In 2018, the African Export-Import Bank reported that only 15% of international trade by African countries takes place within the African continent. This percentage compares unfavourably with other continents such as Europe (67%), Asia (58%) and North America (48%).1 Some factors that have been identified for this relatively low trade performance include tariff barriers, and non-tariff barriers such as poor infrastructures that stifle the movement of goods and services across the African continent.2
In order to improve intra-continental trade in Africa, the African Union (AU) introduced the African Continental Free Trade Area (AfCFTA) Agreement ("AfCFTA Agreement" or "the Agreement") on 21 March 2018. The AfCFTA Agreement creates a single continental market for the free movement of goods and services within the African continent. The Agreement came into force on 30 May 2019, after ratification by 22 AU member states. However, Nigeria became a signatory to the AfCFTA Agreement on 7 July 2019.3
With average tariffs of 6.1%, African businesses currently face higher tariffs when they export within Africa than when they export outside it.4 As such, the AU is committed to progressively eliminating tariffs as well as non-tariff barriers to intra-African trade through the AfCFTA. This will make it easier for African businesses to trade within the continent and benefit from the growing African market.
In this newsletter, we have discussed the provisions of the AfCFTA Agreement and the possible implications for Nigeria in the light of Nigeria's peculiar business environment.
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1. African Export-Import Bank, African Trade Report 2018: Boosting Intra-African Trade: Implications of the African Continental Free Trade Area Agreement, https://www.tralac.org/documents/news/2042-african-trade-report-2018-afreximbank/file.html
2. Excerpts from Interview with Dr. Mukhisa Kituyi, Secretary-General of UNCTAD by Zipporah Musau from Africa Renewal on 27/8/2018 https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=1838
3. Nigeria was the 53rd African Nation to sign the Agreement. As at the time of publication of this document, 54 out of 55 African Countries have become signatory to the Agreement.
4. African Continental Free Trade Area Questions & Answers African Union Compiled by the African Trade Policy Centre (ATPC) of the Economic Commission for Africa (ECA) in association with the African Union Commission https://au.int/sites/default/files/docments/36085-doc-qa_cfta_en_rev15march.pdf accessed 22/7/2019
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