AfCFTA Pushes $1bn Fund, Local Currency Payments to Unlock Nigeria’s Non-Oil Exports

The African Continental Free Trade Area Secretariat has identified trade finance, digital payments, logistics and value addition as critical to unlocking Nigeria’s non-oil export potential.

AFCFTA Secretary-General Wamkele Mene who spoke on Tuesday at the 10th Zenith Bank International Trade Seminar on Non-Oil Export, called for stronger collaboration between financial institutions and the private sector to deepen access to Africa’s 1.4 billion consumer market

Themed “Unlocking Value and Harnessing Growth in Non-Oil Export,” the seminar pooled policymakers, regulators, financial institutions, exporters and other private-sector stakeholders to examine strategies for expanding Nigeria’s non-oil exports.

 “Financial institutions have a particularly important role to play under the AfCFTA by financing infrastructure, reducing financial risks and creating platforms that can improve the competitiveness of African businesses seeking access to the integrated continental market”, stated Mene.

The AfCFTA market, comprising more than 1.4 billion people and an estimated combined GDP of about $3.4 trillion, presents an opportunity for Nigerian producers to diversify their export markets beyond traditional destinations.

According to Mene, the continental agreement is focused on accelerating trade and creating market access through financial and digital solutions while working with commercial banks and the private sector to address financing and other constraints limiting intra-African commerce.

A major area highlighted by the AfCFTA chief was the Pan-African Payment and Settlement System (PAPSS), which allows businesses to conduct eligible cross-border transactions in African currencies without relying on intermediary currencies.

“The system was developed to reduce the cost of trade and payments across Africa” noted Mene who stated that, working with Afreximbank, the cost associated with currency convertibility across the continent has been estimated at more than $5 billion annually.

He also disclosed that commercial banks were formally approved to participate fully in PAPSS, with more than 21 banks having signed up and integrated with the system.

For Nigerian exporters, wider adoption of PAPSS could reduce some of the costs and complexities associated with cross-border payments, potentially making intra-African trade more accessible to smaller businesses.

Zenith Bank seminar held virtually on tuesday with sessions streamed across Zoom and other digital platforms. The event is the 10th edition of the bank’s trade seminar, which has evolved into a platform for discussions around Nigeria’s export competitiveness, market access and trade infrastructure.

Mene also disclosed that the AfCFTA Adjustment Fund, established in collaboration with Afreximbank, received an initial $1 billion seed capital approved by the bank’s board.

He stressed that the fund was not designed as budgetary support for governments but to support private-sector industrialisation, export readiness and capacity building.

He said efforts would continue across the continent to mobilise additional capital into the fund and enable businesses to take greater advantage of the AfCFTA market.

The AfCFTA Secretariat is also working towards establishing a single transit guarantee scheme that would allow goods moving across the continent to be covered under a single bond.

According to Mene, such a system would reduce trade costs, lessen regulatory burdens and facilitate the movement of goods across regional economic communities including ECOWAS, SADC and COMESA.

Despite the opportunities presented by the continental market, Mene identified transport and logistics costs among the major obstacles confronting African exporters.

He said the cost of moving goods across the continent continues to limit the ability of private-sector businesses to access markets outside their immediate countries.

Infrastructure remains another major constraint. Mene cited the African Development Bank’s assessment that Africa requires more than $130 billion annually in infrastructure investment, underscoring the scale of financing needed to improve the continent’s trade environment.

He also called for continued customs modernisation and seamless border procedures, noting that more efficient customs systems would reduce delays and improve the competitiveness of African exporters.

Mene said Nigeria has an important role to play in the implementation of the AfCFTA, particularly in digital trade.

He cited data from the National Bureau of Statistics indicating that the African continent has become the number one export destination for Nigerian exports, describing the development as an indication of the growing importance of intra-African trade to Nigeria.

The AfCFTA chief also referenced Nigeria’s digital trade initiatives, including the Digital Trade Forum, which seeks to strengthen digital connectivity, explore investment opportunities and empower young digital innovators.

The development is significant for Nigeria’s diversification drive, particularly given the need to increase foreign exchange earnings from products and services beyond crude oil.

The seminar also brought together major institutions involved in Nigeria’s trade and export ecosystem.

The announced public-sector panel included Abba Bello, Managing Director/Chief Executive of the Nigerian Export-Import Bank (NEXIM Bank); Adewale Adeniyi, Comptroller-General of the Nigeria Customs Service; Aderinola Shonekan, Director of Trade and Exchange at the Central Bank of Nigeria; Aisha Rimi, Executive Secretary/CEO of the Nigerian Investment Promotion Commission; and Nonye Ayeni, Executive Director/CEO of the Nigerian Export Promotion Council.

The participation of NEXIM Bank was particularly relevant to the financing challenge confronting exporters, given the bank’s mandate around export financing and support for Nigeria’s international trade.

The seminar also featured Patricia Poku-Diaby, Chief Executive Officer of Plot Enterprise Ghana Limited, and former Afreximbank President and Chairman of the Board, Professor Benedict Oramah, alongside other public- and private-sector stakeholders.

Zenith Bank’s Group Managing Director/CEO, Dame Dr. Adaora Umeoji, has also continued the bank’s longstanding focus on trade and export development. The bank’s previous trade seminars have brought together senior executives, regulators, NEXIM Bank, Customs, the AfCFTA Secretariat and exporters to examine ways of improving Nigeria’s export competitiveness.

The latest edition therefore comes at a time when Nigeria is seeking to increase domestic value addition, expand non-oil foreign exchange earnings and position local businesses to benefit more substantially from the AfCFTA market.

For Nigeria, Mene’s message was clear: access to a huge continental market alone will not deliver an export boom. The country must combine affordable trade finance, efficient payments, better logistics, modern customs systems, infrastructure and domestic value addition to turn its production capacity into competitive exports.

The challenge now is to move Nigerian exports further up the value chain, allowing more of the economic benefits from the country’s agricultural, manufacturing and other non-oil resources to be retained domestically.