NIGERIA SIGNS AFCTCA: IS FREE TRADE REALLY THE ANSWER?
WRITTEN BY OLADELE ABIGAIL
The Nigerian government recently signed the Africa’s free trade agreement (AFCTCA). The main aim of the trade agreement is to reformulate and redefine trade relations among African countries. That is, buying and selling among African countries will take place without the imposition of artificial barriers such as the absence of custom duties, quotas, embargos. This is to create a single market for goods and services which would be done through the free movement of these goods. According to them, it will untie 1.3 billion people, create a $3.4 trillion economic bloc and boost trade within the continent. It is also worthy to note that China has signed bilateral trade agreement with more than 40 countries in Africa
The chairman of the union, Egyptian President, Abdel Fattah al-Sisi commented that ‘the success of the AFCTCA will be the real test to achieve the economic growth that will turn our people’s dream of welfare and quality of life into a reality’. This births the question, is free trade really the answer?
There was however, a delay in signing the trade agreement by the Nigeria president, Muhammad Buhari. According to him, the government needed more time to consult with some key and major stakeholders of the economy which are not limited to the Manufacturers Association of Nigeria, the Nigeria Labour Congress, Nigeria Institute for advanced legal studies, Aviation association group, Nigeria association of small and medium enterprises. We believe that after due consultation and consideration with the various stakeholders, the Nigeria government made the right decision in signing the agreement. However, as there are positive implications to their decisions, we believe that the government is aware of the negative side and have therefore taken appropriate safeguards and measures.
The trade agreement is quite beneficial to the Nigerian economy as it tends to improve trade among African countries and will create the opportunity for Nigeria to export her products to other countries thereby creating access to a larger market and would help in job creation. The small and medium enterprises aren’t left out as this agreement could help them attain economies of scale. All this put together will help boost economic growth.
Taking a close look, this agreement might crowd out domestic industries especially infant companies who will have to compete with foreign firms. If infant companies don’t survive this undue competition, it will aggravate poverty, unemployment and crime. Also, the ‘big’ companies aren’t left out as they are faced with a huge competition from companies that produces substitute goods. Individuals now have a large basket of goods to choose from. With this, there is a possibility of a reduced sales and revenue. With reduced sales, organizations will lay people off. There is also the possibility of degradation of natural resources since companies are faced with a larger market and for the government, no more revenue from tariffs. The government also didn’t give us details on how the importation of dangerous commodities and goods that embargos have been placed on will be restricted from entering into the country.
Taking a look at economic theory, economist who contributed to the development of international trade argued that a country should go into trade with countries in which it has a comparative cost advantage over or an absolute advantage. One of the assumptions of this theory was that there is the free flow and mobility of factors of production, it was however concluded that the principle couldn’t work due to some of their unrealistic assumptions which included that there is no free transport between the countries of the world. So is free trade really the answer? It is important to note that the World Trade Organization (WTO) encourages free trade among countries. According to the organization, it will boost the economic growth of the countries involved.
Recalling the Egyptian President, Abdel Fattah al-Sisi, we really hope that through the free trade system, the Nigeria government will achieve the economic growth that will turn the people’s dream of welfare and quality of life into a reality and will prove to us that Free trade is the answer. In all, appropriate safeguards should be put in place to protect some sectors of the economy. Also, the government should use this opportunity to create a competitive economy and attain the platform of a leadership role in Africa.
By Oladele Abigail
Oladele Abigail, an economics graduate of Bowen University who applies her passion for writing to her career path.
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