Vanguard Money Digest

December 9, 2021

Unlocking the potentials of AfCFTA: Impact on Insurance services

AfCFTA: Nigeria likely dumping ground for others - NAGAFF
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Global trade and commerce has always been driven by deliberate partnership and agreement reached amongst countries of the world to harness individual country’s potentials, especially where they have competitive advantage over the others. The essence is to make services and goods available to their citizenry. Efforts in this direction are age long, traceable to early century and development of civilization as we know it. The African Continental Free Trade Area (AFCFTA) is a most recent move by African Union to bolster intra-African countries’ trade facilitation and reduce tariff barriers, a significant step in advancing Africa’s regional integration and development agenda. The African continental Free Trade Area (AFCFTA) was launched by the African Union Assembly at the 25th Ordinary Summit of Heads of State and Government on 15th June, 2015 in Johannesburg, South Africa. Concerns had been raised on its possible or easy implementation faced with the following situations: differential impacts on socio-economic groups due to unequal access to credits and economic opportunities, challenges being faced by trades in participating in welfare related trades, adverse impacts on agricultural livelihoods and food security due to trade liberalization, rising skepticism towards regional integration and trade agreements. Nonetheless, the benefits of intra-countries’ synergy is far more robust and beneficial than the downside of the trade agreement. A report culled from a multi-disciplinary expert team made up of Mr. James Thuo Gathii and team  under the guidance of UNECFA and the Friedrich-Ebert Stifting, Geneva office) established the following as some of the benefits of the agreement: It will improve the livelihoods of millions of African people, alleviate poverty by creating jobs and promoting equality, provide a platform to facilitate structural transformation of African countries and contribute to the attainment of African agenda 2063. The scope covers trade in goods and services, investment, competition policy and intellectual property rights. Stakeholders should cautiously assess its likely impact on policy space and multi-jurisdictional implications amongst countries. A peer review study will be a good move for holistic evaluation prior to its implementation and to remove perceived fears on its larger effects on trade and services. This exposition will not lay claim to exhaustivity as to the benefit spelt out in the agreement but rather to bring to the fore few salient issues. Between 2004 and 2014, the total value of African manufactured export more than doubled from $50.9bn to $106bn (Culled from report by multi-disciplinary experts team made up of Mr James Thuo Gathii and team under the guidance of UNECFA and the Friedrich-Ebert Stifting,Geneva office). Insurance role in international trade will cover various risks of default from both domestic and international trade. These risks exposures will more often than not be evaluated by the insurance service providers using the existing metrics and modeling, taking cognizance of peculiarities of any emerging risks and individual country’s peculiarities and custom coupled with socio-political environment of business. At the home front, the government is reported to be adopting a legislation-backed policy to promote the ease of doing business in the country. A glaring perspective on this could be seen in the areas of the revised Company and Allied Matters Act (CAMA) 2020 and the Petroleum Industry Act 2021. These are bold moves by government to reposition the country as an investment destination of choice in Africa. The AFCFTA provides Africa with a combined Gross Domestic Product of $3.4trn according to media report .This trade agreement will be a major game changer to the economies of participating countries and for the most part, this will travel down to the average citizenry.But I must admit a big thumb up for the bold effort on AFCFTA whilst hoping for a seamless implementation after crossing the rubicon as it evolves in its phase.