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Cpanel

19September2017

Despite sizeable growth potential, intra-African trade is considerably low

The impact of the sustained weak global economy and the attendant uncertainties has had mild impact on Africa; most countries continue to post solid growth. The World Bank analyst estimated that African economy grew by 4.9% in 2011 just shy of the 5% pre crisis (average of 2003-08). When South Africa, the region’s biggest but slower economy, is excluded, the regional growth averaged 5.9%. This trend is expected to be sustained in 2012 with improved performance in 2013. But this performance could be better perhaps if the region’s 59 countries with over a billion population trades more amongst themselves. The impressive performance highlighted above has been driven largely by external demand for the enormous natural resources of the continent. EIU argues that the rising demand for these resources by emerging economies of Asia and Latin America as demand from developed world wanes sustained the continent’s growth on trend.

Key attempts at increasing intra-regional trade remain work in progress

Intra-African trade remains very low despite the efforts of the regional member state governments (through the regional organisation, the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (WAEMU- OEMUA)) to integrate the economies of member states through a common external tariff (CET) regime and the ECOWAS trade liberalisation scheme (ETLS). The full adoption and implementation of the CET was meant to be a platform for the negotiation of an expanded regional Economic Partnership Agreement (EPA) with the European Union.

While some progress has been made, for instance in the adoption of the CET and commencement of the ETLS in relation to approved products, non-tariff barriers remain high in many countries. Some member nations, including Nigeria, are also requesting for the creation of additional band into the CET established bands to protect its industries. And in recent times, some of the trade-related fiscal policies especially in relation to the import prohibition and tariff measures aimed at boosting agricultural production may contrast with regional trade agreements.

African trades still very low on the global trade map

According to the World Trade Organisation (WTO) trade statistics for the third quarter of 2012, intra-regional trade in the European Union accounted for an average of 61% of the total import and export US$2,800 billion and 31.1% of total global trade in the quarter.  Africa’s contribution to global trade was insignificant and was summed up with that of the Middle East and others. This group accounted for only 8% of the global trade within the period. However, this was an improvement over 2011 when this group accounted for only 3.2% of global trade. The sub Saharan Africa’s share of world trade has ranged between approximately 1.3% and 2.2% over the last two decades. At the core of the shallow trade value and volume from Africa is the low intra-regional trade activities.

According to IMF Direction of Trade Statistics, only 4.7% of sub-Saharan Africa (SSA) trade was transacted with other Africa and Middle East countries in 2011. In the first eight months of 2012, this increased to 5%. In other words, the amounts of trades concluded within SSA region were substantially smaller. In 2011, Nigeria exported only N553.18b value of goods, representing 3% of total exports to the ECOWAS region. During the same year, only N132.722b value of goods, representing only 1.4% of the total was imported into Nigeria from other ECOWAS countries. The proportion of Nigeria’s total export and import to Africa in 2011 were 10.9% and 8.8% respectively. The rest went to and came from the Americas, Europe and Asia.

It’s time to harness the opportunities that intra-regional trade portend

The key issues remain how it has been more easy and convenient for countries in the region to trade with countries outside the region yet near impossible to operationalize free exchanges amongst themselves. A number of factors have been identified for this lacuna which includes the non-tariff barriers; the infrastructural challenges plaguing these countries; politicisation of regional agreements among others. Countries such as South Africa and Nigeria that have attempts to close these barriers have enjoyed tremendous benefits of regional trade and integration. On that gauge, it is imaginable what the continent and the sub regions within it can achieve in growth via robust intra continent exchanges.  It is time these barriers are bridge, time policy makers in the continent get to work at localising benefits of free exchanges with regional peers, time the bourgeoning continental domestic demand is better served by continental supplies. 

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