…Context, Challenges, and the Role of AfCFTA
‘The cancellation or non-renewal of AGOA would remove duty-free privileges that currently make African exports competitive in the U.S. market.’
Olajumoke Familoni
The African Growth and Opportunity Act (AGOA) has been a cornerstone of trade relations between the United States and sub-Saharan Africa since its enactment in 2000. Designed to enhance economic development through trade preferences, AGOA provided eligible African countries with duty-free access to the U.S. market for thousands of products. However, as the program approaches its expiration in 2025, uncertainty about its renewal raises critical questions about Africa’s trade future, competitiveness, and integration into the global economy. This paper explores the potential implications of AGOA’s cancellation for African economies, with a specific focus on Nigeria, and examines the opportunities that the African Continental Free Trade Area (AfCFTA) presents as an alternative framework for sustainable trade growth.
What Is AGOA?
The African Growth and OpportunitAct (AGOA) is a U.S. trade policy enacted in May 2000 under the Clinton Administration. It was established to promote economic growth, deepen trade ties, and stimulate market reforms across sub-Saharan Africa (U.S. Trade Representative, 2023). The Act grants eligible African countries duty-free and quota-free access to the U.S. market for over 6,800 products, including textiles, agricultural goods, and manufactured items.
To qualify for AGOA, countries must meet specific criteria such as maintaining a market-based economy, upholding the rule of law, protecting human rights, and eliminating barriers to U.S. trade and investment. These eligibility conditions are reviewed annually, and non-compliance can lead to suspension or removal from the list of beneficiaries (UNCTAD, 2022).
AGOA’s primary objective is to facilitate Africa’s integration into the global economy by leveraging trade as a catalyst for development. Since its inception, the initiative has boosted African exports to the U.S., created jobs, and encouraged industrial diversification, though its benefits have been uneven across the continent. South Africa, Kenya, Lesotho, and Mauritius are among the top beneficiaries, while countries like Nigeria have yet to fully capitalize on its opportunities beyond crude oil exports (World Bank, 2023).
3. What Is AfCFTA?
The African Continental Free Trade Area (AfCFTA), officially launched in January 2021, is a landmark initiative by the African Union aimed at creating the world’s largest free trade area by number of participating countries. AfCFTA seeks to eliminate tariffs on 90% of intra-African goods, facilitate movement of services and investments, and enhance industrial development across the continent (African Union, 2023).
By promoting regional integration and intra-African trade, AfCFTA addresses one of Africa’s persistent economic weaknesses, its reliance on external markets. In contrast to AGOA, which links African economies primarily to the United States, AfCFTA strengthens Africa’s internal market potential and collective bargaining power. The framework envisions a unified market of 1.3 billion people with a combined GDP of over $3.4 trillion, potentially transforming Africa’s trade landscape (UN Economic Commission for Africa [UNECA], 2023).
4. Implications of AGOA Cancellation
4.1 Economic Implications
The cancellation or non-renewal of AGOA would remove duty-free privileges that currently make African exports competitive in the U.S. market. Countries like Nigeria could face standard tariffs on textiles, agricultural products, and footwear, leading to higher export costs and reduced demand (BusinessDay NG, 2024). Export volumes may decline, affecting national earnings and employment, particularly in labor-intensive sectors.
Moreover, AGOA’s expiration would expose Africa’s structural dependence on commodity exports. Nigeria, for example, has largely utilized AGOA for crude oil exports, missing broader opportunities in value-added goods. Without AGOA’s preferential treatment, African countries could lose approximately $4.5 billion in annual export revenue to the U.S. (Brookings Institution, 2023).
4.2 Industrial and Employment Implications
Industries such as textiles and apparel, which have thrived under AGOA’s tariff exemptions, would be at significant risk. In Nigeria and Ethiopia, AGOA-supported factories have employed thousands of workers, particularly women. Cancellation could lead to factory closures, job losses, and reduced foreign investment (UNCTAD, 2022). The loss of AGOA’s industrial incentives may also stall progress toward manufacturing-led diversification.
4.3 Strategic and Political Implications
AGOA has been a key instrument of U.S. foreign policy in Africa, promoting democratic governance and economic reform. Its expiration might signal a retreat of U.S. influence on the continent, creating a vacuum that other powers, such as China and the European Union, may fill through alternative trade frameworks (Carnegie Africa, 2023). African countries may thus face increased pressure to negotiate bilateral trade deals or regional alliances to preserve market access.
5. Implications for AfCFTA
While the end of AGOA poses challenges, it could simultaneously accelerate Africa’s regional integration under AfCFTA. The loss of preferential access to U.S. markets might push African nations to look inward, strengthening intra-African trade networks and value chains.
AfCFTA offers a sustainable path for industrialization and economic cooperation by promoting cross-border production hubs and reducing dependence on volatile external preferences. However, realizing these benefits requires addressing key barriers such as inadequate infrastructure, policy misalignment, and non-tariff obstacles (UNECA, 2023).
Additionally, AfCFTA’s success hinges on effective coordination among member states and complementary investments in logistics, customs modernization, and digital trade facilitation.
6. Nigeria’s Position
Nigeria, Africa’s largest economy, has been a significant albeit underperforming participant in AGOA. Most of Nigeria’s exports under the Act have been crude oil and gas, accounting for over 90% of its AGOA trade value. Non-oil exports such as textiles, cocoa, and leather products have yet to achieve comparable success due to infrastructural bottlenecks, quality certification challenges, and low industrial competitiveness (Central Bank of Nigeria, 2024).
The cancellation of AGOA will expose Nigeria’s narrow export base, potentially reducing its trade surplus with the U.S. Nevertheless, Nigeria can leverage AfCFTA to diversify exports, develop industrial clusters, and integrate into regional value chains in agriculture, manufacturing, and digital services.
7. Strategic and Policy Recommendations
To mitigate the potential fallout from AGOA’s expiration and harness AfCFTA’s opportunities, African nations particularly Nigeria should consider the following strategies:
- Diversify Export Markets: Expand trade beyond the U.S. by strengthening ties with the EU, China, and within Africa under AfCFTA.
- Enhance Industrial Competitiveness: Invest in infrastructure, technology, and quality assurance systems to increase value-added production.
- Promote Regional Value Chains: Develop specialized industrial zones and cross-border trade corridors to capitalize on AfCFTA’s scale.
- Negotiate Bilateral Trade Agreements: Engage the U.S. and other partners for new sector-specific deals in green technology, agriculture, and digital services.
- Support Affected Industries: Provide fiscal incentives, retraining programs, and access to credit for sectors most affected by AGOA’s end.
- Strengthen Governance and Trade Facilitation: Simplify customs procedures, reduce corruption, and enforce trade-related reforms to attract investment.
8. Conclusion
AGOA’s potential cancellation represents both a challenge and an opportunity for Africa. While the loss of U.S. trade preferences could reduce export competitiveness and expose structural weaknesses, it also offers a chance for African economies to rethink their trade strategies and deepen continental integration through AfCFTA. For Nigeria and its peers, the future of African trade lies in industrial self-reliance, regional collaboration, and strategic engagement with global markets. In this way, the post-AGOA era can mark not a regression, but a pivotal step toward a more resilient and self-sustaining African economy.
Prof. Olajumoke Familoni is President/Provost ICLED Business School.
