AfCFTA Agreement: Hitting the Coronavirus Bumps?


Tuesday, April 21, 2020 / 12:31 PM / By CSL Research / Header Image Credit: Reuters

Proshare Nigeria Pvt. Ltd.

In March 2018, Africa reached a landmark agreement to create a free trade area in Africa. This was done through the signing of the African Continental Free Trade Agreement (AfCFTA) which was later ratified in May 2019. Meanwhile, Nigeria joined the pact on July 7, 2019 after initially pulling out of the agreement. Subsequently, 54 of all 55 African countries signed the pact with Eritea now indicating willingness to sign after resolving its dispute with Ethiopia. Notably, the agreement which entered its operational phase on July 7, 2019 was expected to kick start in July 2020 following completion of negotiations on the last phase 1 negotiation item- schedule of tariff concessions and phase 2 negotiations on protocols for competition, intellectual property and investment.

Unfortunately, the coronavirus pandemic has introduced significant level of uncertainty on the implementation of the agreement. Phase 2 negotiations started in February 2019 and was expected to be completed by 2020 after which implementation would commence. However, with 52 out of the 54 member countries in the agreement battling the coronavirus pandemic, negotiations have been implicitly placed on hold. As of now, no official statement has been made by the African Union (AU) as to whether full implementation will commence in 2020.

At the recently concluded Spring meetings of the International Monetary Fund (IMF) and World Bank, the Managing Director of IMF, Kristalina Georgieva restated the importance of the landmark AfCTA deal to recovery in Africa post coronavirus. This informs our view that should the implementation of the agreement be deferred due to critical negotiations not concluded, it would be to the detriment of the continent. While we note industrialization in Africa remains weak relative to other continents, the agreement was expected to open up trade channels and facilitate cross-border investment in industrial capacity given access to a large African market.

Proshare Nigeria Pvt. Ltd.

For Nigeria, the deal was expected to open up the African market for key manufacturing companies in the country to support export sales while attracting new capital for increased capacity. Delay in implementation implies these benefits may not materialise at least in the short term. That said, we continue to reiterate that Nigeria does not sit in a strong position to benefit from the agreement. Apart from crude oil, Nigeria lacks any major product to offer the African market. Key infrastructure such as power, transportation, strorage systems etc. needed for industrial revolution also remain largely underdeveloped.

There is a dim hope for a possible implementation of the agreement in H2-2020, if the virus is contained in H1 2020. The IMF has stated it would leave no stone unturned in ensuring the AfCTA deal is implemented as it plans consultations with the AU and other leaders of the continent.

Proshare Nigeria Pvt. Ltd.

Related to AfCFTA

  1. AfCFTA Will Industrialize Africa - Kunle Elebute
  2. Impact Assessment Study and Economy-Wide Implications of AfCFTA on the Nigerian Economy
  3. AfCFTA: Opportunities for Nigeria's National Development - Desmond Guobadia
  4. AFCTA - African Companies Should Explore M and As – Ambassador Chiedu Osakwe
  5. AU, AfDB Sign US$4.8m AfCFTA Grant
  6. AFCTA: LCCI Harps On Competitive Nigerian Economy, Ghana To Serve As Secretariat
  7. Signing AfCTA Agreement; Our Concerns for Nigeria
  8. Nigeria Finally Signs AFCTA Agreement
  9. Key Takeaways From The ECOWAS 55th Ordinary General Assembly of Heads of State
  10. The African Continental Free Trade Area (AfCFTA) – Fact File
  11. How Nigeria can Leverage The AfCFTA - Prof Oramah

Proshare Nigeria Pvt. Ltd.

Related News - Trade Investment

  1. Ecobank is Providing Opportunities that Support Exports and Imports - Sunday Abah
  2. IFC Partners with Coronation Merchant Bank to Boost Trade Finance in Nigeria
  3. Ecobank Nigeria To Host Regional Trade Forum 2020; Reiterates Africa Wide Network Advantage
  4. Addressing FDI Barriers to Take Advantage of the Regional Trade Opportunity
  5. From CFA franc to the Eco: A Mere Name Change or Something More?
  6. Italian Trade Agency Opens Office in Lagos, Restates Support for Economic Growth in Nigeria
  7. Intra-Regional Trade Key To Increasing Private Capital Investments Into Africa
  8. The UK Steps Up to the Plate in the New Scramble for Africa
  9. UK-AIS 27 Commercial Deals Worth Over 6.5bn Pounds
  10. 70 Nigerian Companies To Participate At The Maiden UK-Africa Summit

Proshare Nigeria Pvt. Ltd.
Related News