Later this month, President Muhammadu Buhari will be joining other heads of state on the African continent to sign the historic African Continental Free Trade Area (CFTA) agreement. The trade deal has gained much support and is poised to usher in a new era of economic prosperity for member states, but the president of the largest trade union in Nigeria, the Nigerian Labour Congress (NLC), thinks otherwise.
In a statement credited to Mr Ayuba Wabba, the leader of NLC said: “There is a renewed, extremely dangerous and radioactive neo-liberal policy initiative being driven by the Ministry of Trade and Investment that seeks to open our seaports, airports and other businesses to unbridled foreign interference never before witnessed in the history of the country.”
“We are more worried by the probable outcome of this policy initiative if it is given life because of its crippling effect on the local businesses and attendant effects on jobs. We find it confounding that at a time nations, including the United States are resorting to protectionism in defence of their local businesses and protection of jobs, we have the audacity to want to fling open our doors, windows and rooftops.”
“We have no doubt this policy initiative will spell the death knell of the Nigerian economy. Accordingly, we urge Mr President not to sign this agreement either in Kigali or anywhere,” the NLC leader concluded.
While free trade deals have their downsides as noted by Mr Wabba, almost every country’s economy in the world have massively benefited from these trade agreements over the years, including the United States. Due to unrestricted trade, countries have been able to specialize in certain areas and also obtain goods from other countries at a cheaper price. China’s own economic development was facilitated by opening up to imports of low-priced manufacturing inputs to help enhance its own export competitiveness. So far, the fragmentation of Africa’s economies hasn’t helped any country on the continent but only limits its economic potentials.
The CFTA, as proposed by the African Union (AU), will bring together all African countries – comprising 1.2 billion people and a combined GDP of over $3.4 trillion – under a single continental market for goods and services, including free movement of people, business and investments, and expansion of intra-African trade. Mahamadou Issoufou, the President of Niger and the AU champion for the free trade agreement, claims that “Africa’s ambitious trade deal covers 90% of goods traded within the continent, with the remaining 10% of sensitive items and excluded products to be reviewed and phased-in.”
Currently, intra-regional trade in Africa accounts for only 18 percent, representing the lowest in the world, with Europe (70 percent), North America (55 percent), Asia (45 percent) and the Latin America (35 percent) all ahead of the the continent that will account for almost half of the world’s population by 2050.
Businesses in Nigeria have always found it difficult doing trade in other African countries. Aliko Dangote, the Nigerian industrialist and richest man in Africa, also lamented about Africa’s intra-trade policies some years ago. He explained that it was easier to export to countries outside the continent than African countries.
“We in Africa are making things difficult for ourselves. For example, today, it costs an average of 2.5 percent to export outside Africa, but when exporting to another African country, the cost rises to about 13.3 percent. This is making it difficult to do business,” he explained.
As opposed to what Mr Wabba thinks, this trade deal if well executed (and that would need the strong political will of African leaders and major infrastructural developments) will not only increase the scale and rate of mobility of persons, businesses, goods, services and capital across and within Africa, it will also create higher-wage jobs and unlock greater business opportunities for Small and Medium Enterprises (SMEs). Surely, having access to 53 other potential markets is better than just one.
Also, free trade creates the spirit of competition in the economy. Considering the possibility of intense foreign competition under free trade, domestic producers wouldn’t want to lose their grounds. Ultimately, competition enhances efficiency and reduces the cost of goods. And where local producers can’t compete favourably, the government can use subsidies and incentives to help local producers in some major industries.
The Nigerian president seems to believe in the trade agreement and its ability to improve the country’s trade too. Earlier this year he spoke about the deal at the 30th African Union Summit, he said: “We must push ahead to speedily establish the Continental Free Trade Area (CFTA), which will make Africa more integrated, united and prosperous.”
Over the weekend, Ministers in charge of trade from member states, including a Nigerian representative, approved the 250-paged draft of the CFTA agreement. Barring any inconsistency in legal details when the ministers of justice of each country peruse the document, we can expect an assent to the document on March 21.