FG Approves N205m For Implementation Of Africa’s Free Trade Agreement

Despite criticisms trailing the closure of the nation’s border to neighboring countries, the Federal Government has set aside the sum of N205m for the implementation of the African Continental Free Trade Agreement.

The amount is provided in the 2021 Budget proposal which was submitted by President Muhammadu Buhari to a joint session of the National Assembly.

Buhari had presented a budget proposal of N13 08trn up by 22.9 per cent from the N10.8trn 2020 budget, with  revenue projected at N7.5trn, while the deficit amounted to N5.21trn.

The President had said the proposed N13.08trn expenditure comprises Capital Expenditure of N3.85trn,
Non-debt Recurrent Costs of N5.65trn;
Personnel Costs of N3.76trn;
Pensions, Gratuities and Retirees’ Benefits of N501.19bn;
Overheads of N625.5bn;
Debt Service of N3.124trn;
Statutory Transfers of N484.49bn; and
Sinking Fund of N220bn to retire certain maturing bonds).

The AfCFTA which was signed last year and was supposed to take off on July 1, this year, had been delayed due to the coronavirus disease outbreak that has set back negotiations on the protocol for trade in goods, including tariff concessions

Based on projections by the United Nations Economic Commission for Africa, the AfCFTA is expected to boost intra-African trade by between by $50bn to $70bn in monetary terms, with a 40 per cent to 50 per cent increase over the first 20 years of its implementation.

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 of more than $3.4trn.

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 Organization.

Estimates from the Economic Commission for Africa suggest that the AfCFTA has the potential both to boost intra-African trade by 52.3 percent by eliminating import duties, and to double this trade if non-tariff barriers are also reduced.

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 harmonization and coordination of trade liberalization 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.

While the Federal Government had in August last year partially closed its borders with Benin and Niger to curb rice smuggling with the excuse that is threatening the country’s attempt to boost local production, some experts have said the move was against the principle of the AfCFTA.

The Minister of Finance, Mrs Zainab Ahmed had during a chat said the action was taken because the Federal Government was not getting the right cooperation with neigbouring countries.

She had said going by the fact the Nigeria had signed onto the African Continental Free Trade Agreement, there is need for government to ensure that those bilateral agreements with other countries are respected

Also, the Minister of Industry, Trade and Investment, Adeniyi Adebayo had said that the Africa Continental Free Trade Area would improve the export quality of products manufactured in Nigeria.

He said with the implementation of the agreement, there would be sophistication of exports across the continent, adding that this would provide manufacturers in Nigeria the opportunity to increase the quality of export.

He stated that government was fully committed to resolving the constraints that may affect the business environment.

The Minister added that relevant agencies of government are implementing various initiatives that would enable companies in Nigeria benefit from the pact.

He said, “Though the share of intra-Africa exports as a percentage of total Africa exports increased from about ten per cent  in 1995 to around 17 per cent in 2017, it remains low compared to levels with Europe 69 per cent, Asia 59 per cent,and North America 31 per cent.”

Adebayo said that if the continent is to achieve its potentials of diversifying  and transforming its economies through the AfCFTA, it must begin the work of implementing strategies for exports, diversification, industrialization and value chain development.

“The AfCFTA present us with a game chaining opportunity that cannot be missed,” he added.

But the Director, Africa Development, International Monetary Fund, Abebe Selassie
said while the AfCFTA has the capacity to stimulate intra-African trade, such potentials could only be achieved under an atmosphere that discourages trade barriers.

He said, “You know, it’s a kind of trade that we want to facilitate, and the AfCFTA I think will do that subject to tariffs, of course, being lowered, which is what the agreement deals with.  But also not other barriers to trade being opened up.  

“On the border closure in Nigeria which has been impacting Benin and Niger, our understanding is that the border has been closed, reflecting concerns about smuggling that’s been taking place, illegal trade, not the legal trade that you want to facilitate. 

“So we’re very hopeful that, you know, discussions will resolve the challenges that this illegal trade is fostering. 

“To be sure, if the border closure was to be sustained for a long time it’s going to definitely have an impact on Benin and Niger, which of course, rely quite extensively on their big brother next door.  So, we hope that there will be a resolution to that.”

Also, the Nigerian Economic Summit Group said that the implementation of the African Continental Free Trade Agreement would have negative impact on the Nigerian economy.

It said that relying on the inflow of foreign savings to grow the economy may not readily pay-off at a time when the economy is not yet competitive.

In a study conducted by the NESG, it recommended that the government should embark on massive infrastructure upgrade and institutional reforms to improve the business environment.

The infrastructure upgrade, the Report noted, could be realized through the concession of major infrastructural projects to the private sector such as electricity, roads, bridges, airports, and seaports among others

The Group in the report said that the concessions must, however, be complemented by strong institutional reforms to effectively regulate the operations of the private sector.