AFRICAN’S CONTINENTAL FREE TRADE
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AFRICAN’S CONTINENTAL FREE TRADE
Chapter one
INTRODUCTION
Background for the Study
The African Continental Free Trade Area (AfCFTA) is a gigantic endeavour intended at promoting economic unification across the African continent ( African Union, 2013).
The AfCFTA, which will be officially started on January 1, 2021, aims to create a single market for products and services, facilitate people and capital movement, and boost intra-African commerce.
With 54 African nations participating, it is the world’s largest free trade area in terms of member states (Trade Law Centre, 2019). Nigeria, Africa’s most populous country and a major economic power, is critical to the AfCFTA’s success and influence.
Nigeria has a complicated economic landscape with a large population, significant natural resources, and a diverse industrial sector (World Bank, 2022).
However, the country is facing severe economic issues, including unemployment, poverty, and an overreliance on oil exports (United Nations Economic Commission for Africa, 2018).
The AfCFTA provides Nigeria with both benefits and problems, making it critical to perform a full impact assessment to determine how this trade agreement will effect Nigeria’s growth trajectory.
One of the key benefits of the AfCFTA for Nigeria is the potential for enhanced intra-African trade. Tariffs and trade obstacles between member states can be eliminated, thereby stimulating trade and economic growth.
Economic theory suggests that trade liberalisation can lead to production specialisation and comparative advantage, leading in higher efficiency and economic gains (Ricardo, 1817; Jones, 2020).
Nigeria, with its diverse economy and industrial capabilities, might profit from greater access to African markets for its goods and services. This might improve export opportunities, create jobs, and boost overall economic growth (Erasmus, 2018).
Furthermore, the AfCFTA can help to diversify Nigeria’s economy. Nigeria’s economy currently relies significantly on oil exports, rendering it subject to price changes (World Bank, 2022).
The AfCFTA, by expanding trade in non-oil sectors and stimulating the development of value-added businesses, has the potential to reduce Nigeria’s reliance on oil revenue while also improving economic stability. This diversification can also help to reduce the negative effects of external shocks on Nigeria’s economy.
On the other hand, the AfCFTA poses obstacles for Nigeria. One concern is the possibility of increasing rivalry in domestic markets. As trade barriers fall, Nigerian sectors may face competition from established enterprises in other African countries (Saygili et al., 2018).
To stay competitive, Nigerian industry may need to enhance efficiency, product quality, and competitiveness. This may necessitate expenditures in technology, skill development, and infrastructure.
In addition, there is a need to address trade facilitation and infrastructure development. Inadequate infrastructure, such as roads, ports, and logistics, can impede the seamless movement of commodities inside Nigeria and across borders (United Nations Economic Commission for Africa, 2017).
Improving infrastructure and lowering trade barriers in Nigeria will be critical to fully reaping the benefits of the AfCFTA and improving trade efficiency.
The influence of the AfCFTA on Nigeria’s agriculture industry is also a topic of interest. Agriculture is important to Nigeria’s economy, employing a high proportion of the population (Bayale et al., 2020).
The AfCFTA may expand markets for Nigerian agricultural exports, but it may also raise competition from more efficient producers in other African nations (Mayer & Zignago, 2005).
A complete impact evaluation should look at how the AfCFTA affects the agriculture industry, its potential benefits, and the necessary policy changes to assure the sector’s growth and competitiveness.
Furthermore, the AfCFTA’s influence on Nigeria’s small and medium-sized firms (SMEs) must not be disregarded. Small and medium-sized enterprises (SMEs) play an important role in Nigeria’s economy, providing jobs and money.
The reduction of trade barriers may give SMEs with new export prospects, but they may have difficulties in obtaining funding, technology, and market intelligence (Caliendo and Parro, 2014). An impact evaluation should analyse how the AfCFTA can help SMEs grow and overcome any challenges they may face.
As a result, the African Continental Free Trade Area (AfCFTA) is a substantial project with the potential to transform Africa’s economic landscape. Nigeria, as a major contributor to the continent’s economy, stands to benefit from increasing intra-African trade and diversification opportunities.
However, it confronts other hurdles, including rising competition and the need for infrastructural expansion. A comprehensive impact assessment, taking into consideration the many economic sectors, is required to guide Nigeria’s policies and strategies for maximising gains and tackling issues provided by the AfCFTA.
Such an assessment should take into account the dynamics of commerce, agriculture, infrastructure, and the role of SMEs in ensuring that this historic trade deal has a beneficial impact on Nigeria’s growth trajectory.
Statement of the Problem
The establishment of the African Continental Free Trade Area (AfCFTA) in Nigeria has created a dynamic landscape of possible benefits and concerns. On the one hand, the AfCFTA has great promise for the Nigerian economy.
Tariffs and trade obstacles between African nations can be eliminated, thereby stimulating economic growth and creating job possibilities. This is consistent with Nigeria’s long-term economic diversification aspirations of lessening its historical reliance on oil exports (United Nations Economic Commission for Africa, 2018).
Furthermore, the AfCFTA has the potential to accelerate industrialization by stimulating the growth of value-added sectors and promoting technological breakthroughs (Abrego et al., 2019).
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