The president of Nigeria, Muhammadu Buhari on Sunday, July 7, 2019, finally signed the African Continental Free Trade Agreement (AfCFTA) agreement. This comes over a year after the landmark agreement was signed by 44 countries.
It would be recalled that when the agreement was first signed in March 2018, Nigeria and South Africa which are Africa’s biggest economies said they wouldn’t sign the deal. The president of South Africa, Cyril Ramaphosa had said that he needed to consult home; the Cabinet; the partners at the National Economic Development and Labour Council as well as Parliamentarians because the country was going through a cleaning up process to ensure everyone was on board.
Meanwhile the president of Nigeria, also stated that Nigeria would not sign the deal and that the trade agreement must fairly and equitably represent the interest of Nigeria and her African brothers despite series of calls and criticism from Nigerians.
President Buhari decided to sign the agreement at the opening of the 12th Extraordinary Session of the Assembly of African Union Heads of State and Governments in Niamey, Niger after receiving the report on the impact of AfCFTA from a high-level committee that he set up last year.
In as much as people claim that this agreement would be beneficial to Nigeria, it is worthy to note that Nigeria is not ready for this change and needs to look into the next level following this agreement, with regard to how it would affect Nigerians.
Generally, the AfCFTA should make doing business on the continent easier. For Africa’s small and medium-sized enterprises (SMEs), which account for approximately 80 percent of the continent’s businesses. The agreement will put measures in place that allow companies to tap regional markets that they might not otherwise access through preferential trade regimes, transit and customs cooperation, and tariff reductions on intermediate and final goods. These measures should help improve the risk-return profiles of the participating countries and bring new investors to the table. But is this really the case for Nigeria most especially its manufacturers?
Manufacturers in Nigeria will be the hardest hit by this decision. Imagine producing in a country without poor power supply and you spend money generating your own power for production. In the end, the price of this power will be factored into the cost of the goods. Whereas, the countries with steady power supply will end up spending less on production, which will, in turn, make their products less expensive.
As a result of the AfCFTA, Nigerian manufacturers will suffer more as Nigerians will prefer to buy goods from other countries rather than buying the locally manufactured once.
This means that the government needs to give the various sectors the necessary support needed and ensure that policies that would benefit Nigerians are put in place as soon as possible in order to ensure that the AfCFTA achieves its aim in the country.
Without mincing words, Nigeria may end up becoming a dumping ground for all exports from other African countries as Nigeria has the market and population to buy their goods. But if the government provides the basic things needed by manufacturers— such as constant power supply and decongested ports, then it could also benefit from the agreement. The country could also see multinational companies set up factories in the country rather than neighbouring African countries.
On another note, there is the likelihood that Nigeria’s capital market would benefit from the AfCFTA, leading to an influx of trading companies which will eventually evolve into manufacturing companies. A repetition of history, like in the 60s when the likes of Nigerian Breweries, Guinness and Cadbury came into Nigeria before the petrodollar boom in the 70s when they became listed on the Nigerian Stock Exchange.
However, without good policymaking and preferential treatment to Africa’s most at-risk economies, the AfCFTA could prove to be a force for economic divergence rather than a force for good.