Despite COVID-19 pandemic erasing $79 billion in Africa’s output in 2020, a new report by the World Bank has shown that Africa’s trade pact could boost the region’s income.
The pact, dubbed African Continental Free Trade Area (AfCFTA), is estimated to boost Africa’s income by $450 billion by 2035 through the elimination of red tape and simplify customs procedures. If fully implemented, it is posed to speed up wage growth for women, and lift 30 million people out of extreme poverty by 2035, the report says.
The report, “The African Continental Free Trade Area Economic and Distributional Effects,” looks at the economic disruption caused by COVID-19 and how regional agreements can streamline border procedures, and prioritizing trade reforms in the face of future shocks.
According to the World Bank report, tariff liberalisation (reduction in non-tariff barriers) such as quotas and rules of origin would increase income by 2.4 percent, or about $153 billion. The remainder, $292 billion, is expected to come from trade-facilitation.
Albert Zeufack, the World Bank’s Chief Economist for Africa, said, “The African Continental Free Trade Area has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans.
“The AfCFTA is expected to lift around 68 million people out of moderate poverty and make African countries more competitive. But successful implementation will be key, including careful monitoring of impacts on all workers –women and men, skilled, and unskilled—across all countries and sectors, ensuring the agreement’s full benefit.”
Nigeria Projected to be Among Biggest Gainers from Implementation
Using data from the Global Trade Analysis Project (GTAP), a global network of researchers – the report estimates that Nigeria will be among the biggest gainers from the implementation of the trade facilitation agreement with a decline in trade costs of 10 percentage points. Trade facilitation agreement ensures the simplification, modernisation, and harmonisation of import and export procedures. It also helps to improve transparency, increase possibilities to participate in global value chains, and reduce the scope for corruption, according to the World Trade Organisation.
AfCFTA implementation shifts to 2021
The AfCFTA was launched on March 21st, 2018, in Kigali and kicked off a year after required nations signed the trade pact. Nigeria, which signed the agreement on July 7th, 2019, has held back on the ratification, citing illicit trade and its porous borders as an excuse.
Despite the excuses, the Nigeria Economic Summit Group (NESG), in its 2020 Macroeconomic Outlook Report, urged the country to ratify AfCFTA to gain maximum benefits from the treaty. The Think-tank group also called on Nigeria to work towards ensuring the alignment of domestic policies and regulations with the free trade agreement. The AfCFTA Secretariat has rescheduled implementation to January 2021 due to the coronavirus pandemic. The postponement, PWC, extends the benefits till next year.
Get real time update about this post categories directly on your device, subscribe now.
