The doom and gloom of the global economy has seeped into all layers, including the once shining sparkle across the continent: AfCFTA.
The African Continental Free Trade Area (AfCFTA) which was supposed to be implemented on 1 July, has now been postponed.
The 55-nation continental free-trade zone is expected to create a $3.4tn economic bloc with 1.3 billion people across Africa and constitute the largest new trading bloc in the world.
While Wamkele Mene, the Secretary-General of the African Continental Free Trade Area, told Reuters that he was confident the deal would go through, “it is obviously not possible to commence trade as we had intended on 1 July under the current circumstances,” he said speaking about the coronavirus.
For Nigeria, which is having problems funding its budget and is facing a grim future, this new development is cause for concern. Due to the coronavirus, the IMF is predicting the economy of Nigeria will shrink by 3.4% this year.
Harry Broadman, the Managing Director and Chair of Berkeley Research Group’s (BRG) Emerging Markets practice and former United States Assistant Trade Representative as lead negotiator for the establishment of both the World Trade Organization and NAFTA, believes “Africa is an anomaly as the continent trades more comfortably with the outside world than with itself. The AfCTFA presents an opportunity to better connect the continent and improve trade inside.”
Local supply chains in Nigeria, especially in the agricultural sector, have been hit badly. A longer lockdown is sure to increase food insecurity. As the world waits for the pandemic to pass, there are bigger questions about the lasting effects of the virus on global and local economies.
Experts assume that as trade will restart, the gaps between the global north and south will be more evident than it already is. While Nigeria’s nearly 200 million population makes the country a big market for trade, it is perhaps not the best one in Africa. The US is looking to ink a new free trade deal with Kenya among others highlights the fall in Nigeria’s stock globally.
Countries turn inwards
As over 33.3 million people have filed for unemployment benefits in the US, a lot of money will need to be spent internally to restart the economy and try to mitigate the economic disaster from the coronavirus pandemic.
The same logic goes for many countries across the globe, sparking fear that protectionism might be the new order of the day.
According to the IMF, the financial turmoil will be “as bad as or worse than” what the world experienced in 2009, between 5 million and 25 million jobs could be lost, foreign direct investment flows could drop by 30% to 40% and international tourist arrivals could fall by 20% to 30%. This presents a chance for the structure of global trade to change, at the very least temporarily.
“Still early days”
Broadman expects that not much might change just yet, as we are still in the early days of the pandemic.
“China will remain a significant trade partner to Africa. We don’t know the end of the crisis and because it is still early days there will not exactly be changes to the structure,” he explains.
But there are fears that disruptions to global supply chains will lead to different appetites and that will in turn change the flow of trade globally.
The future of Nigeria’s economy
Broadman adds: “In Nigeria, we are finding that the lockdown and a lack of discretion by security agents is affecting the agricultural supply chain. Nigeria might in the end lose out of the market share it holds if the world comes out of the pandemic faster than Nigeria.”
“Nigeria needs to diversify its global trade offerings because the world is changing and very soon, it might find itself unable to compete globally,” says Broadman.
At the moment, Nigeria is finding it difficult to fund its spending. The crash in the oil global oil markets and lack of tax revenue from a paused economy has put the country at a difficult position.
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Adedayo Bakare, a Lagos-based economist agrees: “Perhaps now, the country will invest strongly in its non-oil sources of income. Because we have a country that is not doing enough to care for its citizens and a world that is moving quickly to be efficient in how it trades and perhaps leaving Nigeria behind.”
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