Femi Aribisala, Chairman, Financial Nigeria International Limited
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Subjects of Interest
- International Affairs
The ECOWAS imperative for Nigeria 01 Apr 2013
Nigeria is the linchpin of the Economic Community of West African States (ECOWAS). Over 50% of the ECOWAS population live in Nigeria. Nigeria’s GDP is larger than that of the combined GDP of all the other ECOWAS states put together. Nigeria accounts for the lionshare of the annual ECOWAS budget (31%; relative to only 12.6% by the second highest contributor- Cote d’Ivoire), as well as of the ECOWAS Fund (32% relative to only 13% by Cote d’Ivoire).
The pre-eminence of the Nigerian economy vis-à-vis the other ECOWAS states, and its correspondingly large financial responsibilities (among others), inevitably raises the question of the value of ECOWAS for Nigeria. Many regional integration schemes have been established in Africa in the bid to attain a market no more than half the size of Nigeria. Moreover, Nigeria’s domestic industrial production is still insufficient to accommodate the vast demands of its internal market, how much more to provide for significant exports to neighbouring ECOWAS states.
This has led to the conclusion in some quarters that Nigeria does not need ECOWAS, at least in the short-term. The feeling is prevalent that what Nigeria basically derives from ECOWAS are the headaches of massive illegal alien immigration, rampant smuggling and large financial obligations, especially for peace-keeping.
However, in spite of such “inconveniences,” there is no doubt that it is in Nigeria’s enlightened self-interest to be fully supportive of the ECOWAS venture. Sooner, rather than later, Nigeria will need a regional framework and market for its burgeoning economy. Therefore, it is only prudent to lay the foundation for that projected enhanced economic interaction now, whatever its immediate costs.
A key need for ECOWAS derives from the “artificial” nature of national boundaries in West Africa, bequeathed by colonial demarcation. Given the “colours” of colonialism, Anglophone Nigeria was hermetically sealed-off from Francophone West Africa, and both were impregnable to Lusophone West Africa. Investment patterns were skewed to colonial requirements. In this regard, a higher premium was place on the production of cash crops, as opposed to food crops.
Only 2% of total ECOWAS exports and 3% of total imports are within the region. This marginal trade itself is largely zonal; meaning that the Anglophone countries trade with each other, and the Francophone with each other. Moreover, a substantial proportion of this low-level sub-regional trade is actually no more than the trans-shipment of non-ECOWAS goods. And the picture becomes even more depressing when it is recognised that over 60% of intra-West African exports is represented by Nigerian oil alone. However, Nigeria’s export to the ECOWAS region, which averaged about 7 percent of its total exports between 2001 and 2006, plummeted to 2.3 percent in 2010. The share of other ECOWAS countries in Nigeria’s imports also dropped from 4.4 percent in 2001 to less than 0.5 percent in 2010.
In spite of these adverse developments, ECOWAS remains necessary as a means of reversing the trade incongruities of West Africa, and to ensure that the countries of the sub-region trade and interact economically more with their neighbours than with the far more remote European states. In other words, ECOWAS remains an ambitious attempt to change the inherited colonial map of West Africa through the process of economic cooperation and integration.
Trade liberalisation and the elimination of differences in customs tariffs against outside countries by ECOWAS countries is also likely to militate against the incidence of smuggling within the sub-region. Various estimates already indicate that smuggling (unofficial trade) more than trebles the level of official trade. Inevitably, smuggling in West Africa is highly concentrated in Nigeria given its relative economic advantages, with Cotonou providing a key entry point for goods, including cars, cigarettes, champagne and lace fabrics. A successful ECOWAS promises, therefore, to stem the high annual loss of tax revenue to the Nigerian government through smuggling.
The share of manufacturing in Nigeria’s total exports to the ECOWAS region climbed from 1 percent in 2001 to 5.4 percent in 2010. ECOWAS promotes greater efficiency in Nigerian industries through the creation of an enlarged market. Industries producing for a large and geographically diverse market tend to locate in areas best-suited to optimum production efficiency. Within ECOWAS, this gives Nigeria a decided advantage given the country’s relatively high degree of infrastructural development, and skilled manpower vis-à-vis its francophone neighbours.
Within this ECOWAS framework, Nigeria has profited from investments in economic ventures in neighbouring states. Some of these include iron-ore mining in Benin, uranium in Niger, petro-chemicals in Senegal and cement and sugar projects in Benin. There are also a number of joint economic commissions set up between Nigeria and several ECOWAS member-states.
To underwrite such joint-ventures, as well as attract funds for their finance, ECOWAS has set up a Fund for Cooperation, Compensation and Development. This is used to finance all kinds of industrial projects, compensate losses due to trade liberalisation, guarantee foreign investment and help mobilise internal and external investment for industrial investment. In this regard, ECOWAS has attained full recognition as a credit-worthy organisation in its own right, qualifying for the extension of lines of credit from Europe and such multilateral organisations as the European Development Fund and the European Investment Bank.
Transport and telecommunications
West African countries are poor in infrastructural development. Apart from Nigeria and Cote d’Ivoire, there is only the most rudimentary transport system between and within the sub-region. In the colonial era, the building of roads, railways and ports were not intended to link the different parts of the sub-region, but to facilitate the extraction of resources to Europe. Indeed, it used to be that in order to make a telephone call from Lagos to Cotonou, for instance, it had to be transmitted first to London and then to Paris and finally to Cotonou.
The international telecoms revolution has addressed some of these problems. Nevertheless, it is clear that substantial and co-ordinated public investment in infrastructure in ECOWAS is the prerequisite of Nigeria’s medium-term interest in the sub-regional market. The ECOWAS agenda has a long way to go. This includes the construction of a Trans-West African Highway network part of which would run from Lagos to Dakar. The ECOWAS Fund has underwritten loans for the construction of bridges, including the Mono Bridge from Lagos to Lome and the Manor River Bridge in Liberia.
In addition, the ECOWAS telecommunications project is designed to provide direct automatic links between all ECOWAS capitals. This includes the establishment of micro-wave radio link from Roalack (Senegal) to Banjul (Gambia), and to Cacheu (Guinea Bissau); while another line runs from Tambacounda (Senegal) to Mali (Guinea). The project also includes, among others, a microwave link between Sokoto and Birni N’koni (Niger).
Money and finance
The sixteen countries of ECOWAS have eleven different currencies. Of these very few are freely convertible: The difficulties of direct remittance of funds between countries in the sub-region, coupled with widespread foreign-exchange control, constitute a hindrance to the promotion and expansion of intra-regional trade and exchange.
Most transfers and exchange transactions among countries were routed through London and Paris. Such exchange restrictions account for the widespread bilateral trade and payments arrangements with the sub-region, which go a long way to hamper trade promotion. Bilateralism necessarily involves discrimination against those parties not directly involved, thereby creating sheltered areas where prices are higher than that obtainable elsewhere. In a network of such bilateral arrangements, each country tends to discriminate against its creditors in favour of its debtors and, thereby, encourage the allocation of resources by the requirements of bilateral balance, rather than considerations of competitive efficiency.
In the short-term, ECOWAS has addressed this problem by the establishment of a West African Clearing House (WACH). Based in Freetown, Sierra Leone, this serves the various central banks and facilitates exchanges between the governments of member-states. In the medium-term however, the answer lies in the creation of an ECOWAS currency, or the establishment of a West African Unit of Account which guarantees full convertibility.
Harmonisation of agricultural policies
The agricultural policies of ECOWAS countries are more competitive than complimentary. The share of Nigeria’s agricultural exports, which was 3 percent in 2001, plummeted to virtually zero in 2009 and 2010. In the main, the countries of the community export the same primary products, including livestock on hoofs, meat, fish nuts and cereals. This has made the harmonisation of agricultural policies problematic.
Nevertheless, there are specific areas where Nigeria and other ECOWAS countries stand to profit by the harmonisation of their agricultural policies. One such area is in the development of the large river valleys, such as those of Nigeria and the Chad Basin. The harmonisation of processing and distribution of livestock products would also help reduce the price disparities prevailing between the countries of the sub-region.
Nomads control the bulk of the cattle in West Africa, moving freely across national boundaries in search of food and water. Individual attempts by West African countries to settle the nomads have not met with success. A possible solution would be the establishment of common grazing reserves which cut across national frontiers at a cost to be borne by ECOWAS.
The ECOWAS objective is for all barriers to the free circulation of people, services and capital between member-states to be dismantled. Citizens of member-states are ultimately to be regarded as Community citizens and, therefore, would not require visas or resident permits when travelling within the sub-region. They would also be able to work and conduct business in all ECOWAS countries.
Nigeria derives considerable benefits from the relatively free movement of labour under ECOWAS. Aliens are engaged in the small-and-medium-scale industries in Nigeria, including textile production and food processing. They are also highly represented in the construction industry, where many have been engaged in the building of the Federal Capital Territory in Abuja. They are also well represented in agriculture in the rural areas.
ECOWAS citizens are also heavily represented in the service sector of the Nigerian economy. Many Nigerians themselves bring them into the country for such lowly-paid jobs as labourers, domestic servants, guards, drivers, bus conductors, hotel and supermarket attendants and waiters. Others are invited in as business-partners, industrialists, consultants, doctors, nurses, engineers and technologists. In short, ECOWAS citizens have been very beneficial to the Nigerian economy.
The economic advantages of ECOWAS for Nigeria are considerable. However, many of those advantages are yet to be realised given the slow progress of the ECOWAS venture. There can be no gainsaying that ECOWAS members need to demonstrate greater commitment to the organisation by paying their dues regularly and on schedule; by ratifying and implementing decisions reached forthrightly and with despatch, and by asserting their loyalty to the organisation over rival bodies. Only then can Nigeria and the other members derive maximum benefits from the organisation, and only then can the ECOWAS venture be translated into full productive reality.