Zenith Bank, AfCFTA, Afreximbank in talks over currency differences

By PHILLIP ISAKPA & CHARLES ABUEDE

As Nigeria mulls security concerns

• Talks with Zenith also involve trade portal

In just four days from Monday 28 December, 2020, the much talked about world’s biggest single market brought under the sobriquet, African Continental Free Trade Agreement (AfCFTA), will light up for the world to see, as it begins a historic journey, which many analysts say will not be without its thorns and rosses moments, something the continent will have to work through to make success of what many in the Western world are expecting them to fail at.

But whatever anyone says, a market that is promising 1.3 billion consumers and a financial size of $3.4 trillion in gross domestic products (GDP) size is one that should elicit some jealousy about its prospects of succeeding. Africa must forge ahead, however, say experts and the two enthused Nigerians heading up Africa’s two influential multilateral financial institutions, Akinwumi Adesina, president of the African Development Bank (AfDB), and Benedict Okey Oramah, president of the African Export-Import Bank (Afreximbank), the latter of whom had been somewhat of an arrowhead pushing, and willing AfCFTA to come to life.

There are going to be issues, experts say, and those issues will just have to be tackled and resolved, others are quick to counter. For instance, issues around currency differences and language challenges are going to form initial stumbling blocks, but there are always ways to get round them in international trade.

Already, we have learnt that with regard to currency differences, Nigeria’s Tier-1 lender, and one of the banks regarded as systematically too big to fail, Zenith Bank, is in talks with Afreximbank and the AfCFTA secretariat working on ways to resolve what they figure could pose currency challenges as the agreement gets implemented across a continent that has often been dismissed for being known for wars, hunger, famine and disease.

But specifically, the talks between AfCFTA, Afreximbank and Zenith Bank, revolves around developing a Pan-African payment settlement system to solve currency differences, which will also see the Nigerian lender specifically develop a trade portal that would seamlessly handle transactions as they begin to rapidly be executed.

But even as progress is being made on the free trade agreement, Nigeria, Africa’s largest market, its biggest economy by GDP, its most populous, is still concerned and appears not to be sure in this eleventh hour if this is what it wants to fully throw itself into.

Nigeria’s biggest concern has to do with security. Years of fighting local and international insurgencies and swathes of a now escalating level of banditry, kidnapping, and herdsmen and farmers clashes have left the country drained and its security forces exhausted and unable to handle the multiple points of these security threats.

The country appears worried that opening up its borders for free-flow of human traffic from across the continent in the name of a continental free trade agreement could aggravate its current security situation and expose the country further to new and deeper security issues, especially with ISIS and the Islamic State in West Africa Province (ISWAP) looking to grab a piece of Nigeria for their mission in sub-Saharan Africa.

H.K. Gummi, assistant comptroller general on Trade and Tariff at Nigeria Customs Service, recently warned that the security situation in Nigeria will remain a major threat to the country’s participation in the African Continental Free Trade Agreement (AfCFTA) and called on the federal government to ensure security surveillance systems are put in place across borders to ensure safety in the free movement of goods initiative.

At a recent virtual briefing hosted and geared towards the AfCFTA, Gummi revealed that despite the detected security threats to the treaty, there are arrangements to deploy drones across borders that will monitor both movements of people and goods.

“With respect to the idea of free movement, though it is exciting, security threats exist. National security is still a major issue for Nigeria. There are arrangements to deploy drones across borders that will monitor both movements of people and goods,” Gummi had said, and added that there are plans to station vehicles with equipped security cameras across borders.

Yet, the economics of the AfCFTA remains attractive. Tola Onayemi, an international trade and investment lawyer with Nigeria’s Office of Trade Negotiation, had shed light on efforts ongoing as recent key developments regarding the AfCFTA, including AfCFTA’s negotiation with Standard Bank to offer $1 billion trade facility to SMEs, as well as a provision for an initiative tagged Afrochampions, aimed at providing a trillion-dollar investment framework to AfCFTA enabling projects.

However, on the back of the ongoing pandemic, there are plans to fast-track a digital trade and e-commerce platform. Prior to the pandemic, digitising trade was not included in the first and second phase of the AfCFTA implementation.

During a recently held briefing on the free trade agreement in the continent, Francis Anatogu, the secretary, National Action Committee on the AfCFTA disclosed that in terms of competitiveness, sectors such as financial services, entertainment and digital technology are already well-positioned to thrive under the AfCFTA. However, businesses within these sectors must invest in extensive market research before penetrating any market across the free trade area.

The signatures of the African Continental Free Trade Area (AfCFTA) Agreement by 54 African Union member states provide an anchor for long-term reforms and integration. The AfCFTA creates the largest free trade area globally measured by the participation of 1.3 billion people across its member states of the African Union with a combined Gross Domestic Product (GDP) valued at $3.4 trillion. According to the World Bank, AfCFTA is estimated to lift 30 million people out of extreme poverty and 68 million people out of moderate poverty by 2030; with real income gains from full implementation of the agreement increasing the size of the African economy by 7 per cent or $450 billion.

Prior to this moment, 54 countries had signed the agreement while 34 countries had deposited their instrument of ratification. Furthermore, 41 countries captured across different custom unions have submitted their tariff offers, including Nigeria. The tariff offer(s) is an indication from a customs union of its preference on what the member states would like to liberalize.

The AfCFTA, which comes into operations effective January 1 2021, is expected to boost African trade, particularly intra-regional trade in manufacturing. Based on an analysis carried out by the IMF, by 2035 the volume of intra-continental exports is expected to increase by an average of 81 per cent.

Nevertheless, unlocking the full potential of this trade agreement will depend on significant policy reforms, strong political-will and trade facilitation measures.