AfCTA and The Nigerian Creative Industries — Potential Impacts and Opportunities

The African Continental Free Trade Agreement (the AfCFTA) recently came into force after the 22nd African country submitted its law from…

The African Continental Free Trade Agreement (the AfCFTA) recently came into force after the 22nd African country submitted its law from its National Parliament ratifying it.

The AfCFTA is an agreement between all 55 countries in the African Union (the AU) to create a single continental market for goods and services, with free movement of business persons and investments.

President Buhari signed the AfCFTA, on behalf of Nigeria, only last month after years of negotiations aiming to minimize the likelihood of potential adverse effects of the agreement on the domestic economy. The National Assembly must now pass a law ratifying it which must then be submitted to the AU before the AfCFTA comes into force in Nigeria.

I was asked my opinion on the African Continental Free Trade Agreement (the AfCFTA) and in particular how it may affect cultural and creative industries (CCI) in Nigeria. This question had already been at the back of my mind to the extent of wondering if/how the agreement would have an impact on these industries and the current growth trajectories of some of the key sectors in them.

So, after finding a bit of time over the weekend, I decided to put down my thoughts and give a brief overview of the AfCTA and a short take on what (if any) immediate and material impacts it may have on Nigerian CCI once it comes into force in the country.

The Importance of CCI

CCI - which include industries such as music, film/TV, plays, books, fashion, gaming, ICT development and many others - are connected through one key component, namely the underlying creative process required to develop their products and services.

CCI are known to be key drivers of economic growth. These industries are contributing an increasing amount to a $200b global digital economy, and African CCI are beginning to play a significant part in this growth.

Technological development, and growing internet penetration, has led to almost the entire global population adopting digital means of accessing and consuming CCI-based products/services. This has led to the digitization of almost all CCI globally, Nigeria included.

With most African CCI products/services having been digitized, their cross-border consumption is already accounting for a significant part of the value being generated in these industries.

It is well reported that the Federal Government is seeking to harness and leverage Nigeria’s CCI to help grow GDP and stimulate job creation. This increases the importance of raising awareness about the possible impacts, on Nigerian CCI, of the monumental change in the general dynamics of the African economic landscape that will result from the implementation the AfCFTA.

AfCFTA and Why it Matters

As earlier stated, the primary objective of the ACFTA is to create a single economic area in Africa. An economic area that will encompass every country on the continent and that will be the single largest market in the world, made up of 1.2 billion people. This economic area will facilitate the free movement of goods, services, people and investment.

The agreement is to be implemented in five stages. The first is in respect of the trade of goods and services. This stage will focus on the removal of tariffs and other trade barriers between African countries.

The second stage will focus on intellectual property rights including the ability of holders of such rights to register ownership of IP by way of a single registration to cover the entire continent.

The third stage will aim to coordinate laws and regulations to enable and facilitate the free movement of 'investment’, whilst the fourth stage will address competition policy. The final stage will focus on dispute resolution.

Each of the stages will take a number of years to implement. Additionally, once the AfCTA comes into force in the country, Nigerian CCI will only be directly affected by the first and second stages; with the second stage likely to have a lot more impact than the first. Hence these two stages will be briefly looked at.

Trade of Goods/Services

The first stage of AfCFTA’s implementation is not likely to have any major impact on Nigerian CCI. This stage will focus more on the reduction, harmonization and ultimately the eradication of import duties on 'goods/products' being traded between people in different African countries.

It is therefore mainly African CCI that are still based on the trade of physical goods/products that will be affected by this first stage of implementation of the AfCFTA. In this regard the only Nigerian CCI that the first stage of implementation of the agreement will impact is the fashion industry.

The fashion industry is based on the design, manufacture and distribution of physical goods/products (i.e. clothing, footwear and accessories etc). This means the cost of selling Nigerian-made fashion goods in other African countries would ordinarily make such items less competitive in these countries in terms of price, due to associated import tariffs.

The AfCTA, by eliminating tariff barriers between African countries, should therefore have a positive effect on this industry by opening up new territories across the continent for Nigerian-made clothing and accessories - that would no longer be 'overpriced' when compared to local equivalents in these markets.
With little to no tariffs attached to the import of goods into other African countries, Nigerian-made products can compete with local products on a more level playing field.

This principle, however, works both ways. Clothes manufactures and fashion distributors from across the continent will equally also have (non-discriminatory) access to the Nigerian market; the largest market - by population size - in Africa.

In addition to potential market opportunities, the textiles industries will also be directly affected by the (first stage of the) AfCFTA. These industries are important for the fashion business given that manufacturers of cloth and other materials are key suppliers to fashion industry. The removal of import tariffs would empower fashion industry participants to seek for more competitive sources for their input components which could in turn drive down their production costs.

Despite the first stage of the implementation of the AfCFTA only directly affecting the fashion industry (amongst Nigerian CCI), one aspect of this stage that will ultimately have implications for all Nigerian CCI is the development of a Pan-African digital payments and settlement system. Given that the bulk of all CCI-related transactions on the continent are increasingly being conducted digitally, such a system will almost certainly have a significant positive effect on the Nigerian CCI and is thus worthy to note.

Intellectual Property Rights

Asides the digital payments and settlement aspect of stage one of the implementation, the AfCTA will only begin to have a major impact on Nigerian CCI, and African CCI in general, when issues regarding intellectual property rights begin to be addressed in the second stage of its implementation.

The objective of this stage will be to create a single, unified jurisdiction for the administration of IP rights in Africa. This means that one registration would secure rights across the entire continent, as well as the ability to enforce those rights through one judicial mechanism. This will add more value to IP generated in Africa which in turn will encourage creativity and innovation across the continent.

Additionally, harmonization of IP laws and policy amongst African countries leads to more certainty, stability, and confidence in the IP rights of their respective citizens. This should also lead to a more harmonized means of valuing, licensing and transferring such rights.

Conclusion

To summarise, the AfCFTA presents a major sea-change to intra-Africa trade. It is calculated that the removal of tariffs can result in a 50% increase in trade between African countries and removal of other trade barriers can double trade even further.

Implementing the agreement will not be easy and will take time however, given that it has now come into force and will apply within Nigeria sooner rather later, it is important for businesses in Nigerian CCI to begin to think about how they can capitalize on the new regime to expand their offerings to cater for other territories around the continent.

Focus should be initially given to Nigeria’s regional neighbours (that have already rarified AfCFTA) after which sights can be set further afield. Fashion industry players in particular should begin to develop product offerings for different African markets as well as identifying additional/alternative potential suppliers to ensure their production costs are as competitive as possible without sacrificing quality.

AfCFTA is here to stay and there is no turning back. Failure to capitalize on the opportunities that the agreement will bring for small and medium enterprises in Nigeria’s CCI will leave them in the unfavourable position of not being able to benefit from the enlarged market nor being prepared for the imminent potential increase in competition from other African territories.

The time for Nigerian CCI to prepare for the future of trade in Africa is now.