Business

Hope for single African market in 2021 as borders open for AfCFTA

As expectations are high about the reopening of more land borders to regional trade this week, the country would address hiccups in its trade policies to optimize the benefits of the African Continental Free Trade Area (AfCFTA) scheduled to take off January 1, 2021.

The Federal Government recently reopened four borders – Seme border in the South West, Illela and Maigatari border in the North West and Mfun in the South South with optimism that others would be reopened on December 31. This action would enable Africa’s largest economy to participate fully in the long-awaited Africa’s single market.

The border closure, which lasted for 16 months, posed different challenges to cross-border traders, corporate entities and private engagements around the regional line.

On November 11, 2020, the Federal Executive Council approved the ratification of the agreement establishing the African Continental Free Trade Area, ahead of the take-off in January 2021. The agreement seeks to create a single market for goods and services produced on the continent by facilitating free movement of goods, services and investment within Africa.

The AfCFTA agreement requires members to remove tariffs from 90 per cent of goods traded, allowing free access to commodities, goods and services across the continent. According to the International Monetary Fund (IMF), the elimination of tariffs could boost trade in Africa by 15-25 per cent in the medium-term. Once operational, the agreement is expected to create a $3.4 trillion economic bloc, connecting 1.3 billion people across Africa, which would make it the largest trading bloc since the World Trade Organisation (WTO) was formed in 1994.

Stakeholders, in interviews with The Guardian said the Federal Government would need to perfect its rules and procedures on border operations to prevent dumping.

President, Shippers Association, Lagos State, Jonathan Nicol, canvassed proper implementation of the AfCFTA to prevent a repeat of the ECOWAS Trade Liberalisation Scheme (ETLS). He said Nigeria has not benefited from ETLS. He explained that the Federal Government’s policy to hike the tariffs made the cargoes meant for Nigeria to be diverted to Cotonou Port, leading to the border closure.

He stated that free trade is a welcomed idea globally, saying: “That is what the WTO wants. In fact, they are canvassing online transactions in the name of free trade. If people can now travel to Cotonou without a visa, buy goods and come back to Nigeria, there is no issue?

“AfCFTA is a good idea because we are working towards a free-trade region. It all depends on the managers, because they signed the ETLS treaty, it didn’t work. They signed the African Union treaty, it didn’t work. Eventually, it is Nigeria that is paying for other countries, which is not supposed to be.

“It is unfortunate that we cannot handle our economic issues properly, but we feel there is a particular thing that is giving the people at the helm of affairs problems. Is it corruption? Is it the inability to manage resources? Is it planning? But we have professors all over the place. So, I think that something is missing,” he stated.

The general objectives of the AfCTA agreement are to create a single market; deepening the economic integration of the continent;
establish a liberalised market through multiple rounds of negotiations; aid the movement of capital and people, facilitating investment; move towards the establishment of a future continental customs union; and achieve sustainable and inclusive socio-economic development, gender equality and structural transformations within member states.

Others are to enhance the competitiveness of member states within Africa and in the global market; encourage industrial development through diversification and regional value chain development, agricultural development and food security; and resolve challenges of multiple and overlapping memberships.

National President, Association of Nigerian Licensed Customs Agents (ANLCA), Iju Tony Nwabinike said AfCFTA regime which hopes to take effect from January 2021 with a secretariat in Accra Ghana, will place Nigerian businesses people at a disadvantage if the nation’s land borders are not opened to trade.

He said: “Most importantly, we know it’s going to be a borderless trade and what do we have to offer? Do we have the products? Is Nigeria ready? These are questions we need to ask ourselves. For me, I think we have a whole lot of things to do because it is going to be a very competitive market and if you don’t have anything to bring to the table, I think we are going to suffer it. Being a giant of Africa does not mean anything, if you don’t have anything to give on the table, you are going to have a deficit of supply and demand.

“Even the trade liberalisation we are talking about, the ECOWAS trade is going to work up again as they are opened up in all the areas. We are not saying we should leave our borders porous, we need to work in line and principles of AfCFTA and ECOWAS trade liberalisation,” he stated.

However, a special report by SB Morgen captioned “The Year Ahead, Light At the End of the Tunnel, What to Expect” in 2021, said the ratification of the AfCFTA agreement would signal a more positive stance towards free trade, though this appears to be an overly optimistic view.

“Currently, the Nigeria Customs Service maintains a 45-item list of banned imports, despite the country’s membership of the WTO and the implementation of the ECOWAS Common External Tariff. The list is unlikely to get shorter anytime soon. However, reopening the land borders would at least demonstrate a credible commitment to the letter and spirit of the free trade agreement,” it added.

However, it noted that “The impact of the AfCFTA would not be determined by government policies alone but also by how much the private sector leverages the abundant opportunities available in the free trade area in Africa.

“For Micro, Small and Medium Enterprises (MSMEs), the core drivers of the Nigerian economy, policy uncertainty has remained an important determining factor in their decision to engage in international trade.

“MSMEs tend to have a lower capacity to accommodate risks because even small adverse events can lead to business failure.
Considering that MSMEs are quite responsible for almost half of Nigeria’s Gross Domestic Product (GDP), any potential gains from the AfCFTA may not materialize unless the government clearly states and maintains a streamlined, consistent position in favour of free trade,” it stated.

Source: guardian.ng