As reactions continue to trail the recent announcement by the Secretary-General of the African Continental Free Trade Area (AfCFTA) secretariat, Wamkele Mene, that the implementation of the agreement will not begin on July 1, 2020 as planned due to disruptions caused by the coronavirus (COVID-19) pandemic, analysts at CSL Research have urged Nigeria to take advantage of the development to speed up growth in critical infrastructure.
The analysts stated this in a note obtained by New Telegraph yesterday.
The AfCFTA agreement, which is aimed at boosting intra-Africa trade by removing trade barriers, was brokered by African Union (AU). The agreement entered its operational phase on July 7, 2019 and was expected to kick start in July 2020, following the ratification by 54 of all 55 African countries.
The pact requires members to remove tariffs from 90 per cent of goods traded, allowing free access to commodities, goods, and services across the continent.
According to the International Monetary Fund (IMF), the elimination of tariffs could boost trade on the continent by 15-25 per cent in the medium term. Once operational, the agreement is expected to create a $3.4 trillion economic bloc, connecting 1.3 billion people across Africa, which would make it the largest trading bloc since the World Trade Organisation was formed in 1994.
Commenting on the announcement that the implementation of the agreement has been postponed, the analysts said: “For Nigeria, the agreement was expected to open up the African market for key manufacturing companies in the country to support export sales whilst also raising the prospects of attracting foreign direct investment across the value chain and different compartments in the manufacturing sector.
“Although, the delay in implementation implies these benefits will not be seen in the short to medium term, we think it gives the country ample time to accelerate investment in critical infrastructure that will reduce the cost of producing goods locally and improve the competitiveness of local manufacturers. In our view, African countries with the requisite infrastructure needed for large scale manufacturing activities will be better placed to attract foreign capital from multinational companies who are seeking to establish manufacturing hubs in to Africa to take advantage of economies of scale as well as the benefit associated with the absence of regional taxes made possible by AfCFTA.”