Nigeria and other resource-based countries will benefit less from the African Continental Free Trade Area than economies that are more diversified, the Nigerian Economic Summit Group has said,
The NESG, a private sector-led think-tank, said in its 2021 Macroeconomic Outlook that Nigeria could reap more gains through export diversification away from crude oil.
It said trade in Africa remained 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 NESG said, “Evidence has shown that 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 agricultural dependent.
“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,” it added.
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 $2.5tn by 2035.
It said, “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.”
According to the NESG, for Nigeria to maximally benefit from the trade deal, there is an urgent need to also address transport infrastructure bottlenecks and provide improved logistics.
It said, “Finding a lasting solution to the Apapa gridlock by creating similar ports in other regions of the country, so as to ensure speedy clearance of consignments needs to be prioritised.
“Nigeria also needs to set standards for locally-made goods to enhance their attractiveness in the regional market.
“The Nigerian government as a matter of urgency needs to operate an efficient and corruption-free land border system, so as to guide against the importation of low-cost sub-standard products into the country.
“It is only when these and many more reforms are implemented that Nigeria can begin to reap the benefits of the trade deal.”
The group noted that owing to the outbreak of COVID-19, the implementation of the AfCFTA was postponed from July 1, 2020 to January 1, 2021.
It said, “The key goal of the free trade pact is to expand the volume of intra-African trade, which stood at 16 per cent in 2018 .“Till date, 36 countries, including Nigeria, have ratified the agreement. The trade deal is expected to create a single market with a combined GDP of $2.5tn and total population or market size of 1.2 billion.”