‘Political instability threatens AfCFTA implementation’

Political Instability and policy inconsistencies, among others, constitute barriers that threaten the success of the African Continental Free Trade Area Trade in Services Protocol, financial analysts have said.

A campaign to implement the AfCFTA Trade in Services Protocol was recently embarked on by 36 Nigerian business associations led by a five-member committee, with support from the Centre for International Private Enterprise.

According to the Regional Director of CIPE Africa, Lars Benson, the Trade in Services Coalition aims to integrate Nigeria into the five priority sectors of the AfCFTA Trade in Services, namely business, communication, finance, tourism, transport and travel-related services.

Analysts reckoned the Trade in Services Coalition had the potential to improve African industry if it managed the AfCFTA protocol properly and addressed the drawbacks to past attempts at economic integration in the continent.

Economist and former President of the Chartered Institute of Banking of Nigeria, Prof. Segun Ajibola, commended the campaign to move beyond trade in physical goods and extend the scope of AfCFTA to the Services Protocol to help achieve the major goal of improved economic integration for Africa.

He submitted that services generally aid the growth of the primary and secondary sectors of any economy but opportunities in services areas, including transport and tourism, have been ceded to other parts of the world.

“Some countries in Africa have made good efforts to expand communication on the continent (South Africa), banking and finance (Nigeria, South Africa), and tourism (Egypt, Kenya). But lots are begging for attention,” Ajibola asserted.

The economist explained that companies that operate in the services sector of the respective countries of Africa, such as banks, telecoms, IT, airlines, tourist companies, and the countries they are domiciled in, stand to benefit from the trade-in services protocol.

“If the coalition can widen activities in finance, communication, shipping, transport, tourism, etc. with an avalanche of untapped opportunities, then the path towards improved economic prosperity is laid,” Ajibola stated.

However, the economist said the coalition needed to actively work against factors that impeded previous attempts at extending trade across the continent, including the Economic Community of West African States.

“The situation was not helped by political instability and policy inconsistencies in member countries,” he observed.

Ajibola pointed to language barriers, cultural differences, currency management, neo-colonial and imperialistic tendencies, cross-border crimes and country-specific trade barriers as the pitfalls the coalition needed to actively overcome to be successful.

A Professor of Financial Economics at the American University of Nigeria, Leo Ukpong, observed that for the trade-in-services protocol, Nigeria had a clear comparative advantage in commercial banking.

He explained that with a reduction in cross-border charges and taxes, Nigerian banks could experience an increase in their foreign banking operations and revenue.

However, Ukpong noted that other sectors could be adversely affected by the Trade in Services Protocol, particularly the Nigerian airline industry.

He stated that taxes and charges imposed by the Federal Airports Authority of Nigeria were way too high and if the authority was compelled to drop some of the charges, it would affect both the airlines’ and FAAN’s revenue negatively.

The AfCFTA Protocol on Trade in Services came into effect on May 30, 2019, to liberalise trade in services between member states, intending to increase intra-African trade.