Why My Fellow Nigerians Should Welcome Africa’s New Single Market

Why hasn’t Nigeria, the region’s biggest economy, signed the trade agreement?

In July, the African Continental Free Trade Area (AfCFTA) will begin operations across Africa, forming a single market that will span a population of 1.2 billion people and eliminate the tariff on 90 percent of goods traded within Africa. The AfCFTA’s potential is unparalleled: It will stimulate economic growth, boost the industrial sector, and make the free flow of goods and services within the continent easier and cheaper. So why hasn’t Nigeria, the region’s biggest economy, signed the trade agreement?

Would AfCFTA Be Good for Nigeria? 

Dr. Gbadebo Smith, the director-general of the Nigerian Institute for Social and Economic Research, argues that the decision is based on politics rather than economics because Nigeria doesn't have the necessary information, data, or models to sign the agreement. He also adds that African nations produce “poor country goods” and that Africa is not the buyer of African goods. 

Aliko Dangote, Nigeria’s richest man, also has fears about the AfCFTA. He believes it will undermine local manufacturers and entrepreneurs and may lead to Nigeria becoming a dumping ground for finished goods.

When the government burdens the economy with trade restrictions to protect jobs and manufacturers in their own countries, they restrict free enterprise.

But as a young Nigerian, I see the plight of my generation trying to create solutions despite the high rate of unemployment and the difficulty of starting a business. I also know that these existing protectionist policies will keep my country stuck in poverty, which makes me wonder if Nigeria realizes that protectionism will only prevent future economic prosperity.

When the government burdens the economy with trade restrictions to protect jobs and manufacturers in their own countries, they restrict free enterprise at home and abroad. This is exactly the case with the Manufacturers Association of Nigeria and labor groups that are supporting the federal government’s resistance to the trade agreement. This is not what Nigeria needs now. 

Nigeria Should Reject Protectionism

Free trade between countries is a time-tested economic idea that helps improve both poor countries and wealthy countries far better than government aid programs ever could. In fact, the African Export-Import Bank reports that the trade agreement could increase intra-African trade by more than 50 percent by 2022. This is a huge opportunity for Nigeria to reduce its poverty rate, which currently stands at 46.7 percent. By signing up to the free trade agreement, Nigeria can give its citizens the benefits that come with cheaper goods and a booming industrial sector. 

These potential economic benefits are clear and supported by trade theory, which posits that a continent-wide free trade area would lead to specialization among African countries in goods on which they have a comparative advantage. Through this increased specialization, the trade area would also see the output and growing efficiency in the use of productive resources. 

Nigeria should sign the AfCFTA to boost economic growth, improve living conditions, and help our people become more prosperous.The AfCFTA commits African economies to the removal of trade barriers on imports (tariffs and quotas), which will reduce import costs and, consequently, consumer prices. 

If Nigeria signs and ratifies the AfCFTA, millions of Nigerians will benefit by being able to consume a large variety of African products in a single market and will be able to produce and sell to a market of over a billion people. The country will also see an increased flow of foreign direct investments (FDI) as investors seek to take advantage of the market size, shifting FDI away from natural resources and toward industry and manufacturing. The result: millions of people will be lifted out of poverty.

Protectionism is an evil economic idea that isolates nations from global trade, which then forces them to rely on complex solutions, like social programs and foreign aid, to address poverty. Instead of going this route, Nigeria should sign the AfCFTA to boost economic growth, improve living conditions, and help our people become more prosperous.

Further Reading

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