INTRODUCTION
The African Continental Free Trade Area (AfCFTA), established in 2018, aims to create a single market for goods and services across 54 African countries. As the largest free trade agreement globally, it connects 1.3 billion people with a combined GDP of $3.4 trillion. While it promises economic benefits, such as trade liberalization and sustainable development, there are several challenges, especially for Nigeria.
This article outlines the legal and institutional framework of the AfCFTA, as well as the impacts and challenges related to its implementation in Nigeria.
Legal dynamics of AfCFTA
AfCFTA involves multiple protocols on:
- Trade in goods: Reduction of tariff and non-tariff barriers, price undercutting, and facilitation of customs co-operation.
- Trade in Services: creation of open, transparent, and integrated single service markets across sectors.
- Investment: Harmonisation of coexisting national, bilateral and regional investment laws featuring administrative and judicial treatment (AJT).
- Intellectual property: Support public health through the compulsory establishment of a local pharmaceutical production unit, promotion of coherent IPR policy in Africa, and deepen intellectual property culture in Africa.
- Competition policies: Creation of an integrated and unified African continental competition regulation regime and guarantees gains from trade liberalization often undermined by anti-competitive practices.
Its success depends on how well member-states align national laws with the treaty. By virtue of Part III of the AfCFTA treaty, the institutions responsible for the implementation of the treaty include the Assembly, the Council of Ministers, the Committee of Senior Trade Officials, and the AfCFTA Secretariat. Other institutions include Dispute Settlement Body, Appellate Body, and several technical committees and sub-committees established by the Council of Ministers.
Impact of AfCFTA on Nigeria’s economy
AfCFTA will grow the African economy significantly. It promises to create millions of jobs and lift people out of poverty, with the World Bank estimating 30 million people could escape extreme poverty. It is expected to enhance foreign investment, improve trade connections for SMEs, and increase competition in goods and services. In essence, AfCFTA offers:
- Increased market access,
- Job creation in various sectors,
- Increased competition,
- Increased Investment,
- Harmonized framework, and
- Rural economic development, amongst many others.
Challenges to AfCFTA implementation in Nigeria
Despite Nigeria’s late entry into AfCFTA, there are ongoing concerns, including:
- Implementation Gaps: The challenge of implementing the African Continental Free Trade Area (AfCFTA) lies in the persistent gaps caused by frequent shifts in policies, regulatory uncertainties, and inconsistent law enforcement in Nigeria. These factors create an unpredictable environment for businesses, complicating their ability to plan, operate, and grow effectively. When policies are constantly changing, businesses struggle to keep up with new regulations, making it difficult for them to maintain compliance or make informed long-term decisions. Additionally, the inconsistent enforcement of laws further exacerbates the issue, leaving businesses unsure of the rules they need to follow and the penalties they might face. This instability undermines confidence in the system and hinders the ability of businesses to operate smoothly, potentially stifling economic growth and the successful implementation of AfCFTA.
- Conflict of National interest: The slow pace of AfCFTA negotiations underscores the tension between national interests and the larger pan-African goals. With countries like Egypt, Algeria, and South Africa making up the bulk of Africa’s GDP as a result of their diversified economy, while others struggle, there are obvious disparities in productive capacity and industrialization. Nations like Mauritius, South Africa, Tunisia, and Egypt are likely to dominate trade under AfCFTA, raising questions about whether the agreement will leave some countries, especially Nigeria, trailing behind while others reap the rewards.
- Substandard Goods: There’s growing concern that smuggling and the influx of low-quality products through the African Continental Free Trade Area (AfCFTA) might put a serious dent in Nigeria’s local businesses. While the agreement aims to boost cross-border trade, there’s a real risk that unregulated or counterfeit goods could flood the Nigerian market, making it harder for local industries to stay competitive. These substandard products, often sold at a fraction of the price, could create an unfair advantage for illicit traders, leaving Nigerian manufacturers and suppliers—especially those still building capacity—struggling to keep up. Local businesses could find themselves in a tough spot, battling cheaper or illicit goods while trying to hold on to their market share. Plus, the presence of these low-quality products could damage consumer confidence in locally made goods, further stalling the growth of Nigerian industries. These concerns were part of the reason Nigeria hesitated to sign the treaty when former President Muhammadu Buhari opted out in Kigali in 2018.
- Non-Tariff Barriers (NTBs): Corruption, bureaucratic inefficiencies, and ineffective customs procedures significantly hinder trade in Nigeria under the AfCFTA. These issues cause delays, increased costs, and a lack of transparency, impeding the smooth flow of goods and services. Corruption worsens the situation by promoting bribery and fraud within customs and regulatory bodies, deterring legitimate trade. Additionally, outdated customs processes and inadequate border controls undermine Nigeria’s ability to manage cross-border trade efficiently. Without streamlined, transparent procedures, Nigeria risks missing out on the AfCFTA’s benefits, such as reduced trade barriers and broader market access. Addressing these challenges through reforms will help Nigeria better leverage the AfCFTA to boost trade and economic growth.
- Infrastructure Deficiencies: Nigeria’s underdeveloped transport networks and inadequate infrastructure present substantial challenges to maximizing its trade potential within the framework of the African Continental Free Trade Area (AfCFTA). The country’s roads, rail systems, and energy infrastructure remain largely insufficient to meet the growing demands of cross-border trade. As a result, businesses face higher transportation costs and significant delays in the movement of goods, which reduces the overall efficiency of trade operations. These logistical inefficiencies hinder Nigeria’s competitiveness within the AfCFTA and its ability to fully capitalize on regional trade opportunities. Addressing these infrastructure gaps is essential for enhancing Nigeria’s ability to engage in seamless trade with other African nations, ultimately supporting economic growth and integration into the regional market.
- Dispute Resolution Issues: As of March 2024, the ECOWAS Court of Justice has had a bit of a rough time, with over 150 of its rulings being completely ignored by member states. Nigeria leads the pack with 43 unenforced judgments, followed by Togo with 23, and Guinea with 14. This lack of follow-through has raised some serious doubts about the court’s ability to deliver justice and governance in West Africa. Now, if that’s the case, how much more effective will the AfCFTA’s dispute resolution mechanism be in promoting justice between member states in Africa? According to the Protocol, parties are “encouraged” to voluntarily comply with the Dispute Settlement Body’s (DSB) decisions – the body established by AfCFTA Protocol on Rules and Procedures on the Settlement of Disputes. Moreover, the exclusion of non-state actors from the AfCFTA’s Dispute Settlement Mechanism (DSM) further exacerbates inefficiencies within the framework. Article 3 of the Protocol restricts dispute resolution to state parties, excluding private enterprises, civil society, and individuals from initiating trade disputes. Since non-state actors, especially SMEs, play a crucial role in cross-border trade and capital movement, their limited access to dispute mechanisms hampers regional trade and economic integration. The reliance on governments to represent SMEs in disputes often leads to the neglect of smaller businesses’ concerns, undermining the AfCFTA’s ability to maintain a fair and equitable trading environment.
CONCLUSION
While AfCFTA holds great promise for Africa’s economic integration and industrialization, Nigeria must address its internal challenges, particularly regarding infrastructure, regulation, and trade facilitation, to fully capitalize on the agreement. Strategic and proactive efforts are needed to overcome these hurdles and ensure the AfCFTA meets its transformative goals in Nigeria’s investment landscape.
