The Nigerian Economic Summit Group (NESG) has revealed that Nigeria will benefit less from the African Continental Free Trade Area than economies that are more diversified.
This was contained in the NESG’s 2021 Macroeconomic Outlook, which stated that Nigeria could reap more gains through export diversification away from crude oil.
According to the report, trade in Africa remained dominated by raw materials and less processed products, adding that on average, minerals and agriculture accounted for 44 per cent and 16 per cent of intra-African trade respectively between 2007 and 2017.
The NESG said, “Evidence has shown that African economies that are more diversified and have improved transport infrastructure, would benefit more from the trade pact than others that are resource-based and agricultural dependent.
“Putting this in context, South Africa currently accounts for 40 per cent of intra-African manufacturing imports. On the other hand, resource-based countries, such as, Algeria, Egypt, and Nigeria – which collectively account for approximately 50 per cent of Africa’s GDP – contribute only 11 per cent to intra-African trade.”
“Another bone of contention is the issue of ‘rules of origin’, which constitutes a significant risk factor. This implies that protectionism practices by some countries could constitute a setback for the establishment of the ambitious single market for Africa. But there are several reasons to be optimistic,” it added.
The group said the World Bank estimates revealed that the AfCFTA would promote manufacturing exports over natural resources, agricultural and services exports and that manufacturing exports would account for one-third of the projected total exports of $2.5tn by 2035.
It said, “Nigeria could reap more gains through export diversification away from crude oil, as manufacturing exports currently account for an average of nine per cent of the country’s total exports.
“This suggests that efforts should be directed at strengthening domestic value chains, particularly the agro-allied industrial base.
“To achieve this, there is a need to attract private capital, most especially, FDI, that would allow for knowledge and technological transfers.”
Furthermore, the NESG stated the Federal Government has to address transport infrastructure bottlenecks and provide improved logistics in order to maximally benefit from the trade deal.
The group noted that owing to the outbreak of COVID-19, the implementation of the AfCFTA was postponed from July 1, 2020 to January 1, 2021.
It said, “The key goal of the free trade pact is to expand the volume of intra-African trade, which stood at 16 per cent in 2018.
“Till date, 36 countries, including Nigeria, have ratified the agreement. The trade deal is expected to create a single market with a combined GDP of $2.5tn and total population or market size of 1.2 billion.”