private actors within the country. After a year of such consultations, on 29 July 2019, the Nigerian President signed the AfCFTA. By then the Agreement had already come into force following the 22nd ratification by the Saharawi Republic and Sierra Leone.
The ratification by Nigeria comes ahead of the December 5, 2020 deadline for all signatories to ratify the Agreement. At the moment, Nigeria is the 34th country to ratify. Currently, 36 countries have ratified the Agreement. The remaining 18 signatory countries have less than a week to do so. Ratifying is significant, as only countries which have ratified are bound by the rules and can enjoy the benefits.
Expectations for the Agreement still remain high, as the World Bank predicts that the AfCFTA could generate up to 450 million dollars. However, the impact of COVID-19 has dampened the prospect of the Agreement. While the operational phase began in July 2019, some part of it has been put on hold due to the pandemic. Additionally, trading under the AfCFTA was originally supposed to begin in July of 2020 but has now been put off until January 2021.
One good news is the AfCFTA secretariat in Accra, Ghana, which was commissioned in August 2020 and handed over to the African Union.
The unilateral closures stand in contrast to the rules provided in the AfCFTA as well as the regional trade agreements of which prevent quantitative restrictions and most-favoured-nation treatment but encourage custom cooperation.
The pandemic additionally presents one of the bigger issues that the Members of the Agreement must tackle to ensure the proper implementation of the Agreement. During the COVID-19, lockdown, border closures, work and travel restrictions resulted in reduced productivity and hampered trade. The African Development Bank predicted that the GDP of the continent may shrink by 1.7%. The AfCFTA however, is an opportunity to create larger supply value chains and diversify productive capacity in countries and boost economic recovery.
It is thus expedient that all signatories ratify the instrument to enhance efforts to recover from the pandemic that has severely affected African economies. Already, the Secretary-General of the AfCFTA has announced that negotiations on digital trade and e-commerce would be fast-tracked to begin early next year ahead of schedule because COVID-19 has increased the need for governance in digital trade and e-commerce. As the AU Chairperson, Moussa Faki Mahamat noted, while the pandemic has derailed plans, ‘the same pandemic has also magnified the urgent need for speed to accelerate economic integration on the Continent’.
Another crucial issue to be addressed is the frequent arbitrary border closures that happen across the continent. At the moment, though Nigeria has implemented the Agreement, its border with Benin, Cameroon and Niger remain closed, despite the president promising in January 2020 to review the closures, no progress has been made. The impact of closures on trade though not yet measured, are bound to be significant.
Many traders have been affected. Similar border closures frequently take place across the continent. For instance, Kenya closed its border with Somalia in 2019 due to concerns of smuggling, transhipment and security. Similarly, Nigeria imposed closure due to trade-related concerns a few months later.
In September 2019, Sudan closed its borders with Libya and the Central African Republic, citing security reasons. Rwanda also closed a busy border crossing with Uganda in February 2019, accusing its neighbour of harassing its citizens and backing rebel groups against the Kigali government.
The unilateral closures stand in contrast to the rules provided in the AfCFTA as well as the regional trade agreements which prevent quantitative restrictions and most-favoured-nation treatment but encourage custom cooperation. For the AfCFTA to be a success, the Members of the AfCFTA must find a way to curb the arbitrary border closures that severely disrupt trade, and create an unstable and unattractive trade environment.
Perhaps the proposed dispute settlement mechanism can be of use in doing so. Ensuring implementation and adherence to the agreement is of crucial importance.
The road ahead of the AfCFTA remains a long but promising one. Phase II negotiations on intellectual property, investment and competition are already underway, despite the COVID-19 stall. However, for now, the main focus is getting it off the ground and running. There are still many aspects of the Phase I negotiations which cover trade in goods, services, trade facilitation and dispute settlement, that still remain outstanding. The Schedules of Tariff Concessions, the Rules of Origin, and the Schedules of Specific Commitments on Trade in Services are yet to be finalized for all countries.
Without these elements, trading under the AfCFTA will be off to a rocky start. Yet, the promise still looms. There is a lot to be done and the quicker it is accomplished, the better. However, the enthusiasm of all actors in signing and ratifying is promising and holds great potential for intra-Africa trade.
Sarah Akpofure | Research Analyst, Trade & Investment | firstname.lastname@example.org
Ayotunde Abiodun | Research Assistant, Trade & Investment | email@example.com
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