The Africa Continental Free Trade Agreement is set to come into force

Apr 5, 2019

AfCFTA Ratified
The Africa Continental Free Trade Agreement (AfCFTA) has now been ratified by 22 countries, meeting its minimum threshold to come into force. It will create the world’s largest free trade zone, covering 1.2bn people and a combined GDP of $2.5 trillion. Nigeria, however, has not yet signed up.

On the 18th March 2018 the Africa Continental Free Trade Agreement (AfCFTA) was signed in Kigali, Rwanda. Just over one year on, Gambia has become the 22nd country to ratify the agreement, meeting the minimum threshold for the agreement to come into force 30 days later.

AfCFTA will create the world’s largest free trade zone, covering 1.2bn people and a combined GDP of $2.5 trillion. It could remove tariffs on 90% of goods. It could also increase intra-African trade by 52.3% annually, according to the United Nations Economic Commission for Africa (UNECA). It is not, however, a customs union nor a single market.

There are still significant hurdles to overcome. Most importantly, implementation, which will test the commitment of the signatories to upholding the agreement. It is, in effect, a test of governance. Signatories need to implement the features of free trade agreements – standards, customs administration, non-tariff barriers, dispute settlement etc for the AfCFTA to deliver what it promises. Like any significant free trade agreement, it threatens business owners, industries, sectors of the economy and often whole communities that may previously have enjoyed some immunity from competition.

It is notable that Nigeria has not ratified the AfCFTA. The president of Nigeria’s largest labour union, the NLC’s Ayuba Wabba, has described the agreement as “an extremely dangerous and radioactive neo-liberal policy initiative.” Policymakers in Nigeria are concerned worry about the collapse of local industries, many of which are uncompetitive without trade barriers, and the loss of Nigeria’s economic influence in the region. Nigerian policymakers understand that, as the most important destination market in Africa, they can set trade rules in their favour. A comprehensive free trade agreement potentially removes that influence, although there are strong arguments in favour of Nigeria ratifying the agreement (risks of isolationism, potential of the labour market, knowledge transfer etc).

Also, a minor point: only 15 out of the 22 nations that have ratified the agreement have so far submitted their ratification documents at the Africa Union headquarters in Addis Ababa.

Correctly implemented, the AfCFTA will be transformational for African economies, facilitating the kind of frictionless movement of goods that exporters, importers and (sometimes) consumers dream of. Sceptics are right to be sceptical, however: this amount of change won’t be easy to implement. It doesn’t deliver benefits uniformly, or obviously (for example, where it lowers consumer prices). It threatens vested interests and it also removes one of the most lucrative channels for corruption in places where that source of income can make a big difference.

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