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IMF Identifies Trade Digitisation as Vital Catalyst for AfCFTA Implementation



IMF Article IV Consultation with Nigeria

The International Monetary Fund (IMF) has emphasised the central role technology and trade digitisation would play in implementing Africa Continental Free Trade Agreement (AfCFTA).

It noted that global technological progress, including digitalization brings opportunities for Africa to succeed with its interregional trade agenda and serve its over 1.3 billion population with a combined gross domestic product (GDP) of $3 trillion as of 2022.

The adoption of new technologies would enable gains in productivity and competitiveness, strengthening the continent’s growth potential, according to the body.

In a report obtained by BUSINESS METRICS, the body said the African region should take cognisance of occurring changes such as climate change and its consequences, emerging risks of geopolitical fragmentation, ongoing technological progress and digitalization, and Africa’s prospective demographic boom.

AfCFTA, which became operational in 2019, was a culmination of various efforts in decades to promote intra-regional trades among African countries, and establish one big market without border in the continent.

In the context of trade integration, IMF said there are several ways in which Africa can take advantage of technological progress and more specifically its key feature of digitalization, the incorporation of data and the internet into production and consumption, cross-border flows, and finance.

Two of these relate to more efficient customs processes and cross-border payments that help lower trade costs and thus improve the structural trade environment, it said.

The Fund noted that intraregional trade would benefit from faster customs processes and digitalization can help with this for example via the following tools:

It illustrates import/export platforms such as electronic single-windows that allow lodging of information and documents in a single-entry point to fulfil all import, export and transit-related requirements.

These systems, according to the IMF, shorten clearance times by allowing simultaneous submissions of customs and other documents, reducing costs by limiting the duplication of processes and the need to submit physical documents; and reducing errors by ensuring consistency and traceability of transactions.

It recalled that such a system helped keep trade and customs revenue flowing in Nigeria during the COVID-19 pandemic.

The IMF further suggests that non-intrusive inspection technology such as cargo scanners can speed up inspection and monitoring of containerized goods, replacing time consuming manual examinations, noting that Nigeria and Uganda are using such scanners successfully.

In another instance, electronic cargo tracking systems make it possible to monitor goods in transit. In Kenya and Tanzania, such systems have improved border efficiency and reduced trade costs for private businesses.

The report read in part: “Intraregional trade would also benefit from improved cross-border payment systems within Africa, and initiatives are under way to strengthen these systems through digitalization.

“In recent years, payment platforms have emerged that allow settling payments in local currencies within certain regions, replacing more complex and expensive transactions with correspondent banks outside Africa.

“However, there are as yet no links between these regional platforms, hindering trade between sub-Saharan African regions as well as between sub-Saharan and North Africa.

“To address this challenge, the AfCFTA Secretariat and the African Export-Import Bank launched the Pan-African Payments and Settlement System (PAPSS) in January 2022.

“This cloud-based system aims to link African central banks, commercial banks, and FinTech firms into a network to enable quicker transactions among the continent’s countries in their currencies.

“The AfCFTA Secretariat and the Arab Monetary Fund announced plans to ensure interoperability between PAPSS and Buna, the crossborder multi-currency payment system in the Arab region.”

The body further stated that advancing digitalization in Africa will require reforms to improve information and communication technology (ICT) infrastructure, strengthen foundational infrastructure (notably for electricity), build digital skills, and enhance cybersecurity resilience.

With respect to ICT infrastructure, it acknowledged there is already notable progress that should be sustained, noting that while the African continent is still the digitally least connected region, its mobile and internet connectivity are growing rapidly, enabling greater digitalization.

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