Home Uncategorized AfCFTA to Push Nigeria, Other African Economies to $29tn By 2050
AfCFTA to Push Nigeria, Other African Economies to $29tn By 2050

AfCFTA to Push Nigeria, Other African Economies to $29tn By 2050

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The elimination of tariff following the introduction of the African Continental Free Trade Area Agreement (AfCFTA) is expected to boost intra-African trade by 52 per cent and help Nigeria and others benefit from a $29 trillion market by 2050.

According to a report by Ernst and Young (EY), titled: “Diversification and Non-oil Export Opportunities for Nigeria States Post-COVID-19,” which was commissioned by the PDF Bridge Programme, through the elimination of tariffs, the enlarged continental market will attract higher FDI flows into the continent to support infrastructure development, increase productivity, support diversification, value addition and structural transformation.

The emerging economic prosperity is also expected to trickle down to Nigeria given its large market and government’s drive to grow the economy via its succeeding economic plans.

The report added that having ratified the AfCFTA, Nigeria would potentially access a largely underutilised intra-African market thereby driving the competitiveness and growth of local companies, consequently aiding the country’s pivot away from crude oil.

The publication, however, stated that the period taken to achieve documentary compliance remained a major deterrent to trade in the country, largely due to the inadequate infrastructure to support the testing and verification process of products by certifying standards agencies.

It called for institutional discipline to drive the development, synchronisation and harmonisation of various government and organised private sector actions particularly as multiple players currently operate within the MSME and non-oil sector development space.

“However, these different players often operate in silos, with limited information sharing,” it added.

The report noted that Nigeria currently operates a pseudo-closed economy, with restrictions on capital flows, restrictive capital repatriation processes and inconsistent foreign exchange policies.

It noted that the country in 2019 partially closed its land borders as part of its effort to curb cross border smuggling and strengthen local production, adding that although the land closure resulted in higher local production for some commodities including rice, the “inconsistency of this move vis-a-vis a recent signing of the WTO TFA and the AfCFTA indicates a lack of coordination by the policymakers and overall institutional environment in the country and further reduces the ability of the economy to garner required foreign direct investment.”

It stated that some stakeholders had pointed out that in a bid to sustain production levels, foreign currency was sourced from the parallel market (N475/$) due to the low supply from the CBN.

“However, proceeds from exports are then received at the investors and exporters’ (I&E) window rate (N390/$), thereby further limiting their constrained earning potential.

“Trade protectionist policies, such as the CBN’s forex exclusion list, while stimulating local production may also have a regressive effect on economic growth.

“Local production of a protected commodity is increased at an uncompetitive cost to consumers, resulting in overall erosion of living standards,” the report added.

The publication documented the results and findings of a study carried out to identify non-oil export opportunities within Nigeria’s value chain and proffered recommendations on how Nigeria could generate foreign exchange earnings from identified products as part of its trade diversification plans.

It expressed concern that currently, there are only 25 private and public laboratories nationwide, 12 of which are located in Lagos – accredited by NiNAS to conduct phytosanitary testing and certification for food export in the country.

It called for the establishment of the One-stop Border Posts (OSBPs) in Nigeria to improve border crossing speed and efficiency thus reducing barriers to trade and improving business competitiveness with Nigeria’s neighbouring countries.

The report stated that the OSBP has the capacity to eliminate some of the incentives of illegal trade, by reducing the cost of formal trading and multiple contacts with border officials.

It explained that the one-stop border post would be a facilitating upgrade from the two-stop border post model characterised by multi-layers of paperwork, lengthy clearance transactions, and duplication of exit/entry procedures that cause delays and increase the cost of doing business.

This, according to the report, will expedite the movement of goods and people and to reduce transport costs across national boundaries through increased cooperation and information sharing between agencies from both jurisdictions.

The report also pointed out that with women constituting 70 per cent of informal trade in Africa, inclusive growth strategies are vital as gender inequality can constrain a country’s trade expansion as well as hamper competitiveness.

It explained that gender has been cited as one of the reasons for business informality in Nigeria as women traders prefer to utilise an intermediary, usually male, in order to avoid targeted sexual-based harassment and illegal fees at customs and border stops.

It said while Nigeria’s trading ecosystem was characterised by exports of primary products and importation of finished or intermediate goods, the recent ratification of the AfCFTA would lead to liberalisation of trade within Africa while the country was expected to re-open all its land borders after recently announcing the re-opening of the Seme, Illela, Maigatari and Mfun land borders.

The AfCFTA is expected to stimulate economic growth and create jobs in substantial numbers that would prepare Africa for about 11 million youths that enter its job market every year.

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