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Wednesday, March 22, 2023

Nigeria Ranks 3rd on Intra-African Trade as total Africa Trade Down to $1.049trn

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Despite reasonable economic growth, the volume of African trade actually fell by 0.13 percent last year from $1.051 trillion in 2018 to $1.049 trillion in 2019.

This is according to data seen by MoneyCentral from the 2020 African Trade Report launched yesterday by the African Export-Import Bank.

Intra-African trade was worth just $147.8bn last year, down from $156bn in 2018. South Africa alone was involved in 23.1 percent of African cross-border trade last year, followed by Democratic Republic of Congo with 7.7 percent.

Nigeria takes third spot, despite the fact that other African countries account for only 3 percent of its imports and 13 percent of its exports, with the latter dominated by oil exports.

Indeed, the volume of Nigerian trade with the rest of the continent actually fell last year, from $10.9bn in 2018 to $10.4bn, as the country’s share of intra-African trade remained constant at about 7.03 percent.

The next biggest contributors to intra-African trade are Namibia, Zambia, Egypt, Zimbabwe, Botswana, Cote d’Ivoire and Congo Brazzaville, in that order.

However, the real volume of cross-border trade in Africa is likely to be significantly higher because of substantial informal cross border trade. More than any other region in the world, a large proportion of intra-African trade is informal.

The small reduction in total African trade has to be set against the context of a 2.89 percent decrease in global trade, on the back of the trade wars and tariff increases that characterised the international trade landscape last year. Africa’s better performance was largely the result of economic reforms, some economic diversification and increased South-South trade, which reduced the continent’s reliance on its traditional export markets.

Higher public and private consumption, underpinned by lower inflation, also played a role. Although there has been some diversification, the continent remains overly dependent on the export of raw commodities.

Asia overtook the Europe Union as Africa’s largest regional trading partner in 2018 and strengthened that position last year, accounting for 28.86 percent of total African trade, compared with 26.24 percent for the EU. China and India alone accounted for a combined23.1 percent of African trade in 2019.

There was a huge 46 percent fall in the continent’s trade deficit last year, from $69.19bn in 2018 to $36.93bn for 2019, driven by a 3 percent fall in merchandise imports and 3.15 percent rise in exports. However, Africa’s total foreign exchange reserves contracted by 5.25 percent to $408.49bn in 2019.

The report reveals that Africa remains on the sidelines of global trade, accounting for just 2.8 percent of official total trade flows last year, while, intra-African trade is severely limited, accounting for just 14.4 percent of total African trade in 2019.

This contrasts sharply with intra-continental trade elsewhere in the world, which reached 73 percent in Europe and 52 percent in Asia last year.

Although it is by its very nature difficult to quantify, the report estimates that Informal Cross-Border Trade (ICBT) could be worth as much as 80 percent of the value of formal trade in Eastern Africa. Informal trade could be brought into the mainstream to drive greater trade between African states as the African Continental Free Trade Agreement (AfCFTA) evolves.

Indeed, the 2020 African Trade Report takes ‘Informal Cross-Border Trade in Africa in the Context of the AfCFTA’ as its theme. AfCFTA offers an opportunity to integrate formal and informal trade activity to produce accurate cross-border trade statistics across Africa.

Informal cross-border trade is often widespread and organised, covering important commodities, such as grains, petroleum, coffee and edible oils. The removal of tariff s and non-tariff barriers through the implementation of the African Continental Free Trade Area agreement should see greater official trade between surplus and deficit countries, and reduce levels of smuggling.

See Full Report HERE

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