AfCFTA: Trade in Africa and Financial Inclusion

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By Adebayo Abubakar

If globalisation could be conceptualised to mean “the global economy as a single integrated, and unified economic structure”, then permit me to view African trade, within the framework of the African Continental Free Trade Area (AfCFTA) as “Africanisation” for the purpose of this piece. In a speech by Dr. Chimaroke Nnamani, a former governor of the Nigerian State of Enugu titled, ‘Globalising in Poverty’, which I quoted in an article I wrote on The Cable earlier this year, he spoke about factors that would prevent the full participation of Africans in the globalised economy including  weak infrastructure.

With regards to infrastructure, he mentioned availability of credit facilities, the technology required to facilitate payments, and seamless movement of cash. How much access does an African entrepreneur have to  credit facilities? The level of financial inclusion in the majority of  African countries is still very low for Micro Medium and Small Enterprises to be fully involved in driving the integration within the framework of the AfCFTA.

Generally speaking, financial inclusion varies greatly on the African continent between regions and also between countries (Demirgüç-Kunt and Klapper, 2012a). For example, 51% of Southern Africans owned a bank account in 2011, compared to 11% of Central Africans. In terms of formal savings, only 4% of North Africans saved money at a formal financial institution, compared to 18% of Western Africans. This is according to a report by “Science Direct“. 

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Notably, South Africa has shown great commitment when it comes to financial inclusion. Results from the 2016 FinScope South Africa survey indicate a level of 89% financial inclusion (38.2 million adults) while approximately 11% of the adult population (4.3 million adults) are financially excluded.

In Nigeria on the other hand, out of an adult population of over 106 million, over 38.1 million (36%) of the country’s adults remain completely financially excluded. This is a shortfall by 16 percent points from the desired target of a 20% exclusion rate, according to a report on a Nigerian media outfit that focuses more on business reports, Business Day, published on December 29, 2021.

Member countries of the AfCFTA need to come up with, and agree on a financial inclusion strategy, that will ensure an optimum participation of a larger percentage of Africans entrepreneurs. A financial inclusion strategy ensures that trade under AfCFTA runs on an engine built locally in order for it to truly have a “Pan-African” make up. Our leaders must come up with legal and institutional frameworks that enable access to finance to be expanded primarily through banks – Merchant Banks, Commercial banks, Microfinance banks and the Development Banks. Finance must not only be made available, it must also be affordable.

To achieve this, the African Development Bank (AfDB) needs to collaborate with relevant financial institutions in each of the member states, to allow for more financial penetration to get the unbanked and the semi-banked population on board, and enhance more financial inclusion. In the area of financial technology, the African Union has been able to find a way around it, through the establishment of a centralised financial market infrastructure enabling the efficient and secure flow of money across African borders, called Pan-African Payment and Settlement System – PAPSS. This is a platform that minimises risk and contributes to financial integration across the regions. PAPSS is an African Union infrastructure developed in collaboration with the African Export-Import Bank (Afreximbank) to complement trading under the AfCFTA. However, the problem of availability of credit facilities still needs to be secured first, before Africa can begin to sing “Hosanna ”.

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Once the avenue for trade finance is opened, Africa, through the instrumentality of AfCFTA will, seamlessly play the role it is better positioned [on account of its endowment in human and material resources] to play by default – that is, to be the rescuer of the global economy currently going through some turmoil, as a result of crises caused both COVID-19 Pandemic and the Russia’s invasion of Ukraine. The crises, it would be recalled, have no doubt worsened the socioeconomic conditions of more than two-thirds of the world population, who were hitherto struggling to make ends meet. Africa is blessed with enough arable land to produce the food that can feed the world, just like it is abundantly endowed with mineral resources more than any other continents of the world. With this deliberate effort to enhance financial inclusion towards the stimulation of the productive capacity of the continent, the era of African countries depending on grants and donations from abroad, or loans from the Western creditors will be a thing of the past.

Adebayo Abubakar is a Nigerian journalist. You can reach him via  email: