Nigeria and other African economies face significant trade costs arising from regulatory, logistical and institutional barriers within countries, with about 60 per cent of total trade costs across the continent attributed to behind-the-border constraints, the World Bank has said.
The global development institution said the finding underscores the need for African countries to look beyond tariffs and customs duties in their efforts to deepen regional trade, stressing that inefficient domestic systems and fragmented regulations continue to make cross-border commerce costly and difficult.
The World Bank made the assessment in its report, Integrating Africa: From Threads to Hubs, which examines the structural constraints limiting trade and economic integration across the continent.
According to the report, the major sources of trade costs include inefficient customs clearance procedures, poorly aligned regulatory frameworks, inadequate logistics services, fragmented transit systems and weak infrastructure.
“About 60 per cent of total trade costs stem from unilateral sources,” the report said, noting that these costs are largely generated by domestic institutional constraints rather than tariffs imposed at international borders.
The report explained that while border-related challenges remain important, the larger burden comes from how individual countries design and operate the systems that support trade.
It identified regulatory misalignment, inefficient administrative procedures, weak transport and logistics networks and inadequate infrastructure as key factors that increase the cost and time required to move goods across African markets.
The World Bank further noted that bilateral frictions at border posts compound these domestic challenges.
Such frictions include differences in product standards, the lack of mutual recognition of licences and permits, and weak transit arrangements, all of which can delay the movement of goods and increase costs for businesses engaged in regional trade.
The findings suggest that reducing tariffs, although important for trade liberalisation, will not by itself deliver the level of regional integration required to build efficient African production and supply networks.
The report said the continent’s integration agenda should instead focus on ensuring that the different systems governing trade can operate effectively across national boundaries.
“This understanding reframes the integration agenda: reducing trade costs in Africa is not primarily about liberalization but is about making systems interoperable,” the World Bank said.
It added that countries should move beyond simply asking whether borders are open and focus on whether the systems supporting cross-border commerce can work together effectively.
This includes ensuring that goods and trucks can move efficiently, trade-related data can be exchanged, payments can flow smoothly and businesses can operate across jurisdictions without facing unnecessary administrative and regulatory obstacles.
The World Bank said countries where such systems work together effectively are better positioned to develop trade and production networks, while fragmented systems can undermine regional integration even when tariffs have been reduced to zero.
The findings have particular implications for Nigeria, given the country’s size and importance to regional trade in West Africa.
Nigeria’s extensive road connections with neighbouring countries make cross-border transportation an important channel for regional commerce, while the country’s large consumer market and industrial base position it as a key potential hub for African production and distribution networks.
However, the World Bank identified West and Central Africa as regions where cross-border road transportation continues to face high logistics costs, regulatory fragmentation and limited competition.
For businesses operating across the region, such constraints can translate into longer delivery times, higher transportation expenses and additional compliance costs, potentially reducing the competitiveness of locally produced goods.
The report therefore points to the need for African governments to strengthen coordination among customs authorities, transport agencies, standards bodies and other institutions responsible for facilitating trade.
Improving the interoperability of these systems, alongside investments in transport infrastructure and logistics services, could help reduce the cost of moving goods between African markets.
The World Bank’s assessment comes as African countries continue efforts to deepen intra-African trade through the African Continental Free Trade Area (AfCFTA), which seeks to create a more integrated single market for goods and services across the continent.
For Nigeria and other major African economies, the report suggests that achieving the full benefits of the continental trade agreement will depend not only on tariff concessions but also on addressing the regulatory, infrastructure and logistical bottlenecks that continue to impede the movement of goods and services across borders.
(The Whistler)