Economic integration

Africa must take regional economic integration seriously

Addressing the second conference of the African Sub-Sovereign Governments Network (AFSNET) in Abuja last Friday, President Muhammadu Buhari reiterated the need for more effective regional economic integration among African countries.

“As leaders,” the president told his counterparts on the continent, “we all need to be concerned that we are not trading enough with each other. It is a bitter reality that intra-regional trade still represents only a tiny fraction of total trade in Africa”.

[email protected]: the African giant of yesterday, today and tomorrow

Nigeria Polls 2023: Here are the campaigns

President Buhari could not have spoken at a more crucial time for Africa. Amid the global economic turmoil of recent years, African economies are in dire straits, as developments in three key economic areas in recent months amply illustrate. The first is rising inflation in many African countries as economies experience sharp increases in the prices of goods and services, especially food and fuel. While the headline inflation rate in sub-Saharan Africa is expected to reach a record high of 12.2%, it is significantly higher in many countries than the continental average. In Ethiopia and Ghana, for example, the inflation rate is 34.5% and 33.9%, respectively, and exceeds 20% in three African countries: Angola (23.9%), Nigeria (20.5%) and Rwanda (20.4%), according to a recent and insightful article in this newspaper.

Food inflation on the continent, in particular, is even worse. Staple food prices in sub-Saharan Africa have jumped nearly 24% in 2020-22, the most since the 2008 global financial crisis, according to a statement from the International Monetary Fund (IMF) just last week. Since Africa imports many of its major food staples like wheat, palm oil and rice, global factors have contributed to rising food inflation on the continent, the IMF said. But the report also makes it clear that local factors – domestic supply chain disruptions, local currency depreciations and rising fertilizer and input costs – also contributed. Cassava and maize are produced locally in Nigeria, but their prices have doubled this year, and in Ghana, cassava prices have increased by 78%.

Local African countries have also been hit hard. No one knows what the Ghanaian Cedi is worth anymore; and in Nigeria, the Naira reached unprecedented levels of depreciation in international foreign exchange markets, while the CFA, used in 14 African countries but linked to the single European currency at a fixed rate, fell in value as a direct result of the fall of the euro against the dollar.

The result of all this is an increasingly bleak regional economic outlook and a worsening poverty situation on the continent. According to the African Economic Outlook 2022, released in May this year by the African Development Bank (AfDB), while Africa’s gross domestic product grew by around 6.9% in 2021, it is expected to “decelerate to 4.1% in 2022, and get stuck there in 2023, due to the lingering pandemic and inflationary pressures caused by the Russian-Ukrainian war.” The report further notes that while about 30 million people in Africa were plunged into extreme poverty in 2021 and an estimated 22 million jobs were lost in the same year due to the pandemic, this trend is expected to continue, with an additional 2.1 million Africans estimated to fall into extreme poverty in 2023.

The Daily Trust believes that while these austere figures are worrying enough for African economies, the biggest problem is the lack of concerted efforts for genuine economic integration at regional and sub-regional levels. While African leaders are happy to be massed on a bus in the British capital for the state funeral of Queen Elizabeth II or to be accommodated in expensive hotels in New York for the United Nations General Assembly last month , millions of Africans at home have yet to see similar levels of enthusiasm for systematically addressing and solving collective economic problems on the continent.

Africa has always been the most vulnerable to global economic shocks which have become more frequent and severe in recent years. This is primarily due to a glaring lack of collective strength on the global economic stage. African countries trade more individually with the rest of the world than with each other at home. As a 2019 report by the Brookings Institution shows, intra-regional trade in Africa stood at 17% in 2018, a paltry figure compared to 69% in Europe and 59% in Asia. Yet regional and sub-regional initiatives for Africa’s regional economic integration have hardly gone beyond the headlines and the resounding rhetoric of African leaders.

Debates on an African Central Bank, the Afro as a single currency at the continental level, and even the Eco at the sub-regional level have not materialized. And when it was designed in 2018, the African Continental Free Trade Area Agreement (AfCFTA), which commits countries to remove tariffs on 90% of goods, gradually liberalize trade in services and tackling a host of other non-tariff barriers, it was hailed as a new chapter in Africa’s regional integration that will make Africa the largest free trade area in the world by creating a market unique African country of over one billion consumers with a total GDP of over $3 trillion.

Yet this remains only a distant dream, as do complementary initiatives like the Protocol on Free Movement of Persons, Right of Residence and Right of Establishment, and the Single African Air Transport Market (SAATM).

But as the current global economic crises increase Africa’s vulnerability to external shocks, a renewed commitment to regional economic integration by African leaders, governments, regional bodies and businesses is needed. A good starting point for all stakeholders is to demonstrate political will that goes beyond rhetoric.