On Policy Reluctance and Economic Peril

Recent efforts to promote intra-regional trade in Africa have met misguided reluctance from its largest economy, Nigeria.

Written by Abdulrasheed Isah

Dec 24, 2018

Men off-loading bags of rice from a vehicle at Bodija market, Ibadan, Nigeria.. ADEBAYO O./IITA.

Africa is often referred to as a sleeping giant due to the continent’s enormous yet underutilized intra-regional trade potential. But recent efforts to promote intra-regional trade in Africa have met misguided reluctance from its largest economy, Nigeria. Currently, intra-African trade is only 16 per cent of the continent’s overall trade, compared to 50 per cent intra-Asian and 70 per cent intra-European trade. Meanwhile, the continent is home to 1.2 billion people, providing a huge market for African businesses. Analysts predict that by 2030, Africa will have a combined consumer and business spending of $6.7 trillion.

One of the major challenges facing African businesses has been the difficulty of tapping into other African markets due to poor infrastructure, complex trade barriers and administrative bottlenecks. These challenges have made it difficult for African businesses to achieve economies of scale and benefit from learning by exporting, which occurs when firms become more productive by exporting goods abroad. According to a report by the Brookings Institution, greater intra-African trade will not only strengthen product value chains but will also facilitate technology diffusion and knowledge sharing across the continent. In addition, increased intra-African trade will stimulate infrastructure development and attract foreign investors.

In a move to bolster intra-African trade, the African Union recently initiated the Africa Continental Free Trade Area (AfCFTA). The AfCFTA is poised to be the world’s largest free trade zone and aims to “create a single continental market for goods and services, with free movement of persons and investments”. Although the deal was widely accepted across the continent, several countries including large economies like South Africa and Nigeria showed reluctance. While the former has recently ratified the deal, the latter has yet to make meaningful progress in endorsing it.

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About the Author

Abdulrasheed Isah

is a DAAD Scholar pursuing a doctorate at the Center for Development Research (ZEF) at University of Bonn, Germany. As a Commonwealth Scholar, he obtained an MSc Development Economics at SOAS University of London, United Kingdom.

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On Policy Reluctance and Economic Peril