What's the Deal with: the African Community Free Trade Agreement

By Folakunmi Pinheiro & Loye Oyedotun | July 2019, Volume 3 Issue 2


"Lifting trade barriers across Africa should increase the value of intra-African trade by between 15 percent (or $50 billion) and 25 percent (or $70 billion) by 2040" — Vera Songwe, executive secretary of the United Nations Economic Commission for Africa (UNECA)"

We have to start by explaining that Naija, who usually no dey carry last, dey carry last. Africa's largest economy (if only because of population size, amongst other factors) is not a signatory to arguably the most significant and historic trade agreement.
What is the African Community Free Trade Area Agreement (the "ACFTA" Agreement)?

It is an agreement similar to the Treaty which established the European Union (the "EU"). It was promulgated by the African Union (the "AU") with the understanding that despite the troubles which the EU currently faces, it is ultimately a force for good and a net benefit for its member countries. The ACFTA was signed by 44 out of the 53 members of the AU on 21 March 2018, in Kigali, Rwanda and once fully implemented will be the largest free trade area in the world by number of members. Since then, the ACFTA has been signed by another eight (8) countries including South Africa, to bring the total number of signatories to 52 of the 55 countries on the continent, still no Nigeria.

The ACFTA is a free trade agreement, the first in a series of ground-breaking agreements which will also provide for freedom of movement, a Single African Air Transport Market, and a single-currency union. The AU aims to use the ACFTA to create a single market and a customs union in Africa aka an African version of the EU. The first step of this will be the removal of tariffs on 90% of goods which are traded between members of the ACFTA. A visual depiction of Nigeria carrying last.

The operational stage of the agreement is set to begin on 7 July 2019 when another summit will be held in Niger. This will provide an avenue where Phase II Protocols can be implemented - e.g. competition law, intellectual property protections, and place of origin rules (for instance, Champagne is only Champagne if it is grown in France; imagine if Ofada was only Ofada if it was made in Nigeria). In addition to this, dispute resolution and elimination of barriers will also be implemented.

What does it mean for you and your pocket?

This is the koko right? With all this fancy talk, what does the ACFTA actually mean for you in your day to day life? We have listed a number of ways the ACFTA can benefit you:

1. African Union Passport: Even Dangote, Africa's Richest Man™, was rejected for visas from other African countries. However, this was before he was granted the African Union passport. Taking their inspiration from the vaunted EU passport which allows citizens of the Member States to travel within the territory seamlessly, the AU passport is an initiative which will allow Africans to travel to every country on the African continent. This is nothing less than a paradigm shift.

2. Make I give you shitor make your… aka Cheap(er) shitor and chicken yassa (yasss!): The deal is proposed to remove tariffs from 90% of the goods which are produced by the African Union Member States. This will make it much cheaper and easier transact business across Africa and obtain goods from any other African countries. You may ask, what goods will be tariff free? No one knows yet (which is one of the reasons the Nigerian government has refused to sign the agreement).

3. A Single Aviation Market: We don't know about you, but it gets expensive constantly travelling everywhere outside of my home continent. Additionally, we feel intense shame at the fact we have been to more countries in Europe than we have in Africa. But correcting that as things stand is an incredibly cost-intensive exercise. Fortunately, the Single African Air Transport Market, which would stem off the ACFTA, will make it such that many of the barriers and costs which airlines face when moving both goods and people intra-Africa are suddenly much lower.

4. Cross-pollination of people, ideas, and best practices: We tend to fear things that we do not understand/know — this underpins many tribalistic prejudices within our own country. The ACFTA will lower the national barriers within the continent, in doing so, it will make the 'other' far more familiar and will help to integrate the continent. In addition the Agreement will, in theory, allow talent and resources to flow where they are most needed — at least it will make it easier for this to happen. This is known as allocative efficiency as talent and resources are allocated to their most efficient uses; as opposed to stockpiled where they have no added benefits.

5. Pan-African Economic growth: Only 18% of the goods African countries export is traded within Africa. In fact, the United Nations Conference on Trade and Development has estimated that around 80% of international trade conducted by African states takes place with non-African markets. The ACFTA presents the possibility of more home-grown multinationals arising. Africa does not currently have an answer to companies such as Unilever, Proctor & Gamble etc. "With 1.2 billion people in 55 countries, the benefits of working together are far superior to operating as small, fragmented markets in the new global order. Second, the AfCFTA opens enormous opportunities for the manufacturing sector and for small, medium, and large businesses. This will boost intra-area trade, create jobs, enhance skills development, and assure best practices through smart competition among countries." (Source)

6. Increased intra-Africa Competition: By making trade easier within Africa and increasing the possibility for economic growth, the Agreement will lead to more intra-Africa competition. If companies and producers that monopolise their home-markets (you know who you are..) are exposed to external competition from foreign companies, they will be forced to reduce their prices and innovate to the benefit of consumers everywhere. Put simply, the agreement will increase the scope of competition and consumers will benefit.

So…Nigeria has failed to sign the ACFTA

Now here's the rub of the article and where Nigeria really showed itself last year. The ACFTA has been in the works since 2013. I think we can all agree that even with our usual sme-sme, that is more than enough time for Nigeria — a leading voice in the AU with significant bargaining power — to insert advantageous terms to the Agreement or remove disadvantageous terms from the Agreement. However, on the day before the treaty was supposed to be signed, with the presidential jet fuelled and ready to be flown over to Kigali for the signing of this agreement, the Nigerian government decided there was too much opposition from labour groups (the same group who gave us back to back hits such as "Fuel Scarcity Bars" and "You want to go to Unilag? That meins…"). The National Labour Congress went so far as to call it a "renewed, extremely dangerous, and radioactive neo-liberal policy initiative." Eyin le mo, mate.

In addition to scapegoating the labour groups, the Nigerian government has defended its decision not to sign the ACFTA on three further grounds:

1. It wishes to defend Nigeria's own businesses and industry;

2. It wants *checks notes* more time to consult businesses and labour unions; and

3. It was worried about anti-competitive practices such as dumping — where foreign sellers outcompete home-grown sellers by selling the same products at a significantly lower price.


Clearly, we are biased in this article — we think the reasons for Nigeria to not become a signatory are few and far between. The positives vastly outweigh the negatives for Nigeria as we have one of the strongest manufacturing industries (with the exclusion of South Africa and perhaps some of the North African countries) and would be able to spread its goods and services across a larger market. Put simply, Nigeria has more to gain than most other countries. This is only made easier by the fact that Nigerian culture is pervasive across the African Continent. The ACFTA provides an opportunity for Nigerian businesses, both large and small to make significant profits from this.

Nigeria has two choices. We can either enter this Agreement at the preliminary stages and play an influential role in how important decisions are made — i.e. what goods will be tariff free, what will be excluded, and the general rules of how the Agreement will operate. Or we can join later (which is inevitable at some point in the future) and take whichever rules are decided in our absence. In sum, we can either be rule-creators or rule-takers. To be sure, Nigeria will end up being a signatory to this Agreement. The question is when? And under whose terms?