Africa’s Path to Prosperity Lies in Regional Trade, Not Global Dependence

Kingsley Moghalu, President of the African School of Governance and former deputy governor of the Central Bank of Nigeria, argues that strengthening intra-African trade is essential for the continent’s economic development.

He asserts that Africa’s continued reliance on “global trade” with developed economies has kept it at the bottom of the global value chain for too long.

Moghalu contends that genuine prosperity for Africa, beyond simply aggregate GDP growth, requires significantly improved trade performance. He points out that Africa’s share of global trade has stagnated at around 3%, a stark contrast to the robust trade performance of other regions.

He advocates for a “second decolonization” of Africa, shifting away from dependence on global trade with advanced economies and prioritizing trade within the continent. He emphasizes that most successful global trade is, in fact, regional, citing the high percentages of intra-regional trade in Europe, Asia, and North America. Africa, by contrast, has only 13% intra-African trade.

Furthermore, Moghalu highlights the disadvantageous terms of trade for African nations, which primarily export raw materials and import value-added goods made from those same materials. He notes that while global trade has lifted millions out of poverty worldwide, Africa has been largely excluded from this progress due to these unequal trade relationships.

He also acknowledges the complexities posed by rising protectionism in industrialized nations and the dominance of manufacturing value chains in global trade, which further marginalizes Africa’s agricultural exports. He argues that boosting regional trade, particularly given the large volumes of unreported informal commodity trade, is the key to building regional value chains.

The African Continental Free Trade Area (AfCFTA), with its potential to create the world’s largest free-trade zone, is a significant step in this direction, Moghalu says. However, he identifies challenges to AfCFTA implementation, including revenue shortfalls for governments, currency convertibility issues, and persistent barriers to doing business.

He notes that Afreximbank’s AfCFTA Adjustment Fund and its innovative payment system for local currency transactions are addressing the first two challenges. The remaining obstacle, the hostile business environment, requires addressing issues like corruption, inefficient logistics, multiple taxation, weak property rights, and insecurity. Moghalu suggests that private-sector coalitions advocating for a private-sector bill of rights could help create a more favorable investment climate.

Moghalu concludes that Africans themselves must drive African prosperity, emphasizing that the path forward lies in regional trade, a transition to value-added products, and a concerted effort to dismantle barriers to doing business.