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African Countries Depend On Other Continents For 85% Of Total Trade – Report

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Report of the Committee on the Impact and Readiness Assessment of the African Continental Free Trade Area (AfCFTA) Agreement has concluded that African countries have been depending on countries outside the continent for over 85 percent of its total trade.

The report, which was formally submitted today, June 27 to President Muhammadu Buhari at the Presidential Villa, Abuja,  by AfCFTA Chairman, Desmond Guobadia, emphasized: “African countries depend on countries outside the continent for over 85% of her total trade.”

The report said that intra-African trade which is trade among African countries constituted only 14.6% of Africa’s total trade with the world whereas intra-EU trade during the same period was 69.8%, intra- American trade was 46% and intra-Asian trade was 59.6%.

It said that the low level of intra-African trade pointed to low production capacity of African countries, high tariff and non-tariff barriers to trade. In order words, African countries are still far from achieving self-sufficiency across all sectors.

 “Another factor is the preference of African countries to trade with countries outside of Africa due to colonial ties and other economic and political considerations.

“It is envisaged that the trade liberalization offered by the AfCFTA will make African goods more attractive and potentially cheaper than similar products from outside the continent.

“The AfCFTA therefore provides immense opportunities for Nigeria’s manufacturing and service companies to expand to Africa. Today, many Nigerian companies have developed capacity in some of these sectors and have long desired to expand to Africa but have been constrained by trade barriers which AfCFTA is expected to remove.

“Our study has shown that the AfCFTA is not without major risks and undesirable impacts. The most significant of which is the potential rise in smuggling and abuse of rules of origin. The risk is that it will provide incentive for traders to disguise goods imported from outside the continent as made- in-Africa goods, to qualify for duty-free treatment.

“This risk is high for Nigeria considering that 92% of Nigeria’s imports come from the rest of the world and smuggling, under-reporting of imports and other forms of abuse of rules of origin already constitute major challenges faced by Nigeria in ECOWAS.

“The risk is further complicated by the lack of capacity, resources and “will” on the part of some African countries, to enforce their borders. Tackling this threat will require collective efforts at the highest level of ECOWAS and the African Union.

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“Our report recognizes that there will be significant adjustment costs to manage the negative impacts and to take advantage of the opportunities.

“The adjustment costs will include retraining workers in declining sectors to be able to take up employment in growing sectors, providing capital to business owners to retool their plants to remain operational and attracting investments to growing sectors in order to produce goods and services to export to Africa.

“The Committee proposed policies, programmes, projects and interventions which may position Nigeria adequately for the AfCFTA.

“We identified sectors which can act as arrowheads for Nigeria’s expansion into Africa, while efforts are intensified to attract private sector investments to the productive sectors.

“Our report shows that on the balance, Nigeria should consider joining the AfCFTA and using the opportunity of the ongoing AfCFTA Phase I negotiations to secure the necessary safeguards required to ensure that our domestic policies and programs are not compromised.

“Specifically, we recommend the following safeguards:

a. extension of the timelines to achieve trade liberalization and integration ambitions and possibly replacing them with a readiness criteria

 b. introduction of explicit rules on import quota restrictions;

c. adoption of a common Market Access Offer for Trade in Goods and Trade in Services for ECOWAS, including synchronized Sensitive and Exclusive Lists;

 d. adoption of the common Market Access Offer for Trade in Goods to replace and supersede the 2013 ECOWAS Common External Tariff (CET), which created vulnerabilities for Nigerian industry and manufacturing; and

 e. adoption of appropriate continental customs cooperation and other mechanisms to tackle predatory trade.

“Considering the potential impact of predatory trade on her economy, Nigeria should consider championing the effort at ECOWAS and AU/AfCFTA to implement and enforce these safeguards.

“At the domestic level, we recommend that: A: a National Action Committee on AfCFTA be established to coordinate relevant ministries, departments and agencies to drive the implementation of the AfCFTA readiness projects and initiatives.

B the AfCFTA negotiation mandate should be updated based on the report of this Committee and submitted to Your Excellency for your consideration and further directives.

“We also recommend that the Nigeria Office for Trade Negotiations (NOTN) be strengthened by enacting its Enabling Law expeditiously.”