By Samson Echenim with agency reports
Against local manufacturers fears that the African Continental Free-Trade Agreement (AfCFTA) recently ratified by Nigeria will flood the country’s markets with substandard products from neigbouring countries, the African Development Bank has said the free trade pact will help local manufacturers most than operators in other sectors.
Akinwmi Adesina, AfDB president, said the free trade agreement will help shift the continent away from its over-reliance on volatile commodity exports and boost manufacturing.
Manur Ahmed, president of the Manufacturers Association of Nigeria (MAN) had warned that the country might be turned into a dumping ground by some countries, which have manufacturing edge over Nigeria, but with far lesser population and smaller market.
However, Adesina said in Niamey, Niger’s capital that sectors where African products already have a competitive advantage have the most to gain from the deal that joins the markets of more than 50 countries, making it the largest free-trade zone in the world, according to a Bloomberg report.
“Manufacturing, trading in value-added products and strengthening supply chains will allow for markets to grow and for new markets to emerge,” Adesina said, adding that “SMEs that account for 80 percent of all trade on the continent will benefit, as well as the financial sector, as digital payments will be needed to transact.”
Commodity exports dominate even in Africa’s two biggest economies, with mining production accounting for about half of South Africa’s shipments while crude oil generates 90 percent of Nigeria’s foreign income.
However, the AfDB boss said the mechanics of the deal now has to be negotiated, noting that a digital system for payments converging one country’s currency to another member state’s is the most important mechanism to have in place before trading starts.
“That’s where the Economic Community of West African States’ plan to adopt a common trade currency will also help because it could reduce foreign-exchange risks,” he said.
Access to the continental market and an increased focus on industrialization are likely to benefit countries with access to ports, railways and airports the most, Adesina said. The continent’s infrastructure funding needs are at $130 billion to $170 billion a year, with a financing gap in the range of $68 billion to $108 billion, according to AfDB estimates.
“Infrastructure is the most critical aspect. If costs of doing trade continues to be high because you have an infrastructure deficit, this will be the biggest challenge,” he observed.
The AfDB will provide $4.8 million for member states to set up the trade zone’s headquarters in Ghana and has asked its board for a general capital increase to invest in infrastructure and support the free-trade area.
The African Export-Import Bank has said it will establish a $1-billion facility to enable countries that signed up to the trade deal to adjust to reduced tariffs as a result of the pact.