AfCFTA: The role of law and policy

In 2012, the African Union Heads of State and Government Summit held in Ethiopia proposed the creation of a framework that allows Free Trade within the continent in a bid to boost Africa’s economy through six broad areas of corporation, which are: trade finance, trade facilitation, trade-related infrastructure, market integration, trade capacity, and trade policy. These were the foundation of the African Continental Free Trade Area (AfCFTA). It was adopted in March 21, 2018

In May 2019, over 22 African countries had signed the Treaty, this progress saw the Treaty officially come into force the same year. As of November 2022, AFCFTA has been ratified by 54 African States, excluding Eritrea. In addition, Ghana plays host to AFCFTA’s headquarters, where implementation of the provisions of the Treaty would be carried from. 

International Organizations and the international community offered positive responses to the reception of AFCFTA; the Treaty was, however, despite its political successes, met with pessimistic questions bordering competition, domination, dumping, tariff and import duty removal, etc., raised by experts and African states, one of which was Nigeria. 

Challenges Nigeria and other analysts have with the AfCFTA

Nigeria delayed assent to the AfCFTA, according to the President, the cause of the delay was to “…appraise its (AfCFTA) potential and possible danger to the local economy.” Several labour groups joined in criticizing the Treaty, with fears that the Nigerian economy would fall as a result of the provisions of the Treaty. We take a curious look at the major fears held by players in the industry against the AfCFTA.

Competition is a major concern raised by experts in the Nigerian trading space. Doing business in Nigeria is an already difficult endeavour, with a high cost of production, allowing for an increase in the prices of goods and services. Having African countries with favourable business environments than Nigeria gain access to the Nigerian market would be a dangerous attempt. 

The possibility of having substandard products from other African States mislabeled and dumped into the country is another issue experts have against AfCFTA. Nonetheless, what is most surprising is that the Treaty has a plethora of provisions protecting against dumping by Member States. 

Experts have also raised the loss of revenue as a challenge the Nigerian government would face if AfCFTA comes into force. The statistical loss is placed at $4.1 billion annually following the removal of import duties and tariffs from the importation of goods amongst members, this according to analysts would impact government revenue, which eventually would cause a fall in social welfare and expose several Nigerians to poverty. 

The World Bank offered a differing position to the Nigerian analyst’s expectation. According to the World Bank’s key findings from AFCFTA, the Treaty is expected to: 

“lift 30 million Africans out of extreme poverty and boost the incomes of nearly 68 million others who live on less than $5.50 a day; 

Boost Africa’s income by $450 billion by 2035 (a gain of 7%) while adding $76 billion to the income of the rest of the world;

Boost wages for both skilled and unskilled workers to 10.3% and 9.8% respectively.”

World Bank

The World Bank further projects West Africa as the biggest gainer from the Treaty, the International Organization sees a 12 million reduction in the number of people living in extreme poverty, this figure is more than a third of the entire poverty reduction projected in the entire continent by the World Bank.

Having listed the varying challenges held by analysts, we must take a look at the provisions of the Treaty as it concerns trading in goods and services. In relation to goods, the Treaty provides member States should treat goods imported from other member states equal to goods locally made after they have been cleared by customs.

For Services, AfCFTA provides that member states accord services and service suppliers of other member states equal treatment to those offered to domestic services and service suppliers. The provisions of AfCFTA in relation to goods might be disadvantageous to Nigeria, but on services can help boost various developing and developed sectors of the Nigerian service industry.

For instance, Nigeria is the continents leading name in entertainment, she can leverage AfCFTA to gain access to a larger market, allowing for more revenue and income to the players in Nollywood, Nigerian music, fashion, art, comedy and other areas of entertainment.

Taiwo Oyedele suggests that:

“the real issues are not with the AFCFTA treaty but potentially its implementation. The best way to solve the problem is to get involved and work with other countries in shaping the Free Trade Area to ensure a win-win outcome for all parties…a review of existing trade policies to identify areas of improvement and harmonize macro-policies.” 

Taiwo Oyedele

Agreeing with Taiwo, Jide Ojo posits the Treaty:

“if properly implemented and guided, Nigeria stands to gain a lot from that because as we do know, Nigeria is a huge market…if the government and relevant stakeholders fail to put measures in place, the nation may not gain from the agreement”

Jide Ojo

Roles of law and policy in driving competitiveness under Africa’s single integrated market

The benefits of the right laws and policies to the overall success and implementation of AFCFTA cannot be overemphasized.

With competition, dumping and tariffs being major issues raised by analysts, these challenges would best be sorted by the presence of effective competition policies, standard consumer protection laws, and upgraded infrastructure, which would eventually allow for ease of doing business, quick identification of mislabeled goods at ports as well as ways to enhance government revenue while maintaining a no tariff and free trade area for member states.

Below are the various roles law and policy act to drive competitiveness for Nigerian businesses, in Africa’s single integrated market. 

Act as a Safeguard

Laws and Policies help to safeguard some fragile industries of the country’s economy. For instance, in producing finished goods, Nigeria lags behind several nations in Africa; having countries like South Africa, Egypt, Kenya, and Ethiopia import finished goods into Nigeria can be disastrous to the efforts made in the industry.

Enacting laws and policies to have some incentives to provide a tax-free business for growing finished products industries helps to create a balance between the prices offered by the players, which in turn helps to safeguard the benefits these players achieve. 

Identifies areas of dominance

Where there isn’t a fair competition, the right policies and laws in place can easily identify the unfair competitive practices and address the areas of dominance.

It is worth mentioning that the present Federal Competition and Consumer Protection Act has provisions that protect against monopoly or unfair dominance in an industry.

That notwithstanding, further policies should be enacted to strengthen industries to compete in a favourable space while having free trade in goods and services amongst African states.

Solves Trade Hindrances

Policies and laws help to address pitfalls that allow for barriers in trading in an industry. This role goes a long way to assisting producers of goods and services in Nigeria to compete with their African counterparts.

A keen look at other African policies and laws on production can be the right step to offering a balance for the Nigerian players. 

Encourages Stronger Institutions

Stronger institutions help to see to the full implementation of the AFCFTA. Having policies that develop institutional frameworks across varying areas of production and trade allows for better-equipped industries that can compete with other African markets. 

Also, stronger institutions avoid the occurrence of dumping mislabeled products into the Nigerian market. Institutions manned with the responsibility of protecting Nigeria’s borders and Ports would identify dumped goods if the right policies were in place. 

Encourage Players and Stakeholders

Nigeria’s determining factor for delaying signing the AFCFTA was the fears held by stakeholders in the Nigerian market space.

The irony was these fears were resulted not from the provisions of AFCFTA but majorly from Nigeria’s poor policy and legal framework. A stronger framework of Nigeria’s laws and policies can further boost stakeholders’ confidence in Africa’s free trade dream. 

Conclusion

The Nigerian Market has been bridled with a fall in policy and legal structures, this lack has invariably caused further falls in other sectors of the Nigerian economy. The AfCFTA has come into force with headquarters in neighbouring Ghana, it is believed that Nigeria would therefore strengthen her policies and laws to play a pivotal role in advancing free trade in Africa.

Is AfCFTA applicable to small and medium businesses?

Yes, small and medium enterprises are believed to get the most support following the implementation of the AFCFTA because it seeks to boost trade without borders between African states.

What is the purpose of AfCFTA?

The purpose of the AfCFTA is to boost Africa’s economy through:
1. Trade finance
2. Trade facilitation
3. Trade-related infrastructure
4. Market integration
5. Trade Capacity
6. Trade policy

This piece looked at the roles law and policies play in advancing competition in Nigerian businesses while maintaining a free single trading area for the continent.