Executive Summary
The African Continental Free Trade Area (AfCFTA) was launched in 2021 to create a unified, continent-wide market, to facilitate the free movement of goods, services, people, and capital. According to UNECA’s 2023 report, AfCFTA seeks to significantly boost formal intra-African trade well beyond the currently estimated volume of only 16% of total cross-border trade by reducing or eliminating, where possible, tariffs and non-tariff barriers among member states.
Despite progress made in achieving the ambitious goals of AfCFTA, several pain points remain. Using the Abidjan-Lagos trade corridor to illustrate them, we show that inconsistent tariff structures, unnecessarily complex regulation, inadequate infrastructure, and widespread informal trading (e.g., efforts to circumvent regulated trading routes) are major structural impediments to achieving trade integration. Other pain points include the lack of coordination of customs procedures, excessive security checks, corruption, poorly trained customs agents and other law enforcement agents (i.e., the police and military), ineffective communication exacerbated by differences in the lingua franca, fluctuation in exchange rates, and limited access to trade financing. We conclude that AfCFTA can be successfully implemented if customs procedures are standardized, regulatory frameworks are aligned, cross-border infrastructure is upgraded, and customs agents and other law enforcement agents are better trained. Formalizing cross-border trade will require careful consultation, as informal traders—who account for about 75% of trade according to the Afreximbank’s 2023 report—may view formalization as an attempt to tax them. Innovative measures such as joint border facilities, along with better digital connectivity and accessible financing, would facilitate trade by reducing trading costs and bringing small and medium enterprises into formal trade networks, ultimately contributing to economic integration and sustainable growth.