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The African Continental Free Trade Area (AfCFTA) Agreement provides a unique opportunity for countries in the region to competitively integrate into the global economy, reduce poverty, and promote inclusion. It presents a major opportunity for African countries to bring 30 million people out of extreme poverty and to raise the incomes of 68 million others who live on less than $5.50 per day. According to a recent report which was based on the surveys conducted for 1,800 Micro Small and Medium Enterprises (MSMEs) in five states in Nigeria, covering multiple sociocultural zones to evaluate the awareness and preparedness of MSMEs, the survey results disclosed that the majority of MSMEs are unaware of the existence of the trade agreement, especially smaller businesses. So, how exactly does this deal affect or benefit start-ups and MSMEs; Here are a few pointers:
Gross Reduction In Tariffs
The beauty of AfCFTA is the promise for zero tariffs for over 90% of goods traded between African countries, which means that manufacturers in Nigeria can produce goods locally and get it across our borders to sell in markets beyond Nigeria, paying little or any duty.Creation Of New Markets
One of the common challenges with local businesses is their inability to compete with the foreign-made goods that are sold locally. However, with AfCFTA, Nigerian manufacturers can export to other countries as the more they compete with their local rivals and export, the better they get at production.Sign up to the Connect Nigeria daily newsletter
Foreign Direct Investment
With restrictions lifted on foreign investments, investors will flock to the continent. This adds capital to expand local industries and boost domestic businesses. New capital enhances an upward productivity cycle that stimulates the entire economy. An inflow of foreign capital can also stimulate banking systems, leading to more investment and consumer lending.Reduction In Input Costs
The AfCFTA will ease the process of importing raw materials from other African countries. It will also enable SMEs to set up assembly firms in other African countries, in order to access cheaper means of production and thereby increase their bottom lines.Increased Efficiency And Sales
Global companies have more expertise than domestic companies to develop local resources. That’s especially true for businesses in the manufacturing sector. The AfCFTA will allow multinationals to partner with local firms to develop raw materials, training them in best practices and transferring technology in the process. It is, therefore, important that MSMEs are proactive and strategic in taking steps to improve their ability to compete with other producers on the continent as well as leverage this golden opportunity for expansion.What To Do: Go For It!
Remember to check available opportunities online, discuss with your business association, relevant government agencies to explore possible and available opportunities. Featured Image Source: Yegon EmmanuelGot a suggestion? Contact us: editor@connectnigeria.com
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