To be or not to be in the Africa Free Trade Area

Apr 04, 2018|Afolabi Adekaiyaoja

One in every four Africans is a Nigerian.

That statistic, first reported in 1975, has served as a reminder of Nigeria’s importance on the continent. Nigeria's status as the largest black-populated nation on earth comes with both prestige and responsibility. It was Nigeria that helmed the United Nations Special Committee against Apartheid, and it was her invitation that allowed Nelson Mandela address the UN for the first time after his release from jail. In fact, the most advanced proposal to increase Africa's self-sufficiency was drafted in Lagos in 1980, a plan that rightly bears the name of Nigeria's former capital city. But when historians revisit March 2018, and the largest trade area since the creation of the World Trade Organisation the 'giant of Africa' will not be mentioned.

The African Continental Free Trade Area (AFCFTA) is a brainchild of the African Union aimed at creating a single market for goods, services, and free movement of labour and investment on the continent. The initiative intends to leverage the sheer size of Africa's population, soon expected to include over a billion people and low levels of regional trade on the continent. Africa's intra-regional trade is currently low (18%) when measured against 69% in Europe.

This is a heavily untapped market and with the potential for both positive and negative outcomes. Ironically, the origin of such a proposal can be traced to the aforementioned Lagos Plan of Action. Under Chapter VII, dealing with trade and finance, a lot of the recommendations in the AFCFTA were initially mentioned, including the free movement of goods, people, and capital. 

So why did Nigeria remain on the sidelines?

Despite the notional gains from trade, Nigeria's Labour Congress argued that the deal opened the country up to foreign interference through economic activity. Strictly speaking, this is true, as some existing tariffs and domestic protecting barriers would be removed. However, this argument ignores the flipside – that Nigerian investors and entrepreneurs would have an even larger market size. Considering its size, geographical location, and level of industrialisation compared to regional peers, Nigeria arguably stood to gain even more than other signatories.

Perhaps a more reasonable argument would be that the free trade area would be too much, too soon for Nigeria and Africa as a whole. 

Despite the fanfare following the signing, the historic ceremony at Kigali did not put the trade agreement into force. States must still go back to their national parliaments and ratify the framework, with 22 needing to do so for the agreement to come into force. And even after ratification, enforcement is likely to be a challenge. 

Without credible enforcement, the AFCFTA has no leg to stand on. While the then European Coal and Steel Community gradually grew into the now powerful European Union with set criteria and a fixed commitment to the principles of the body, the African Union simply requires being on the continent for membership. So while the EU could impose sanctions on member states for excessive deficits, the AFCFTA is yet to agree on a protocol on dispute settlement. Countries could still default and disregard agreements, and the process provides no means of effective sanctions for erring member states. 

Neither does the AFCFTA have a standing body to enforce its actions and its activities – these would likely be established after the Trade Area comes into force. But without clear structure and procedures, the proposed mutual recognition of standards, licensing and certification of service suppliers, a flagship of the agreement, will be difficult to enforce. More sophisticated African economies like Nigeria would either need to see other countries develop their capacities to match theirs or compromise their quality for the sake of quantity – acknowledging a concern of becoming a market of substandard goods. 

Even with all this, opportunities remain. Better movement of goods and services would banish stories of Lagos businesspeople needing to travel through two other African states to neighbouring Sao Tome. Nigeria's role as the largest economy on the continent can help give it the required sway to dictate on specific negotiations and help advance the continent's work. And her admittedly suspiciously large population would give it the ability to demand effective concessions.

For a country whose history is filled with proactive continental leadership, the fact that it did not have a stronger presence in Kigali might be a missed opportunity. Nigeria's 'rival' on the continent has already shown it is ready to assume the leadership mantle, with Ramaphosa signing the protocol and requesting time on the Agreement. If Buhari fails to lead by example, he might find himself as part of the old guard being swept away by change.