Togo Recalibrates AfCFTA Strategy to Turn Policy into Trade Competitiveness
Togo is reviewing its AfCFTA strategy to shift from treaty compliance to competitiveness. With GDP growth near 5%, debt at 55% of GDP, and TG2031 Eurobond yields at 8.6%, Lomé aims to turn its port and industrial base into a real regional trade engine.
Togo’s review of its African Continental Free Trade Area (AfCFTA) strategy signals a deeper recalibration of its economic integration model. Lomé’s goal is not to rewrite trade ambitions but to align them with logistics, industrialization, and fiscal realism. The Ministry of Trade, supported by the AfCFTA Secretariat and CEPIA, has begun assessing whether current trade and investment frameworks can convert membership into measurable value for local industries.
The exercise is timely. Despite strong macroeconomic fundamentals, the gap between regional aspirations and domestic absorption capacity remains wide. GDP growth is expected to hover between 4 and 5 percent in 2025, inflation has averaged about 2½–3 percent, and the fiscal deficit narrowed to roughly 4.2 percent of GDP in 2024. Public debt, at about 55 percent of GDP, is considered sustainable but sits at a moderate risk of distress according to the IMF. Yet even with relative stability, Togo’s external accounts remain vulnerable to regional and global shocks—an issue that the AfCFTA review aims to address through stronger competitiveness and export diversification.
Trade performance underscores this urgency. Intra-African exports account for less than 20 percent of total trade, while logistics costs represent about 28 percent of export value. Moving a tonne of cargo from Lomé to Burkina Faso costs roughly USD 0.12 per kilometre, double the benchmark along the Durban–Gaborone corridor. Customs clearance, still taking up to 72 hours compared to 24 in Mauritius, remains a deterrent for time-sensitive goods. These inefficiencies collectively shave 0.3 to 0.5 percentage points off annual GDP growth.
The AfCFTA review aims to integrate trade policy with industrial and infrastructure strategies under the government’s 2025–2030 Development Plan. Lomé wants to turn its deepwater port into a regional logistics and light manufacturing hub, linking the corridor to northern Ghana, Niger, and Burkina Faso. The Fonds de Développement Industriel et des PME (FONDEP), co-financed by the African Development Bank (AfDB Group) through a XOF 20 billion facility, will anchor industrial support programs. The plan extends beyond tariff harmonization—it is about converting treaty access into private-sector competitiveness.
For context, Togo’s financial environment remains more stable than many of its regional peers. The BCEAO’s monetary policy, anchored by the CFA franc’s peg to the euro, provides price stability but limits exchange-rate flexibility. Private-sector credit stands at about 31 percent of GDP, low by emerging-market standards but improving through regional banking integration. The local 10-year Treasury yield (TG10Y) averages 6.1 percent, well below Ghana’s 17 percent (GH10Y) or Nigeria’s 19 percent (NG10Y), reflecting investor confidence in the country’s fiscal prudence.
Still, fiscal room is narrow. Revenue mobilization at 13.5 percent of GDP leaves little space to finance industrial incentives without eroding fiscal discipline. The AfCFTA framework could help unlock blended finance, particularly through trade facilitation and logistics modernization. The World Bank, Afreximbank, and the EU’s Global Gateway initiative have each pledged technical and investment support for transport corridors and industrial parks, a step that may shift Togo’s role from a transit economy to a manufacturing platform.
Across West Africa, similar dynamics are unfolding. Ghana, Côte d’Ivoire, and Senegal are all reconfiguring customs and export regimes to capture AfCFTA-related supply-chain relocations. Morocco, meanwhile, is aligning industrial and trade frameworks in anticipation of ratifying remaining AfCFTA protocols. Togo’s advantage lies in scale and logistics: it can test smaller trade reforms faster and attract early-mover investment seeking predictable, low-volatility jurisdictions.
For investors, Togo’s low-beta profile is becoming clearer. The country’s Eurobond (TG2031 ≈ 8.6% YTM) trades tighter than many frontier peers, while its currency, the CFA franc (EUR/XOF ≈ 655.96), remains stable under BCEAO management. In a region often defined by FX shocks, Togo’s macro credibility is becoming an asset class in itself. But credibility must translate into capacity. Without a pipeline of bankable, AfCFTA-compliant projects by 2026, the reform narrative risks stalling into bureaucratic optimism.
Ultimately, Togo’s review reflects Africa’s broader trade challenge—turning policy into productivity. The AfCFTA offers a USD 3.4 trillion market, but market access without competitiveness is symbolic. For Togo, success will depend less on ratified protocols than on functioning logistics corridors, reliable customs systems, and fiscal tools that incentivize production over import dependence. If executed with discipline, Togo’s review could transform it from a trade passenger into a regional driver of Africa’s industrial integration.
