After 6 long months President Buhari eventually put his signature on the African Continental Free Trade Agreement (AfCFTA) deal. Nigeria joins other African nations in a trade agreement that is considered as the largest free trade agreement in any continent in the world.
This appears to be a good development. However, as good as it looks, the agreement has contrasting implications for Nigeria. Maybe why the President took his time before he eventually signed.
- Tariff Reduction – other African countries will be able to freely import and export goods to Nigeria at zero or little tariff. This could also cause Nigerian businesses to reduce the cost of their goods thereby making them more competitive among markets.
- It creates healthy competition – over the years, Nigerian manufacturers have been unable to compete with foreign made goods in terms of price and quality. However, with AfCFTA, manufacturers can export goods to poorer African countries thereby creating healthy competition which will in turn cause them to improve their goods in order to have a competitive edge.
- Importation of raw materials – The AfCFTA could enable Nigerian businesses reach out to resource-rich African countries for raw material inputs. Nigeria is also rich in natural resources and can now access new markets for exports.
The Flip Side
- Lower government revenue – eliminating tariffs could wipe out hundreds of billions of naira in custom duties earned by Nigeria.
- High rate of smuggling – The AfCFTA could worsen the smuggling situation if the partner governments do not cooperate and coordinate efficiently.
- Small companies may struggle – SMEs and startups may be unable or struggle to compete with larger and more financially superior companies.