Nigeria could join Africa’s free trade agreement in July, Afreximbank says
Nigeria is set to enter Africa's free-trade agreement as early as July, Benedict Okey Oramah, president of Africa Export Import Bank, told The Annual Debate Africa Investment conference in London on June 5.
Nigeria, along with Eritrea and Benin, has so far not ratified the African Continental Free Trade Area, which came into force on May 30.
Yet Nigeria, which is Africa’s largest economy, accepted the roadmap for the agreement and hosted preparatory events, Oramah said. “I think Nigeria will be a member. I don’t see why they would stay out.”
Oramah predicted that the foreign currency content of inter-African trade will fall because of the ability to pay in local currencies. That will be crucial in the context of increasing global protectionism and predictions of a world recession in coming years.
Many countries in Africa are “highly vulnerable”, said Elisabeth Waelbroeck-Rocha, chief international economist at IHS Markit.
- There is no prospect of commodity prices returning to 2012-2015 levels, she said.
- “Any country dependent on foreign capital would be taken into the storm.”
Yet slowing growth in Asia means a clear opportunity for Africa in terms of increased foreign direct investment, Waelbroeck-Rocha said.
Africa’s free-trade agreement creates an opportunity analogous to that which existed in the early years of the European Union, she argued. It’s not an opportunity that Brexit-embroiled Britain can promote.
- When asked about the potential of African trade integration, Emma Wade-Smith, Britain’s Africa trade commissioner, ducked the question.
- The Africa Union says that gradual elimination of tariffs through the agreement can increase inter-African trade by 60% within three years.
Market size critical
Markus Thill, Africa president for Robert Bosch, stressed that the economies of scale that only free trade can produce are fundamental. The size of the market, he said, is “the first and even the only criteria” that Bosch considers when setting up manufacturing operations, eclipsing even the regulatory environment and corporate governance.
- Thill added that in five years in Africa he has never been offered or seen any evidence of bribes. Corruption, he said, is a “non issue.”
- Financing and logistics issues can always be solved, he said. “The glass is always half full rather than half empty.”
- But Nigeria, he said, is an exception as it won’t allow Bosch to own a subsidiary in the country.
The US-China trade dispute “came at the right time” to serve as a wake-up call for Africa, Oramah argued. He stressed that there is an exit clause for trade agreement signatories : “Anyone can exit.”
- Oramah clarified that the agreement covers 90% of goods by product line total rather than value, which gives countries greater flexibility in managing which products should be included.
Bottom Line: Oramah may have spoken more in hope than expectation about the short-term prospects of Nigeria joining. But the exit clause means that it would be a low-risk commitment which would benefit Nigeria and Africa.