The African Continental Free Trade Area is the largest global free trade area, which could transform the continent’s economic prospects.
Established in May 2018 and effected on 1 January 2021, AfCFTA aims to be a model of cross-border cooperation in an era of growing isolationism. Also, it has the potential to lift 30 million people out of extreme poverty.
The agreement signed by 54 African Union member countries will reduce tariffs among member countries and cover policy areas such as trade facilitation and services, as well as regulatory measures such as sanitary standards and technical barriers to trade.
In addition, due to the impact of Covid-19 pandemic on global economy, AfCFTA is a major opportunity to help African countries diversify their exports, accelerate growth, and attract foreign direct investment.
However, Nigeria is poised to gain from the investment and trade opportunities that the AfCFTA will inevitably bring. In this article, we highlights some of these opportunities.
1. Increased Jobs
For countries such as Nigeria with an abundance of professional in various service industries, AfCFTA would increase the movement of such professionals to countries with a demand for their services.
In addition, labour-intensive trade across borders would require the services of low skilled workers and the free movement of persons guaranteed by the AfCFTA will bring with it the free movement of services these persons will render.
2. Reduce Poverty
The AfCFTA highlights the significance and increasing commitment of the AU to reducing poverty through trade.
A report by the World Bank states the pact will boost regional income by 7% or $450 billion, accelerate wage growth for women, and lift 30 million people out of extreme poverty by 2035. Likewise, wages for both skilled and unskilled workers will be boosted by 9.8% and 10.3% respectively.
3. Trade Integrity
It will promote good governance both globally and across Africa through the concept of ‘Trade Integrity’, which is international trade transactions that are legitimate, transparent and properly priced.
4. Size of Nigerian Market
AfCFTA would increase Nigeria’s market size by allowing manufacturers to increase capacity and expand into other African countries. Also, it will enable investors benefit not only from the Nigerian market but from other countries on the continent as well.
5. Supply Chain Infrastructure
Manufacturers and retailers expanding their operation to other markets would depend on a distribution network that can efficiently deliver goods. This would give expand investments in the distribution and logistics supply chain to ensure the infrastructure needed for transportation of goods is available. It will also be more beneficial to investors who invest in the logistics and transportation space.
6. Shunning Nevagative Impacts of Covid-19
The Pandemic caused over $79 billion in output losses in Africa in 2020. However, AfCFTA presents a short-term opportunity for countries to “build back better” and cushion the effects of the pandemic. In the longer-term, the pact will increase the continent’s resilience to future shocks.
7. Women
With a focus on improving the lives of women, the AfCFTA via tariff reductions will allow informal women traders to operate through formal channels, bringing better protection. Furthermore, a growing manufacturing sector would provide new job opportunities, especially for women.