Elusive agreement: Nigeria is right to withhold AfCFTA endorsement

By Stephen Adewale

The attention of the continent has been shifted to Nigeria over the past week for its refusal to endorse the Africa Continental Free Trade Agreement (AfCFTA). AfCFTA would be the largest free trade agreement since World Trade Organisation was founded over twenty years ago, encompassing over a billion people and up to $ 3 trillion of cumulative GDP. As of today, the agreement has been signed by 52 out of 55 countries. Benin, Eritrea and Nigeria alone are yet to sign. That a heavyweight like Nigeria remains conspicuously on the sidelines at a time of increasing momentum towards continental integration has generated global criticism. On balance, critics’ argument about Nigeria’s non-endorsement is overblown.

When Gambia’s parliament on Tuesday April 9, 2019 approved the Africa Continental Free Trade Agreement (AfCFTA), becoming the 22nd nation to do so, and effectively meeting the minimum threshold for the agreement to come into force. Africa Union’s Commissioner for Trade and Industry, Albert Muchanga, led celebrations of the achievement, posting on his official Twitter account that “the AfCFTA market is being born and is one step ready for launch.” With that, the African Union (AU) echoed the sentiment its officials and propagandists have been circulating online all year that the implementation of the continental free trade agreement will bring us closer to a more perfect Pan African Union.

As much as that analogy resonates, it is an idealism that does not match the existing reality. If there is any lesson to learn from the recent events across the continent, it is that the continent’s current enslavers are public thinkers who have decided to impose this economic policy on the continent that lacks enabling environment that could have made such policy to thrive. At the top of the pyramid sits the African leaders and economists from whom Africans need deliverance. They cannot be the problem and solution.

For clear understanding of the ideology behind the AfCFTA, some historical explanation might be necessary. In March 2018, 44 African countries, buoyed by their desire to advance a vision for greater intra-African trade, signed the framework agreement on the AfCFTA. The ambitious project seeks to remove tariffs on 90% of the goods traded between the signatories to the agreement, and gradually eliminate other non-tariff barriers to trade in goods and services. It proposes creating a single market for goods and services, with free movement of people and investments across 55 countries. The deal promises to redefine trade relations among African states and beyond. It also promises to aid the coordination of trade liberalisation and improve interactions within existing regional economic communities. If implemented, it will draw together the largest number of countries within a free trade area in the world.

Unquestionably, the AfCFTA sounds good on paper and it has immense potential to facilitate a virtuous economic growth cycle for the continent. In a sanity clime, such a policy could double trade figures if tariff rates and non-tariff barriers are reduced, generate much needed employment for Africa’s bulging youth population, and attract new investors to a single African market. However, what the proponents of AfCFTA fail to tell the general public is that this lofty dream is not going to be realised as the AU policymakers have failed to think hard about the long-term distributional consequences of the AfCFTA. While navigating the long road to implementation, they are fallen into inequality traps that will soon leave some economies worse-off and block out of global value chains.

While the AU policymakers used the example of flourishing trade among the Latin American and Asia countries to draft AfCFTA content, they ignored the fact that at just 16%, Africa has the lowest levels of intra-continental trade of any continent on the planet. While the continent’s trading blocs have helped to improve these figures, Africa’s trade with itself is a far cry from the 35% levels witnessed in Latin America and Asia’s 50%. In Africa, intra-continental trade has been substantially outpaced by trade with the rest of the world by as much as 90%. Trade among African countries accounts for just 7% of the continent’s GDP, and its overreliance on commodities for extra-regional trade makes it dangerously exposed to commodity price shocks and the major ebbs and flows of global capital markets.

Today, AU is host to eight Regional Economic Communities (RECs) with overlapping membership. These RECs are, Arab Maghreb Union (UMA), Common Market for Eastern and Southern Africa (COMESA), Community of Sahel-Saharan States (CEN-SAD), East African Community (EAC), Economic Community of Central African States (ECCAS), Economic Community of West African States (ECOWAS), Intergovernmental Authority on Development (IGAD), and Southern African Development Community (SADC). These organisations that were formed, under the watchful eyes of AU, as building blocks for continental economic integration have become hindrances to the integration process as a result of various inefficacies and disparities. AfCFTA’s dream of continental free trade will remain a mirage as long as the challenges of multiple and overlapping memberships are not resolved.

Under the present circumstances, this policy initiative threatens to spell the death knell of many economies in Africa. AfCFTA, rather than unite Africa, will only divide it the more; rather than enrich Africa will only pauperise it the more. For example, one of the major challenges facing African businesses has been the difficulty of tapping into other African markets due to poor infrastructure, complex trade barriers and administrative bottlenecks. These challenges have made it difficult for African businesses to achieve economies of scale and benefit from learning by exporting, which occurs when firms become more productive by exporting goods abroad. Having failed to address these issues before AfCFTA was forced down the throat of African countries, AU has laid another foundation for the future continental setback.

Another issue that was not addressed before the unveiling of AfCFTA is unfair trade practices, such as dumping of foreign goods. In economics, dumping occurs when a country lowers the sales of its exports below the cost of production to gain unfair market share. Abdulrasheed Isah, a teacher of international economics and one of the AU thinktank, in his publication, “On policy reluctance and economic peril: Nigeria and the AfCFTA” criticised Nigeria for her decision not to sign the deal due what the country perceives as AU inability to address the issue of dumping. According to him, “dumping is a development opposition that does not hold in the present AfCFTA situation, which involves only African countries, among whom there are no substantial gaps in manufacturing efficiency.” This assertion shows the thinking of the AU policymakers but if the past experience is anything to go by, this professor is mistaken in a fundamental way. China, for example, could channel a flood of clothes into Africa just by adding a few buttons to them on the continent and calling them African good with the tag “Made in Africa.”

While many scholars and public analysts across the continent have referred to Nigeria’s current reluctance to ratify the trade agreement as a denial of the privilege to shape Africa’s future, these analysts forget or ignore the fact that Nigeria has always been at the forefront of regional integration. It was Nigeria’s diplomatic, economic, and intellectual leadership that helped lead to the formation of the ECOWAS and the signing of the treaty in Lagos on May 28, 1975. They should be reminded that it was Nigeria that hosted the “Lagos Plan of Action for the Economic Development of Africa” in 1980. The major resolution of that conference was to push Africa’s resource-intensive economies towards industrialisation and greater regional integration. Maybe I should also remind them that it was Nigeria that hosted the 1991 “Abuja Treaty” that led to the creation of RECs with the hope of improving regional economic integration and advancing peace and security initiatives.

Therefore, if Nigeria dithers this time round, we vacillate because our past experiences with economic integration on the continent are not that encouraging. As a result of our past experiences, we are highly familiar with deferred continental policies. We are use to those lofty and extremely ambitious promises usually denominated with decade-long life cycles. Those policies, like a malevolent abiku child, are almost always guaranteed to die before they can even live.

The hype around the AfCFTA will soon backfire as negotiation is likely to drag too long or fail. And since the benefits of the AfCFTA have been actively sold by the AU leadership during the preceding negotiations, expectations are already high among the countries that have signed the agreement. Very soon, if traders and investors fail to reap the promised benefits and begin to suspect they have been sold a political project with little concrete value, AfCFTA’s legitimacy and the whole notion of free trade will be undermined. In that process, large customs revenues and businesses will be lost to competitors.

Africa deserves more than what is being peddled by AU. The continent is home to 1.2 billion people, providing a huge market for African businesses. Analysts predict that by 2030, Africa will have a combined consumer and business spending of $6.7 trillion. While the similar system has worked in Europe, the 16% volume of intra-African trade pale in significance to the 70% intra-European trade. Besides, it would be absurd to impose the same policy on Africans who share dissimilar economic history with Europe. EU could not have built European economy if they were the types of leaders we have in Africa. Their kind of selflessness, courage, commitment, conviction and self-transcendence elude the African leaders.

AU is rapidly becoming a ventriloquist for corrupt and visionless African leaders, but still, a puppet who erroneously thought its survival depends on bowing before the western’s graven image. Let me, at this juncture, point out that I do not expect AU to break ranks and admit the truth of AfCFTA’s relevance. That would require it to be an organisation of different set of policymakers and a spine of lion to go with it. At the very least, AU policymakers need to stop hawking this lie that Nigeria need to ratify AfCFTA at all cost because it is the only mechanism through which Africa’s economic development will be realised.

The way they dredge it up to cover AU’s ineffectiveness has trivialised the meaning and turned the word, “economic development” to an empty signifier. If the men that sit atop the AU have any integrity in them, they would not be waiting until they fall on their faces before they are forced to admit to themselves that they ought to change the ways they run AU. Fate gave them the leadership of the AU, and they should demonstrate their gratitude for the privilege by changing their ways while they can still hear some applause.

THE VIEWS OF THE ABOVE ARTICLE ARE THOSE OF THE AUTHOR AND DO NOT NECESSARILY REFLECT THE VIEWS OF THE KAFTAN POST EDITORIAL TEAM