The African Continental Free Trade Area got a major boost last week, as the much anticipated Pan-African Payments and Settlement System (PAPSS) was officially launched in Accra, Ghana.
According to PAPSS will enable a customer in one African country to pay in their own currency, while a seller in another country receives payment in their own currency.
After a successful pilot in the West African Monetary Zone (WAMZ), the payment system was launched commercially. Gambia, Ghana, Guinea, Liberia, Nigeria, and Sierra Leone make up the WAMZ, a West African economic and integration organization.
Speaking at the unveiling of the payment platform, the CBN Governor, Mr Godwin Emefiele said that the financial institutions under its jurisdiction will accept the PAPSS and recommend it to businesses across Nigeria. According to Emefiele, the new payment method will aid in the formalization of trade on the continent, as well as benefit households, businesses, and financial institutions.
With the infrastructure supplied by PAPSS, he estimates that intra-African trade will expand to 35% from 15% in the next five years, just as the Secretary-General of AfCFTA, H.E Wamkele Mene, in his remarks stated that the PAPSS is expected to boost intra-African trade and save the continent $5 billion annually.
Also last week, Nigeria’s Trade Minister, Niyi Adebayo, hinted that the FG will focus on improving access to power and infrastructure for manufacturers to improve Nigeria’s manufacturing capacity in Africa. He said, “With regards to power, we are aware that there is a power problem, so however, based on that, what we are doing is creating special economic zones and special industrial parks.”
He added that the government is spending money with regards to setting up gas pipelines all over the country so that manufacturers can easily tap into the gas pipelines and access the gas and power your plants.
With the launch of the PAPSS system and the Trade Minister’s promise, one can be optimistic about the rollout of the AfCFTA in Nigeria and Africa for the year 2022.
However, compared with last year, the AfCFTA adoption was at a snail’s pace due to multiple factors, with the most important being the covid-19 virus pandemic which disrupted the global supply chains.
Other contributing factors include lack of political will on the part of State parties, insecurity, and poor infrastructure in major trade corridors.
Prince Nwafuru, a Nairametrics AfCFTA columnist and an International Trade Lawyer, tells Nairametrics that in 2022, stakeholders want to see the AfCFTA State Parties develop clear implementation strategies and equally address the tariff and non-tariff barriers that militate against the actualization of the objectives of the free trade agreement.
How feasible is the Trade Minister’s comments for Nigeria to be the manufacturing hub of AfCFTA?
Nwafuru says that Nigeria has the potential not just to be the manufacturing hub but also to lead the way as a key exporter of technical services within the AfCFTA.
“However, the country requires investment-friendly policies to actualize this. And yes, like the Minister noted, we need to first of all address the key challenges such as insecurity, poor infrastructure, port congestion and power issue amongst other non-tariff barriers.
“Manufacturing is capital and power-intensive and you need to have the underlying framework to thrive under a competitive free trade regime as this. The focus now has been on negotiating the rules of origin which will address the tariff aspect of trade barriers. But until those non-trade barriers identified above, Nigeria may not stand a chance against other industrialized countries of Africa such as South Africa and Egypt,” Nwafuru says.
What are expectations for the year and why has there been a slower implementation so far?
On slower rollouts, Nwafuru says a number of factors may be responsible for this. He added that the Covid-19 pandemic has been blamed for a lot of things. Most countries are more focused on how to address the impact of the pandemic on the health sector and the economy and little attention is being paid to other critical issues.
He added that there is also the issue of insecurity and political instability in some of the Regional Economic Communities (RECs).
“Take the recent issue in Mali and also Guinea which led to the imposition of sanctions on Mali. All these to me constitute distractions. But we must note that trading only started in January 2021 and it is still early to pass any judgment particularly with these factors identified earlier,” he said.
“In 2022, we want to see the AfCFTA State Parties develop clear implementation strategies and equally address the tariff and non-tariff barriers that militate against the actualization of the objectives of the free trade agreement as a lot of business owners have complained about lack of information on the implementation and negotiation of the protocol components of the trade agreement.
“We want this to be addressed as well. The private sector should be aware and be carried along at every stage” he added.
Nigeria may not fully take advantage of the AfCFTA until complex policy issues related to power, infrastructure and insecurity are solved, and with Nigeria entering the election season, the capacity to fully take these issues head-on may have to be a priority for the next administration.
As the Trade Minister hinted, the major challenge right now is security, and there is the issue of power and then, there is the issue of general infrastructure. If Nigeria can match up with action the promises of the Trade Minister, Nigeria may be able to compete with Egypt and South Africa as a manufacturing hub for Africa.