“The implementation of AfCFTA trade policy agreement can potentially alter the trajectory of blossoming trade relations African countries have benefited from Africa-China trade relations, due to perceived trade diversion.”
Dr. Lukman Oyeyinka Oyelami, INCDS Research Project Presentation, April 2024
This was the theory propounded at the first Research Project Presentation of the Institute of Nigeria-China Development Studies (INCDS), University of Lagos (UNILAG), for the year 2024.
Determined to champion the cause of research to improve life as we know it, the Institute of Nigeria-China Development Studies (INCDS), University of Lagos (UNILAG), on Thursday, April 18, 2024, held its first Research Project Presentation for the year 2024. And just as a renowned anthropologist in the early-20th-century, Zora Neale Hurston, once said that, “Research is formalized curiosity. It is poking and prying with a purpose”, the Institute has set its sights on using research to examine existing structures and policies with the purpose of improving them, the quality of life, and economies within Nigeria and Africa.
One of the Institute’s Research Fellows, who is also the Coordinator, Trade for Development Cluster at INCDS, Dr. Lukman Oyeyinka Oyelami, set the pace by presenting an ongoing research within the cluster for knowledge sharing/gaining insights among/from faculty members and key role players in industry.
Dr. Oyelami’s research presentation titled, “Potential Effect of AfCFTA Agreement on Africa-China Trade Relations: Evidence from Single Market Partial Equilibrium Simulation Tool (SMART) Model”, scrutinised China’s interests in key trade and investments with Nigeria and Africa as a whole.
He noted that despite the importance of Chinese trade and investment to African countries, the development of AfCFTA as a strategic trade policy in the continent potentially poses new challenges to African/Chinese trade and investment relations.
The African Continental Free Trade Area (AfCFTA) is a free trade area encompassing most of Africa. It was established in 2018 by the African Continental Free Trade Agreement, which has 43 parties and another 11 signatories. This makes it the largest free-trade area by number of member states, after the World Trade Organization, and the largest in population and geographic size, spanning 1.3 billion people across the world’s second largest continent.
Dr Oyelami informed that the evolution of AfCFTA commenced in 2005, even though the final decision that birthed the document as a trade policy took place on March 2018 at the African Union Extraordinary Summit in Kigali, Rwanda.
According to him, this potential challenge to African/Chinese trade and investment relations, especially in the area of trade has not been sufficiently explored empirically. Thus the major thrust of his research cluster’s empirical investigation.
Dr Oyelami’s study therefore adopted the Partial Equilibrium Simulation model as an analytical framework based on guidance from a similar study (Jammes & Olarreaga, 2005; Wonyra & Bayale, 2022). He informed that with the partial equilibrium analysis, focus is placed on the effects of a given policy decision in the market(s) that are directly affected.
Dr Oyelami analysed how much of trade African countries were at a risk of loosing due to the dominant factor of the trade between Africa and China being China’s economic interests to access critical resources. Using stylised facts in form of bar charts, he posited that the inability of an African country to export may rest solely on such country’s shoulders. He explained that this is based on findings that a country can export well if it maximises the potentials of its raw materials and products enough to appeal to the interest of foreign markets.
He noted that the trade relations between Africa and China are imbalanced due to few African countries having raw material with high market value.
To examine the implication of the African Continental Free Trade Agreement (AfCFTA) on Africa-China trade relations, Dr Lukman Oyelami and his research cluster investigated the trade diversion effect of AfCFTA in the two largest economies in the continent (Nigeria and South Africa) and compared the trade diversion effect with other trading partners.
He averred that the evidence of trade diversion is not enough to significantly affect trading with China.
Proposing a way forward to tip the balance more in favour of African countries than it presently is, Dr Oyelami recommended that African countries should reduce the import of consumable goods from China and focus more on intermediate goods with the inherent capability to enhance the productive base of their economies. He also posited that African countries should make efforts towards reciprocity in trade relations with China by increasing their export to the Chinese economy and preventing a lingering imbalance in trade activity.
Dr Lukman Oyeyinka Oyelami is a Research Fellow and Coordinator, Trade for Developmet Cluster, INCDS, UNILAG, as well as a Senior Lecturer, Distance Learning Institute, University of Lagos (UNILAG).
Mr Ope Alaran, former Ag. Director General, Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) and Dr Olawode Agboola of Lagos Business School graciously provided industry and academia based reviews of the report presented. They both proffered ways the report can better cater to the needs of industry and be more comprehensive for academia.
The Chairman and Host of the event, Professor Olufemi Saibu, who is also the Director, Institute of Nigeria-China Development Studies (INCDS), UNILAG, commended the presenter and reviewers. He appreciated participants and guests from industry and assured them of INCDS’ verve to continue holding such important conversations that will benefit both academia and industry.
The seminar was moderated by Mrs Grace Fadahunsi of the Institute of Nigeria-China Development Studies, UNILAG.
