The Agreement establishing the African Continental Free Trade Area (AfCFTA) has continued to generate discussions following the commencement of trading under the novel economic framework.
Nigeria signed the agreement for the African Continental Free Trade Agreement (AfCFTA) on 7th July 2019 and then ratified it in November 2020, with a view to achieving the African Union’s (AU) Agenda of 2063.
The AfCFTA is expected to deepen the economic integration of the continent, by creating a single market. The trade effort is expected to add about $3.4 trillion to the combined Gross Domestic Product for the continent.
Although the COVID-19 pandemic delayed the implementation of the agreement, trading under the pan-African framework started on 1st January 2021.
To derive maximum benefits from the AfCFTA, Nigeria needs to strive to increase local market capacity.
Precisely, we need to concentrate on our comparative advantage. With an arable landmass, a growing youth population, and an improving democratic environment our country stand a chance to derive a large return from the pan-African trade agreement.
The AfCFTA will progressively reduce trade tariffs by over 90% by 2022 and by extension address the increasing inflation and infrastructural deficits within the continent.
Nigeria, being the largest economy in the continent with a strong service sector should position itself to benefit from the economies of scale that will follow the localization of industries. Oil refineries, cement, agriculture, food processing, minerals, banking and financial services, aviation, information technology and legal services have been identified as some of the critical sectors where Nigeria has a competitive advantage.
An example that comes to mind is the “made in Aba” products. These local manufacturers and/or Small and Medium Scale Enterprises (SMEs) should be assisted by providing enabling environment and credit facilities.
The Central Bank of Nigeria and some other financial institutions have rolled out various credit facility programmes but they can still do more especially in the area of granting soft loans. The domestic financial institutions should assist the deep SMEs segment to build capacities that will improve their tech depth, expand their market reach and strengthen product development skills to help the segment compete well in the single market.
In the aspect of food security, Nigeria can take the lead especially in the area of rice production. Presently, rice production has increased in the country but we can do more.
By extending the loan instruments available to the smallholder farmers in the rice farming belts, and expanding the farming infrastructure on the farms, we can dominate the rice market across the continent and will not need to import rice from Asia.
Furthermore, most of our agricultural products are not processed and do not attract a premium price and high patronage in the international market. For instance, our fresh tomatoes in the Northern part of the country can be processed into tomato paste.
The service sector which contributed 46.39% to the economy in 2020 is another locus of opportunity to be explored to strengthen the country’s competitive standing on the continent. The sector which comprises all professional engagements channelled into other sectors will be expanded when the government pivots to massive infrastructural spending in the areas of transportations, electricity generation and distribution, deeper internet connectivity, and capability building hubs for the teeming youth population. The strategic InfraCo $2.4 billion funds announced by the Federal Government early in the year 2021 offers more hope in this regard.
Investment into the development of the ailing local manufacturing industry is also critical. This is part of what a wider pivot to infrastructure development investment brings. Without regular electricity supply and good road/ rail network, it is hard to compete favourably within the pan-African trading framework.
More, increased infrastructure spending will boost the distribution and logistics supply chains that link the country to border countries for smooth and effective movement of goods and delivery of value-added services. This push will reduce the worsening unemployment rate among the active segment of the population.
Another crucial aspect of the agreement is the removal of travel restrictions. The ability to travel, work and live within the African continent under the pan-African agreement will transform the African trading landscape. Intra-Africa trade is currently low. This is because countries on the continent hardly trade with themselves.
In 2019, the total intra-Africa trade was $69 billion, a mere 15% of the overall trade transactions carried out on the continent in that year. By providing better market linkages, removing restrictive laws and promoting visa-free travel to enhance the movement of all African citizens in all African countries, the intra-trade position on the continent will improve.
Essentially, with a visa-free policy, the Nigerian tourism sector should experience improved traction. However, most of our tourist centres are moribund. To benefit from the opening of the borders, the government needs to upgrade the local tourist destinations to international standards.
The influx of foreigners in the country for trading and tourism will increase the demand for affordable housing. Meanwhile, the current housing units in Nigeria are far below the total demand. The high influx of foreigners will drive up the housing demand level.
Precisely, the real estate sector would need the state managers to develop cogent growth-driven policies aimed at assisting real estate players in the development of affordable homes. This move will open up opportunities for the citizens to own good homes; the foreign investors will be incentivized to live in the country as well as have ample opportunities to channel investment into the sector while injecting FOREX into the economy. ATCO Homes, a top player in the real estate sector, which is also my firm, is working assiduously round the clock to ensure the expatriates and indigenes are able to access affordable real estate products in choice areas of Lagos, a trading hub for the nation.
In sum, the AfCFTA has been lauded as a game-changer. It is capable of lifting over 30 million people out of poverty on the continent, through trade and economic integration according to the Pan African Vision (Agenda 2063) of an integrated, prosperous and peaceful Africa.
Bartholomew Egbochie is the Chief Executive Officer of ATCO Homes, a Lagos-based real estate firm.