New Study Shows Intra-African Trade Crucial for Economic Growth in Africa

A recent study conducted by the African Export-Import Bank (Afreximbank) has underscored the critical role of intra-African trade in fostering economic growth across the continent.

Published in Afreximbank’s Policy Research Working Papers and released in March 2024, the study analyzed data from 54 African nations spanning the period from 2004 to 2022, employing a statistical method known as system generalized method.

The findings reveal that intra-African trade not only stimulates economic growth but also enhances the flow of Foreign Direct Investment (FDI) into African economies.

According to the study, there is a direct positive correlation between FDI inflows and intra-African trade, suggesting that increased trade among African countries contributes significantly to overall economic expansion.

Dr. Benedict Oramah, President of Afreximbank, emphasized the importance of integrating intra-African trade into broader economic strategies.

“The study reaffirms that enhancing intra-African trade is a pivotal strategy for achieving sustainable economic development in Africa,” Dr. Oramah stated. “It is clear that as African countries trade more among themselves, they create opportunities for increased investment and economic diversification.”

Africa has historically lagged behind other regions in intra-continental trade and exports. For instance, data from the UN Trade and Development (UNCTAD) shows that intra-African exports accounted for only 16.6% of total exports in 2017, significantly lower than Europe (68.1%), Asia (59.4%), and America (55%).

The low level of intra-African trade, around 2% during the period from 2015 to 2017, highlights the potential for growth through initiatives like the African Continental Free Trade Area (AfCFTA).

The AfCFTA, which aims to create a single market for goods and services across 54 African countries, has been touted as a game-changer for intra-African trade.

It seeks to eliminate tariffs on 90% of goods, foster a unified customs union, and facilitate the free movement of people and investments across the continent.

Projections suggest that by 2035, Africa’s exports to the rest of the world could increase by 32%, with intra-African exports potentially growing by 109%, driven primarily by manufactured goods.

The Afreximbank study further argues that removing barriers to FDI and trade within Africa will accelerate economic integration and enhance the continent’s global competitiveness.

“Countries that prioritize financial sector development and industrial employment are better positioned to harness the benefits of intra-African trade,” the study notes.