Tag: African Continental Free Trade Area

Niger’s Coup: Assessing the Impact on Regional Trade

  • 10th August, 2023
  • 2 min reading

On July 26, Nigériens and the rest of the world woke up to a shocking announcement of the overthrow of 63-year-old President Mohamed Bazoum by top military leaders in the country. This marked the fifth coup experienced by the resource-rich African nation since gaining independence in 1960. The outcome of this upheaval resulted in the ascent of General Abdourahamane Tiani, the leader of the presidential guard, to the helm of a newly formed military government.

While the military Juntas have refused to relinquish power, regional and Western partners of Niger have announced a series of sanctions against the country.

Sanctions on Niger

The first in the series of sanctions was the announcement of the closure of all borders with Niger, the banning of commercial flights, the suspension of all commercial transactions, the freezing of the country’s assets and accounts in the regional central bank, and the suspension of all financial assistance by the 15-nation ECOWAS bloc. Nigeria, a neighboring country and close partner, further escalated by cutting power supply to Niger, all in a concerted effort to wrestle control from the military leadership and reinstate democratic governance.

The most recent blow to Niger’s economic growth and trade has come in the form of the World Bank’s decision to suspend a significant $4.5 billion portfolio investment and recent direct budget support of $600 million to the country. Following suit, the European Union and France, both major contributors to Niger’s economic progress, have declared a suspension of financial support and collaboration with the nation.

Undeterred by these sanctions, General Abdourahamane Tiani exhibited defiance, asserting, “We reject these sanctions altogether and refuse to give in to any threats, wherever they come from”. Such a stance has raised numerous concerns regarding the implications of the sustained military rule on trade, investments, transactions, and businesses within and beyond the challenged African nation.

Impact on Trade and #AfCFTA.

As more countries and international bodies impose stringent sanctions on Niger following the coup, the nation’s economy and investment prospects are poised to suffer significantly. The weight of international sanctions will inevitably hinder Niger’s ability to engage in cross-border trade and further erode its economic stability.

According to the 2023 economic outlook presented by the World Bank, Niger’s real GDP growth is forecasted at 6.9% for the year, with an anticipated upswing to 12.5% in 2024, attributed to economic activities, exports, and sustained donor support. Key trade partners for Niger include Nigeria, France, and China. Beyond the African Union, Niger holds membership in regional blocs such as the Conseil de l’Entente and ECOWAS. The country encourages economic links between African countries, having signed and rectified all three separate agreements of the African Continental Free Trade Area (AfCFTA).

Since the principal beneficiaries of the AfCFTA agreement are SMEs, these series of imposed sanctions on Niger will not only impact trade, foreign investments, and business activities in the country. The consequences are likely to resonate profoundly, impacting the stability of SMEs, hindering their reliable operation, and ultimately impeding the economic strides the country and the AfCTA agreement has made thus far.

Political instability like the Niger coup brings political risk, which could act as a deterrent to investors. Consequently, international businesses are likely to depart Niger, leading to a potential loss of jobs due to reduced economic activity. This exodus could result in diminished access to foreign investment, a decline in foreign currency reserves, and the vulnerability of the nation to exclusion from promising trade opportunities and overall economic growth.

How Has the African Continental Free Trade Area Impacted Africa So Far?

  • 23rd August, 2021
  • 4 min reading

There has been so much written about the benefits and opportunities that the African Continental Free Trade Area (AfCFTA) agreement will present. A key and immediate effect of this agreement is that it has turned Africa into a single market with 1.3 billion consumers, as of January 1st, 2021.

The agreement has the potential to increase employment opportunities and incomes, helping to increase opportunities for all Africans.

The AfCFTA is expected to bring 30 million people out of extreme poverty, and raise the incomes of 68 million others who live on less than $5.50 a day, and make African countries more competitive by boosting intra-African trade by 52.3% once import duties and non-tariff barriers are eliminated.

Successful implementation of the agreement is key, including careful monitoring of impacts on all workers—women and men, skilled and unskilled—across all countries and sectors, ensuring that a wide spectrum of society experience the full benefits of the agreement.

Amongst the pertinent questions being asked right now is whether Africa is ready and fully equipped for such a herculean task, especially in terms of the implementation of the agreement, taking into consideration the intricacies and complexity of bringing together 36 countries to agree on a common position.

A reoccurring concern that emerges is the ‘implementation’ of the pact, what does this mean exactly? Well, it means that all African countries must work together as a united front on the continent to raise standards and build new industries.

The second key element that is critical in this mix is the ability of African nations to pull their resources together to strategize, plan and implement the agreement by empowering and enabling businesses to comply and take advantage of the AfCFTA opportunities.

Africa is now seven months into the agreement. It is pertinent to note that systemic changes will take a while to implement, and it will not be achieved overnight. So, are there any early signs that show that AfCFTA is having a positive impact on Africa?

African Continental Free Trade Area

How Has the African Continental Free Trade Area Impacted Africa So Far?

Amongst the recent positive results and impacts being recorded so far are the following:

  • According to the latest United Nations report, it was only four days later after the trade agreement kicked in January that two Ghanaian companies achieved a major milestone with the first-ever shipment. Using the AfCFTA, the firms became forerunners in product exportation.
  • An expected milestone is the Pan-African Payment and Settlement System (PAPSS) project with Afreximbank giving $500 million for clearing and settlement in the West African Monetary Zone (WAMZ). The system is expected to be ready at the end of 2021 and is the first major step taken in addressing some challenges related to the cost of currency convertibility under AfCFTA implementation. The bank aims to inject up to $3 billion to aid in the Africa-wide PAPSS project.
  • Wamkele Mene the Secretary-General of the AfCFTA Secretariat. Inked an agreement with the UN Development Programme’s Regional Bureau for Africa in March 2021 to assist in digitizing intra-African trade, improving export preparedness of SMEs led by women and youth, and strengthening national customs authorities. So far, the 37 countries that have deposited their instruments of ratification by 7th July 2021 have adopted the AfCFTA Agreement.
  • South Africa is already benefiting from AfCFTA with regard to future growth and further trade expansion, due to its existing strong connections across the continent and its already well-established manufacturing base. Smaller economies, such as those of Ghana and Côte d’Ivoire, are also benefitting, due to existing favourable conditions, such as having open economies, good infrastructure and supportive business environments.
  • As of February 41 State Parties had submitted their schedules of tariff concessions, including customs unions members from the Central African Economic and Monetary Community, the Southern Africa Customs Union, the EAC and the Economic Community of West African States. However, not all customs processes are fully in place. Only a few countries, such as Cameroon, Egypt, Ghana and South Africa, have in place the needed customs procedures as required by the relevant AfCFTA provisions.
  • So far, 11 of the 41 countries and Regional Economic Communities (RECs) have validated AfCFTA implementation strategies. The strategies aim at complementing the broader development framework of each country or region, especially in relation to trade and industrialisation policies. Some are already implementing their AfCFTA strategies and have a National Committee in place to ensure proper coordination of implementation, policy coherence and effective domestication of the agreement.

These indeed are very promising developments of the early stages of the implementation of the AfCFTA agreement and is already revealing a glimpse of the promises it holds for the continent if it is properly executed.

Like all global economies Africa has had to navigate the challenges of the COVID Pandemic.

Many countries have seized the opportunities within the crisis to move faster on key reforms and investments that will be crucial for long-term development. Despite this, the road to recovery will be long and vary significantly across economies and sub-regions.

In this context, a successful implementation of AfCFTA is crucial. In the short term, the agreement would help cushion the negative effects of COVID-19 on economic growth by supporting regional trade and value chains through the reduction of trade costs. In the longer term, AfCFTA would allow countries to anchor expectations by providing a path for integration and growth-enhancing reforms.

Of course, it should be recognized that the full implementation of such an agreement will take years and will require the full buy-in and support of businesses and governments across Africa, but there should be an expectation of short-term benefits and gains for participating countries.

It is hoped that in a relatively short period of time, growth in trade, skills, learning, and efficiencies should materialize. Yes, this is going to be one of Africa’s greatest endeavours, but we should never forget that the African Continental Free Trade Area agreement has the potential to be an economic catalyst for the continent, transforming it into the global economic powerhouse we all know it can be, but only through a shared vision, honest and transparent leadership, and effective collaboration.