Nigeria’s President, Muhammadu Buhari, has received the report on impact of the African Continental Free Trade Area agreement (ACFTA). As you know, most African heads of states have adopted the phase 1 of the agreement. Nigeria’s president sees positives and negatives which ACFTA can bring to the nation. Then, he dropped the words:
“Our position is very simple, we support free trade as long as it is fair and conducted on an equitable basis…As Africa’s largest economy and most populous country, we cannot afford to rush into such agreements without full and proper consultation with all stakeholders. …Africa, therefore, needs not only a trade policy but also a continental manufacturing agenda. Our vision for intra-African trade is for the free movement of “made in Africa” goods. That is, goods and services made locally with dominant African content in terms of raw materials and value addition.”
If you are reading carefully, President Buhari was alluding to the “rule of origin” clause, making sure that the goods which will have low or zero tariffs are actually made in Africa. You do not want France to open factories in Morocco which has an agreement with it, to make things in Morocco, and then ship to Nigeria tariff-free.
Besides, the president hinted on the need to fix key frictions like logistics which will really make Africa thrive. African Development Bank had already concluded on that one also: tariff is useful but building infrastructures will deliver most impacts to Africa’s economic future.
ACFTA (African Continental Free Trade Agreement) has been heralded by many as a possible panacea to many trade frictions in Africa. Interestingly, the African Development Bank’s 2019 African Economic Outlook may have a clear insight on what really matters: “trade costs due to poorly functioning logistics markets may be a greater barrier to trade than tariffs and nontariff barriers”. Yes, logistics paralysis in Africa is more critical than tariffs.