At the African Union Summit in Niger, Nigerian President Muhammadu Buhari launched the African Continental Free Trade Area by signing the continent’s largest economy onto the deal.
After months of reluctance over competition concerns, Nigeria’s support gives weight to forming the world’s largest free trade zone — a 55-nation bloc worth $3.4 trillion.
Only 16% of international trade by African countries takes place between African countries, according to research by the African Development Bank in 2014.
The AU says that the African Continental Free Trade Area – called AfCFTA – will create the world’s largest free trade area.
It also estimates that implementing AfCFTA will lead to around a 60% boost in intra-African trade by 2022
Despite the African free trade area’s launch, much work remains before the agreement becomes effective.
While all of the African Union’s 55 members except Eritrea have signed on to the free trade area, only half have ratified the deal.
And even after costs are reduced, Africa’s exporters still will have to contend with non-tariff barriers that will take much longer to fix — such as corruption and poor transport links between nations.
The free trade zone is considered a critical action to usher Africa into a new era of development.
Objectives of the AfCFTA
- Create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Continental Customs Union and the African customs union.
- Expand intra African trade through better harmonisation and coordination of trade liberalisation and facilitation regimes and instruments across RECs and across Africa in general.
- Resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes.
- Enhance competitiveness at the industry and enterprise level through exploiting opportunities for scale production, continental market access and better reallocation of resources.