President Mohammadu Buhari recently appended his signature to the African Continental Free Trade Area (AfCFTA) agreement. OYENIRAN APATA, OLUSEGUN KOIKI and CHRIS EBONG present positions of stakeholders at different fora on the development and Nigeria’s membership of AfCTA.
The African Continental Free Trade Area (AfCFTA) was officially launched at the 12th Extraordinary Summit of the African Union (AU) in Niamey, Niger on Sunday July 7,2019.
At the summit, Nigeria alongside Benin signed the AfCFTA agreement; all African countries except Eritrea have now signed. Gabon and Equatorial Guinea also deposited their instruments of ratification, bringing the number of countries that have ratified the agreement to 27.
Several instruments to facilitate the implementation of the agreement were launched at the summit, including rules of origin, a trade-in-goods dashboard, a payments and settlements system, and a dashboard of the AU Trade Observatory.
Ghana was also announced as the host of the AfCFTA secretariat. However, critical parts of the agreement have to be finalised before countries commence trading under the AfCFTA on July 1, 2020, including on schedules of tariff concessions and services commitments, and policies around investment, intellectual property, and competition.
Background
It would be recalled that the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union, held in Addis Ababa, Ethiopia in January 2012, adopted a decision to establish a Continental Free Trade Area by an indicative date of 2017. This deadline was, however, not met.
The Summit also endorsed the Action Plan on Boosting Intra-Africa Trade (BIAT) which identifies seven priority action clusters: trade policy, trade facilitation, productive capacity, trade related infrastructure, trade finance, trade information, and factor market integration.
The AfCFTA will bring together all 55 member states of the African Union covering a market of more than 1.2 billion people, including a growing middle class, and a combined Gross Domestic Product (GDP) of more than $3.4 trillion.
In terms of numbers of participating countries, the AfCFTA will be the world’s largest free trade area since the formation of the World Trade Organisation. Estimates from the Economic Commission for Africa (UNECA) suggest that the AfCFTA has the potential both to boost intra-African trade by 52.3 per cent by eliminating import duties and to double this trade if non-tariff barriers are also reduced.
Objectives
The main objectives of the AfCFTA are to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union.
It will also expand intra-African trade through better harmonisation and coordination of trade liberalisation and facilitation and instruments across the RECs and across Africa in general.
The AfCFTA is also expected to enhance competitiveness at the industry and enterprise level through exploitation of opportunities for scale production, continental market access and better reallocation of resources.
African leaders held an Extraordinary Summit on the African Continental Free Trade Area (AfCFTA) in Kigali, Rwanda, during which the Agreement establishing the AfCFTA was presented for signature, along with the Kigali Declaration and the Protocol to the Treaty Establishing the African Economic Community relating to the Free Movement of Persons, Right to Residence and Right to Establishment.
In total, 44 out of the 55 AU member states signed the consolidated text of the AfCFTA Agreement, 47 signed the Kigali Declaration and 30 signed the Protocol on Free Movement.
Status of Negotiations
During the 32nd Ordinary Session of the Assembly of the Union in Addis Ababa in February 2019, H.E. Mr. Issoufou Mahamadou, President of the Republic of Niger and Leader of the African Continental Free Trade Area (AfCFTA), presented a report on the status and progress made in the AfCFTA negotiations the Road Map for Finalisation of Outstanding Work on Phase 1 and Conclusion of Phase II Negotiations; and Draft Guidelines for Services Negotiations under the AfCFTA Protocol on Trade in Services.Ratification status
The African Continental Free Trade Area Agreement came into force on May 30, 2019 for those countries that had deposited their instruments of ratification before this date.
According to Article 23 of the Agreement, entry into force occurs 30 days after the 22nd instrument of ratification is deposited with the Chairperson of the African Union Commission (AUC) – the designated depositary for this purpose – an essential step for the AfCFTA to enter into force.
On April 29, 2019 Sierra Leone and the Saharawi Republic deposited their instruments of ratification with the depositary, paving the way for the AfCFTA’s entry into force. Since then, five countries have deposited their instruments of ratification. Cameroon approved ratification on July 19, 2019.
Nigeria’s Membership
After refraining from append ing his signature on the agreement in 2018, President Mohammadu Buhari last month signed the treaty in the presence of African Heads of States and Governments, delegates and representatives from the private sector, civil society, and the media attending the 12th Extraordinary Summit of the AU Launch of the Operational Phase of the AfCFTA.
The President in a statement issued by his media team declared that Nigeria’s commitment to trade and African integration had never been in doubt nor was it ever under threat.
He told the Summit that Nigeria will build on the event by proceeding expeditiously with the ratification of the AfCFTA.
“Nigeria wishes to emphasise that free trade must also be fair trade. As African leaders, our attention should now focus on implementing the AfCFTA in a way that develops our economies and creates jobs for our young, dynamic and hardworking population.
“I wish to assure you that Nigeria shall sustain its strong leadership role in Africa, in the implementation of the AfCFTA. We shall also continue to engage, constructively with all African countries to build the Africa that we want.”
President Buhari went on: “We fully understand the potential of the AfCFTA to transform trade in Africa and contribute towards solving some of the continent’s challenges, whether security, economic or corruption.
“But it is also clear to us that for AfCFTA to succeed, we need the full support and buy-in of our private sector and civil society stakeholders and the public in general.
“It is against this background that we embarked on an extensive nationwide consultation and sensitization programme of our domestic stakeholders on the AfCFTA.
“Our consultations and assessments reaffirmed that the AfCFTA can be a platform for African manufacturers of goods and providers of service to construct regional value chains for made in Africa goods and services.
“It was also obvious that we have a lot of work to do to prepare our nation to achieve our vision for intra-African trade which is the free movement of ‘made in Africa goods.
“Some of the critical challenges that we identified will require our collective action as a Union and we will be presenting them for consideration at the appropriate AfCFTA fora.
“Examples are tackling injurious trade practices by third parties and attracting the investment we need to grow local manufacturing and service capacities.”
President Buhari noted that Nigeria’s signing of the AfCFTA and its Operational Launch at the 12th Extraordinary Summit was an additional major step forward on the AU’s Agenda 2063.
With Nigeria and the Benin Republic signing the Agreement at the Summit, 54 out of 55 African countries have signed the world’s largest free trade area deal, encompassing 55 countries and 1.2 billion people.
The African Growth and Opportunity Act (AGOA) is a piece of legislation that was approved by the U.S. Congress in May 2000.
The purpose of this legislation is to assist the economies of sub-Saharan Africa and to improve economic relations between the United States and the region. After completing its initial 15-year period of validity, the AGOA legislation was extended on 29 June 2015 further by 10 years to 2025.
Stakeholders lamented that Nigeria has never taken full advantage of the potentials due to over reliance on oil while other Africans are turning around their economy with this programme.
The AGOA project initiated by the United States of America in 2000 was to help develop trade and facilitate exporting over 6000 goods into America with no tariff.
The trade agreement primarily set up to galvanise the African economy covered 15 years and has since elapsed in 2015.
However, Nigeria and other Africa countries on the programme have been given a second chance when the programme was extended by another 10 years.
According to the Nigeria American Chamber of Commerce (NACC), 14 years after its establishment, Nigeria precisely as at 2014 only exported $6 million worth of goods to the USA compared to $6billion accounted for by other Sub-Saharan African nations.
Speaking on the bungled opportunity provided by the AGOA project, Sherifdeen Tella, a Professor of Economics at the Olabisi Onabanjo University (OOU), Ogun State, stated that the benefits Nigeria may derive from AfCFTA are enormously provided the country will do the needful to take maximum advantage of the opportunities therein.
“On the other side is the lack of seriousness of Nigeria in all of these opportunities. Nigeria is yet to effectively tap into AGOA where South Africa seized the opportunities to record growth and became industrialised.
“The fact that the agreement allows for unification of all markets in the continent gives us a vast market to operate. In that sense, it means if we improve on our output it means we can get market for our produce and goods in the continent and by implications reduce unemployment and provide jobs in all the sectors where we produce for export.
It will also lead to an increase in income for the country”.
Addressing Nigeria’s failure with the AGOA initiative he said: “We are unable to take maximum advantage of the opportunity because we are a single product economy. The implication is that for us to benefit from AfCFTA we need to sit right and develop other sectors of the economy particularly the extractive sector.
“However whether Nigeria is ready to do all of these and avoid mistakes of the past is a different ball game.
“As we have not been able to benefit from AGOA because of lack of seriousness on the part of the government it will not be a surprise if the new opportunities go the way of others before it. Other countries are aligning, growing their markets and trading among themselves. If Africa can also do more intra-trade it will be better for the continent.
“When Africa unites it provides an opportunity to all member countries to collaborate, do business together and improve trade among them. Unfortunately, such does not exist as they are competing among themselves on trade with outsiders.
If the countries are ready to improve on their output in different sectors they will, in the end, benefit from the potential opportunities that the AfcFTA will offer.
“Unfortunately most African countries don’t have established institutions that will guarantee steady growth and galvanize African trade.
According to him, “It was unfortunate that many African countries missed the benefits offered by AGOA leaving South Africa to benefit immensely through a deliberate plan for industrialisation and export of goods and services into America.
“Within the African continent, intra-trade is still at its lowest ebb. The African trade pact is supposed to improve intra Africa trade growth but many lacked the required institutions to drive growth and develop their different sectors”.
He submitted that the 53.2% projection could be realized if African countries make up their minds to trade among themselves rather than trade with countries outside the continent.
Speaking in the same vein, Dr. Ayo Teriba, the Chief Executive Officer of Economic Associates, recently told SUNDAY INDEPENDENT at a stakeholders meeting in Lagos that Nigeria and other African countries lack the financial capacity to actualise the Africa Continental Free Trade Agreement (AfCFTA), saying that the needed solution is for the government to position the country’s economy to attract Foreign Direct Investment (FDI) to drive the intra-African trade initiative.
In his presentation at the meeting organised by the Financial Derivative Company (FDC), he stated that Nigeria lacked enough liquidity, saying that the country had been plagued by all forms of illiquidity including capital illiquidity.
He said: “If Nigeria cannot produce, it cannot adequately take advantage of the AfCFTA which has been adjudged the biggest trade treaty in the world. “The country inability to take advantage of the AfCFTA would, therefore, imply that the essence of signing the treaty is defeated”.
Speaking on the dearth of infrastructure, Teriba added that Nigeria’s road and rail transportation system has deteriorated over time, saying all of these add up to make it difficult to guarantee a successful actualization of the new trade pact.
He charged the federal government to take advantage of these opportunities like its peers in the developing world.
Ambassador Chiedu Osakwe, Director-General Nigerian Office for Trade Negotiations, described governments as monstrous creations all over the world and wondered where the government will source the money required to drive trade in the country.
He tasked the private sector to step in to provide infrastructure and warned against companies getting carried away by forgetting the government by resorting to whatever they like.
Not impressed with the activities of the Economic Community of West Africa (ECOWAS), Ambassador Osakwe advocated for a reorganisation of the regional body to fit into the African Continental Free Trade Agreement (AfCFTA), saying that the operation of the continental trade agreements would be a test case for ECOWAS to make AfCFTA work for West Africa.
The Lagos Chamber Of Commerce and Industry (LCCI) at the end of stakeholders meeting on AfCFTA earlier in the year, expressed fear about the existing numerous bilateral trade pacts agreements of some AU countries with the rest of the world and Nigeria’s underdeveloped industrial & infrastructural profile.
The Chamber argued that this Agreement will potentially make Nigeria a dumping ground due to our uncompetitive manufacturing sector, large market size and population.
The stakeholders at the conference noted that for trade to be effective and benefit from the AfCFTA existing trade focused bodies such as the Nigerian Diaspora Direct Investment Summit, National Trade Consultative Committee and the Nigerian Industrial Policy and Competitiveness Advisory Council should be bolstered, with trade and infrastructure interconnected.
The participants therefore, proposed that safeguards be put in place for the Nigerian economy and sensitive sectors on transhipment, dumping and expected a surge of import.
As stakeholders proposed an effective framework for the enforcement of Rules of Origin, they equally expressed concerns on the prevailing disconnect between regulatory agencies and policy inconsistencies among countries on the continent.
Participants, however, called for policy coherence and the reinforcement of interconnectivity between agencies to protect consumers and the Nigerian economy, as well as, enhance the interface between, trade, investment and governance.
The deep concerns about the lack of data on trade within the continent and likely negative effect of poor statistics on the implementation of AfCFTA was expressed.
The stkaholders, therefore, concluded that though the opportunities in AfCFTA outweigh the drawbacks but the necessary safeguards, systems, soft and hard infrastructures including viable ICT policies must be activated to maximize the potential benefits such as; consumers and market right of access to multiple and diversified products and services; protection against abusive and injurious parties in and outside Nigeria based on ongoing capacity expansion of trade laws; investment opportunities for innovative Nigerian entrepreneurs.
Speaking at the FDC organised stakeholders meeting, Mr Muda Yussuf, LCCI Director-General said: “I worry that I have not seen any evidence on how we are going to create an enabling environment for AFcFTA to thrive.
“We need to position the economy to take advantage of AFCTA. There is no policy pronouncement on how to tackle electricity supply to industries. ECOWAS is still grappling to ensure free trade among member nations,” he said.
Proponents of the continental free trade area say it will lead to a 52.3% growth in intra-African trade by 2022. But where is this figure from?
The pan-African free trade agreement no doubt has enormous potential but it is subject to current economic realities. The pan-African free trade agreement no doubt heralds great benefits but for those to be harnessed, current economic realities will have to change.
The African Continental Free Trade Area’s (AfCFTA) entering into force is a laudable development, building on existing initiatives for regional integration and laying the groundwork for more. The immense support from countries and leaders across the continent is merited.
At the same time, however, AfCFTA’s strong political backing and the excitement surrounding its rapid progress has led to some claims of its potential benefits going unchallenged, particularly surrounding intra-African trade gains. Most commentators appear reluctant to interrogate publicly a popular pan-African project, even when this analysis might be constructive.
According to Africa Arguments, this is a problem because a misleading impression has been created that signatory countries should soon enjoy the benefits of improved trade levels.
Specifically, following repeated citations by international organisations and the media, the estimate that AfCFTA will lead to a 52.3% increase in intra-African trade by 2022 is now widely taken as a given.
Though seldom cited, this number comes from a paper presented in 2012 by two UNECA specialists to the 7th African Economic Conference. And, importantly, the report’s authors make clear that their projection of a 52.3% increase by 2022 – compared to a 2010 baseline – is based on several assumptions: a fully-liberalised and continent-wide trade area by 2017; harmonisation of external tariffs across the continent by 2019; and a series of practical trade facilitation measures.
The post AfCTA: Stakeholders Seek Private Involvement, Government Seriousness appeared first on Independent Newspapers Nigeria.
Source: Independent
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