What are the main advantages of the AfCFTA in 2021?

The African Continental Free Trade Area is the world’s largest free trade area, which could transform the continent’s economic outlook.

Created in May 2018 and entered into force on January 1, 2021, the AfCFTA aims to be a model of cross-border cooperation in an era of growing isolationism. In addition, it has the potential to lift 30 million people out of extreme poverty.

The agreement signed by 54 African Union member countries will reduce tariffs between member countries and cover policy areas such as trade facilitation and services, as well as regulatory measures such as sanitary standards and technical barriers to trade. trade.

In addition, due to the impact of the Covid-19 pandemic on the global economy, the AfCFTA is a major opportunity to help African countries diversify their exports, accelerate growth and attract foreign direct investment.

However, Nigeria is poised to take advantage of the investment and trade opportunities that the AfCFTA will inevitably bring. In this article, we highlight some of these opportunities.

1. Increased jobs

For countries such as Nigeria with an abundance of professionals in various service industries, the AfCFTA would increase the movement of these professionals to countries with a demand for their services.

In addition, labor-intensive cross-border trade would require the services of low-skilled workers and the free movement of people guaranteed by the AfCFTA will result in the free movement of the services that these people provide.

2. Reduce poverty

AfCFTA stresses the importance and growing commitment of the AU to reduce poverty through trade.

A World Bank report says the pact will increase regional revenues by 7 percent or $ 450 billion, accelerate the growth of women’s wages and lift 30 million people out of extreme poverty by 2035. Likewise, wages of skilled and unskilled workers will be increased. 9.8% and 10.3% respectively.

3. Business integrity

It will promote good governance both globally and across Africa through the concept of “trade integrity”, that is, legitimate, transparent and properly priced international trade transactions.

4. Nigerian market size

The AfCFTA would increase the size of the Nigerian market by allowing manufacturers to increase their capacity and expand into other African countries. In addition, it will allow investors to benefit not only from the Nigerian market, but also from other countries on the continent.

5. Supply chain infrastructure

Manufacturers and retailers expanding their activities to other markets would depend on a distribution network capable of delivering goods efficiently. This would increase investment in the distribution and logistics supply chain to ensure the availability of the infrastructure needed to transport goods. It will also be more advantageous for investors who invest in the logistics and transport space.

6. Avoiding the negative impacts of Covid-19

The pandemic caused more than $ 79 billion in production losses in Africa in 2020. However, the AfCFTA presents a short-term opportunity for countries to “build back better” and cushion the effects of the pandemic. In the longer term, the pact will increase the continent’s resilience to future shocks.

7. Women

By focusing on improving the lives of women, the AfCFTA through tariff reductions will allow informal traders to operate through formal channels, providing better protection. In addition, a growing manufacturing sector would offer new employment opportunities, especially for women.

What are the main advantages of the AfCFTA in 2021? was last modified: September 22, 2021 through Adedunni Aderoju

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