African superpower Nigeria has signed an agreement which aims to increase trade between African countries.
This leaves Eritrea as the only African country not to be part of the trading bloc.
Nigerian President Muhammadu Buhari signed the landmark agreement at the African Union (AU) summit in Niger.
The first step is to cut tariffs for goods from countries within the bloc but the timeframe to do this is yet to be announced.
At the moment, African countries trade only about 16% of their goods and services among one another, compared to 65% with European countries, reports AFP news agency.
The AU estimates that implementing the African Continental Free Trade Area – called AfCFTA – will lead to a 60% boost in intra-African trade by 2022.
It also says that AfCFTA will create the world’s largest free trade area.
Eritrea did not participate in the negotiations because of their conflict with Ethiopia, according to the commissioner fort Trade and Industry of the AU commission Albert Muchanga
He adds that now the two countries are at peace and Eritrea has asked the AU to go through the agreement with them.
“So over time they are going to come on board” he said.
What are free trade agreements?
Free trade agreements are designed to cut trade tariffs between member countries.
Tariffs are a form of tax, like a border tax.
They are placed on goods coming into a country for a range of reasons, sometimes to try and protect a home-made product.
The purest free trade agreement (FTA) removes all border taxes or trade barriers on goods.
They get rid of quotas too, so there is no limit to the amount of trade you can do.
FTAs also help make a country’s exports cheaper and give easier entry to other markets.
They come in all sorts of forms and with different rules but in short, they make trade between countries as liberal as possible and allow for more rules-based competition.
Source: BBC
