| Nigeria | Jan 25, 2015
Over the years, several initiatives aimed at promoting integration between countries on the African continent have been launched. With the creation of the Economic Community of West African States (ECOWAS) […]
Over the years, several initiatives aimed at promoting integration between countries on the African continent have been launched. With the creation of the Economic Community of West African States (ECOWAS) on May 28, 1975 in Lagos, its member states committed to working towards creating a West African trading bloc.
To this end, Article 3 of the ECOWAS Revised Treaty stipulates that the ultimate goal of ECOWAS is to promote “co-operation and integration, leading to the establishment of an economic union in West Africa.” According to the Treaty, one of the core components of an economic union is a common market, which should be created through the adoption of a common external tariff and common trade policy vis-í -vis third countries. It is against the backdrop of this aim of creating an ECOWAS economic union that Nigeria, keen to integrate its economy into the global market, committed itself in 2005 to adopting the Common External Tariff (CET) of ECOWAS.
Implementing a CET seems the next logical step in ECOWAS’ evolution toward an economic union, and will enable it to offer protection to the community’s growing industries. It is a significantly more encompassing trade policy instrument than the current ECOWAS Trade Liberalization Scheme (ETLS), which is in essence a Free Trade Area (FTA). The key difference between an FTA and a CET lies in the fact that under an FTA agreement, member states are not obliged to utilize a common tariff on imports from non-member states. The implementation of the current FTA remains problematic, as evidenced by the abundance of barriers to trade in the area. The CET would enable ECOWAS countries to harmonize their tariffs on products being imported from countries outside the bloc, which would result in significant advantages, such as a strengthening of the internal FTA and the creation of a common trade policy. Both of these are essential as stepping-stones for further integration, and thus indispensable in a future ECOWAS economic union.
The ECOWAS CET was originally designed to have four tariff bands: zero percent for essential social goods, 5% for goods of primary necessity, raw materials and specific inputs, 10% for intermediary products, and 20% for final consumer goods. However, the Nigerian Federal Government, realizing that the peak tariff of 20% does not provide sufficient protection for its developing industries, insisted on the creation of a fifth tariff band. Set at 3%, it applies to specific goods for economic development, which are located in sectors that the government is keen to protect.
After years of bickering between member states, the CET was finally officially adopted at an ECOWAS Heads of State Summit in October 2013 in Dakar, and the implementation date was set at January 1, 2015. Once implemented, the CET may yield significant benefits for Nigeria, as the market for Nigerian products will be decidedly enlarged, and smuggling might be reduced due to harmonized tariffs.
However, the CET may very well prove to be a nemesis for Nigeria’s nascent industries, and some commentators have raised the question as to why Nigeria aligned itself rather easily with its less industrially developed brothers and sisters in ECOWAS that do not share Nigeria’s need for protective trade policies, and, therefore, designed and agreed on relatively low tariff bands. Furthermore, the track record of most West African states regarding their regional commitments is slightly worrying, and emphasizes the need for the creation of a strong monitoring and compliance enforcement framework.
The CET will, thus, inevitably face serious, yet arguably surmountable, challenges, and it remains to be seen when the implementation process will be finished. And while it shows the willingness of ECOWAS to advance to the creation of an economic union, it has at the same time demonstrated the dissent that is still very much alive within the community of West African states.