Potential Challenges to the AFCFTA in Africa
Following the brief introductions of the AFCFTA in our previous newsletter, have you ever wondered what challenges this project will bring? In this newsletter, we will be exploring some of the challenges posed to the AFCFTA as well as how Nigeria can benefit from the AFCFTA
Potential Challenges of the AFCFTA
Despite all the promises and potentials of the AFCFTA, there are some challenges it will face before the region can begin to reap all of its benefits. Some of these challenges include;
With over 40 different currencies in Africa, countries who want to engage in trade or trade between themselves would have to use a third party currency to carry it out. i.e., if Nigeria wants to trade with Ghana, both countries would have to convert their currency into the dollar or pounds equivalent or any currency they choose. If transactions like this are not carefully carried out, it would end up enriching the economy of the country whose currency is chosen as opposed to that of the African economy.
B. Effective Communication
When dealing with a free trade area, effective communication between human beings is very key to its success. Coupled up with the different languages in the region, the high level of illiteracy will hinder effective communication between member states when trying to conduct trade with one another.
C. Poor Infrastructure
Some African countries do not have solid infrastructure such as adequate power, good roads, accessible railways, etc. lack of such basic infrastructure will hinder intra-African Trade. Bodies such as ECOWAS and COMESA are feeling the impact of the poor infrastructure in the region.
HOW NIGERIA CAN BENEFIT FROM THE AFCFTA
Nigeria’s membership of the AFCFTA was ratified on the 11th of November 2020. Given the opportunities the AFCFTA presents to the African continent as well as individual countries, some of the ways Nigeria can benefit from the AFCFTA include;
Size of the Market
Nigeria has the largest economy in Africa, with over five hundred billion dollars in GDP This market size allows manufacturers to increase capacity and expand into other African countries. This will therefore enable the investors to take advantage of not just the Nigerian market but from other countries on the continent as well.
As the AFCFTA looks to provide job opportunities in the region, countries like Nigeria which have a high rate of unemployment labour-intensive trade across borders would require the services of low skilled workers and the free movement of persons guaranteed by the AFCFTA will bring with it the free movement of services these individuals will render.
The Ghanaian Minister of Trade and Industry; Alan Kyerematen, during the inauguration of 36 Council Members of the Ghana National Chambers of Commerce and Industry (GNNI) stated that to harness the benefits of AfCFTA, the Ghanaian government complemented the ongoing Industrial Transformation Agenda by launching the National Export Development Strategy in 2020 to increase non- traditional export revenue to US$25.3 billion by 2029.
Read more HERE.
The Governor of the Central Bank of Nigeria, Mr Godwin Emefiele has suggested that the AfCFTA will give Nigerian Business access to the African Markets worth billions of dollars in goods when in full effect.
Read more HERE
Till Next time