While at the African Union Summit in Niger, President Muhammadu Buhari launched the African Continental Free Trade Area. The President signed Nigeria into a deal that contains a vast majority of African states, ensuring soother trade.
After holding out for months over issues with competition, Nigeria’s inclusion into the deal now gives it credibility. The Free Trade Area is now the largest in the world, with 55 nations and worth about $3.4 billion.
Speaking, Pat Utomi, a member of the Nigerian delegate, said that all African countries stand to benefit from this deal.
He added, “Together, the mutual benefits of trade will lead to elevating Africa’s status away from the poverty of today.”
As things stand, 17 percent of exports come from intra-African trade. However, vices such as corruption, sub-standard tax structures, and bureaucracy have hampered this. With this trade pact, the countries now try to optimize cross-border trade by getting rid of any tariffs.
The African Union has also launched a pan-African payment system to help bolster cost reductions.
Okey Oramah, President of the African ExportImport Bank, decried the influence of using the dollar in trade deals.
He said that this consistent use hampers the functionality of third currencies, while also costing the entire continent anywhere between $5 billion and $7 billion.
He added, “Beyond that, it also reduces trade because Africa has a scarcity of foreign exchange.”
African traders have been enthusiastic about the launch of the FTA, but there is still a lot of work to be done before the agreement comes into effect. While all of the Union’s members- except Eritrea, that is- have signed on, only about half have given full ratification.
Also, even with reduced costs, traders will still have non-tariff barriers to deal with. Issues such as poor transport and corruption will disrupt inter-national links, thus undermining the agreement.
Still, it is a step in the right direction.
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