One free trade area in Africa will become a reality as even Nigeria has decided to join in, but a shortage of dollars may well limit its effectiveness. Intra-African trade is accounting for only 15% of total African trade, the lowest intra-regional ratio in the World (16% in Latin America, but 46% in Asia and 70% in Europe). This is a direct consequence of an export concentration towards commodities often traded by wholesalers in advanced economies. A free trade area will not be achieved tomorrow and is not only about trade tariffs cuts, since non-tariffs barriers are numerous (e.g. subsidies, quotas, rules of origin, red tape). The agreement will also need to leapfrog in order to be fully operational: ecommerce and mobile payment will be on the agenda. Dollar scarcity is another issue: More openness to trade would mean a larger part of foreign currency denominated flows in economies where dollar access is often limited. According to our calculations, dollar cash shortages entail a USD40bn cost per year (1.7% of GDP) through missed opportunities.
