Three important legal instruments were presented to African Heads of State on the 21st March, 2018. It comprise the AfCFTA; Kigali Declaration; and Free Movement Protocol. The signing of these instruments signaled the African bridge to a single economic space by creating a free trade area in the continent.
The most significant provisions in these legal instruments include elimination of duties and quantitative restrictions on imports and to be treated no less favorably than domestic products. Elimination of non-tariff barriers including addressing Rules of Origin issues, Cooperation of customs authorities; Trade facilitation and transit; Trade remedies, Protections for infant industries and Cooperation over product standards and regulations.
The legal instruments is also expected to include Protocol on progressive liberalization of Trade in Services, Mutual recognition of standards, licensing and certification of services suppliers.
An important, though not readily recognized, benefit to the national good, to be derived from the implementation of the AfCFTA is the confidence building impacts of trust and transparency in the public-private dialogue.
In keeping with its declared public policy of good governance and transparency, African Countries are committed to consultative processes and focused public-private dialogue to enhance the understanding and involvement of different public. Also, to encourage the broad appreciation of the benefits and impact of trade and trade liberalization in the AfCFTA.
Intra-regional trade and its challenges
The figures on intra-regional trade continue to show a disconnection between the well accepted policy objective of deeper integration and what is actually happening on the ground. Africa still has incredible unrealized potential in increasing its level of intraregional trade, which, at just 18%, compares unfavorably to that in Europe and Asia with 69% and 52% respectively. ECOWAS is barely 12% but ongoing policies are going in the right direction to increase intra-regional trade.
The African region’s economic development priority objectives are focused on self-sustaining economic growth based on strong international competitiveness, innovation, productivity and flexibility of resource use.
However, development issues and challenges such as high unemployment rates, decline in Foreign Direct Investment (FDI), undiversified markets, dependence on external trade particularly imports, low productivity and overreliance on primary goods remains.
Some of these challenges may also be linked to lack of economic coordination, related transportation issues at our borders, high cost and time associated with documentary requirements for imports and exports. The foregoing leads to the inability to efficiently expedite the movement, release and clearance of good which has implications for overall economic development and calls for focused dialogue on trade and economic issues.
Importance of AfCFTA to the region
Several studies show that implementation of the AfCFTA would increase market access for African countries and reduce trade costs to boost regional trade. It would also encourage and boost trade among African countries particularly intermediate goods.
Countries like Nigeria are expected to see the biggest gains for both the consumer and supplier since we are faced with some of the largest procedural obstacles at our ports of entry and internally. For companies, it will mean lower trade transaction costs at the border, manufacturing inputs at reduced cost and better entry into foreign markets.
Companies are more likely to become more profitable which should encourage domestic investment. In addition, foreign direct investment is likely to be attracted to countries that fully implement the AfCFTA and improve their business facilitation index. Increased trade means better employment prospects for workers and greater revenue collection by governments.
Essentials for effective implementation
Some key elements for effective implementation of the AfCFTA based on the Nigeria’s experience so far include:
(i) An active & well-funded national committee to secure the needed inter-agency collaboration, harness the institutional knowledge, technical expertise inclusive of a sectoral or industry networks and processes of our border agencies.
(ii) Strong policy coordination and focal point leadership.
(iii) Private sector support and partnership.
In addition to collaboration through the national committee, the broad-based engagement of the business community – the main conveyors of trade impacts – should be fostered. The effective understanding of the private sector on the provisions of the AfCFTA is critical for economic impact. There is a need for private sector exporters in Nigeria to have knowledge through:
a) Identifying the main areas in which AfCFTA could potentially impact on their operations; and
b) Identifying what steps need to be taken at the company level to ‘AfCFTA’ export supply chains.
Actions to simplify business related processes
Nigeria should support implementation of the provisions of the AfCFTA at both national and the regional level within ECOWAS. It however, needs to avail itself of priority technical assistance and capacity building support (TACB) aligned with the AfCFTA.
Most critical for Nigeria’s implementation is to take steps to modernize and harmonize its customs administration as well as promote trade facilitation with other African countries particularly ECOWAS sub-region. These steps may be similar to those being taken or already taken by other member states in the region like the Tripartite Trade Facilitation Agreement in Southern Africa region.
As part of a strategy to further facilitate improvements to its trade performance and creating an enabling environment for doing business in Nigeria, the Government should move forward with plans to conceptualize and develop a road map for the AfCFTA with an export strategy.
Nigeria should take the lead in taking business and trade facilitation to a higher level by the standardization of procedures along with the implementation of international norms and best practices. This will lead to a strengthening of Customs’ operations efficiency for control and improve transparency, reform the customs clearing procedures, among other mechanisms.
The success of Nigeria in the AfCFTA depends on the extent the ECOWAS sub-region makes in the implementation of the agreement. Hence, fostering of regional approaches to the implementation of the AfCFTA will minimize the challenges and the costs associated with the implementation of some measures under the Agreement nationally.
Nigeria needs a strong AfCFTA institution to drive implementation. Ensuring continuous active dialogue among stakeholders on the AfCFTA to address new and ongoing business and trade facilitation issues and to ensure the overall effective implementation of the Agreement is critical for inclusive economic impact for Nigeria.