Protectionist Policy By African Countries May Hamper AfCFTA–NESG
The Nigerian Economic Summit Group has said that the ‘rules of origin’, which deals with protectionist practices by some countries could constitute a setback for the establishment of the ambitious single market for Africa.
In its 2021 Macroeconomic Outlook, the Group noted that while Nigeria may reap more gains through export diversification away from crude oil, ‘rules of origin’ constitute a significant risk factor.
President Muhammadu Buhari had in 2019 signed into AfCFTA, which seeks to create a $3.4trn economic bloc, uniting over 1.2 billion people.
According to the outlook, African economies that are more diversified and have improved transport infrastructure, would benefit more from the trade pact than others that are resource-based and agriculture dependent.
It stated, “Putting this in context, South Africa currently accounts for 40 per cent of intra-African manufacturing imports. On the other hand, resource-based countries, such as, Algeria, Egypt and Nigeria – which collectively account for approximately 50 per cent of Africa’s GDP, contribute only 11 per cent to intra-African trade.
“Another bone of contention is the issue of ‘rules of origin’, which constitutes a significant risk factor. This implies that protectionism practices by some countries could constitute a setback for the establishment of the ambitious single market for Africa. But there are several reasons to be optimistic.”
According to the report, trade in Africa is still dominated by raw materials and less processed products, adding that on average, minerals and agriculture accounted for 44 per cent and 16 per cent of intra-African trade respectively between 2007 and 2017.
The Group said the World Bank estimates revealed that the AfCFTA would promote manufacturing exports over natural resources, agricultural and services exports, and that manufacturing exports would account for one-third of the projected total exports of $2.5trn by 2035.
“Nigeria could reap more gains through export diversification away from crude oil, as manufacturing exports currently account for an average of nine per cent of the country’s total exports.
“This suggests that efforts should be directed at strengthening domestic value chains, particularly the agro-allied industrial base.
“To achieve this, there is a need to attract private capital, most especially, FDI that would allow for knowledge and technological transfers,” it added.
The Group also stressed on the need for Nigeria to fix its transportation deficit for it to reap the gains of the trade agreement.