African Integrity Magazine – Exporting to Ecowas: The Challenge of Nigeria

Exporting to Ecowas: The Challenge of Nigeria

Jan 16, 2016 Samuel Issues 0

Echoes from ECOWAS at 40 – 1975 – 2014

The Invitation to present a paper titled “EXPORTING TO ECOWAS: THE CHALLENGE FOR NIGERIA” is a testimony to the increasing co-operation between the public and private sectors of the economy and an acknowledgement of growing contribution of the Ministry of External Affairs to the National Economic Recovery process, particularly in the area of economic diplomacy. Such an increasing co-operation between the two sectors you will no doubt make for better decision-making in both sectors thus enhancing economic growth and development.

The topic suggests that the West African Market is of special significance for the development of Nigeria Export Trade. It is, because in the short-run, it is the testing ground of the success of our efforts to diversify the structure of our exports, currently dominated by crude oil.

The Economic Community of West African States was established in 1975 and comprises of sixteen states. As with similar Economic Integration Groupings, one of the primary objectives of ECOWAS is to promote intra-regional trade. This is not to suggest that there was no trade within the sub-region prior to the establishment of ECOWAS. There was, but it was relatively small, informal and mostly unrecorded. In fact, I make bold as to say that, if all the tariff and non-tariff barriers to trade within the West African Sub-region were removed today, we will not see a dramatic improvement in intra-ECOWAS Trade.

I will advance a number of reasons for making this assertion. One of them is the historical pattern and direction of trade of the sub-region. West Africa countries are mainly producers of primary commodities for export to the industrial countries and some of them, including Nigeria, have only just begun to diversify into the export of manufactures. This situation arises both out of the historical factor mentioned earlier as well as the Post-Independence import-substitution strategies pursued in most of the sub-region.

Closely related to this is the fact that bigger manufacturing concerns are subsidiaries of Trans-National Corporations. Since similar subsidiaries can be found in other West African countries, the parent company is unlikely to encourage the kind of competition that exporting would entail.

The most important obstacles of the development of Export Trade are the institutional and infrastructural constraints that currently exist. By this, I mean the lack of payment arrangements, the poor transport and communications network and the general ignorance about trading opportunities. After all, of what benefit is geographical proximity if it costs more to transport goods within ECOWAS than it does to do so from Europe. In Nigeria, we have compounded that institutional barriers with what I would chose to call an ‘Attitudinal Hangover’. This manifest itself in our hostile attitude to foreigners who have come here to buy from us or in the tales of harassment of exporters within national borders and across the national frontiers. Indeed, our understanding is that the volume value of exports are far greater than officially recorded and that it is more cost effective, less burdensome and convenient to have your goods unrecorded when passing through across national frontiers.

Although the ECOWAS countries should have moved much faster in the dismantling of internal tariffs, nothing seemed to have happened since its founded in 1975. Intra-Sub-Regional trade is still riddled with high tariff walls and member countries face in many cases higher tariffs than other exporting countries outside the community. Consequently, the trade creation effect which could have been expected from a successful materialized. The problem is understandable having regard to the fact that a significant percentage of national revenues of many member countries is derived from custom duties and the machinery to compensate members for the inevitable loss arising out of trade liberalization is yet to be put into operation. The high tariff regimes therefore pose a great challenge to Nigerian exporters who wish to export into community markets.

The problem of smuggling is yet to be solved. This is responsible for the high rate of unrecorded trade especially in so far as Nigeria is concerned. There are many reasons responsible for this. Apart from the irregularities committed by the guardians of our borders, the non-alignment of the currencies and existence of parallel markets in some of the member countries give an impetus to the activities of smugglers who buy and sell across borders without regard to the requirements of the law and customs regulations. Indeed, the extent of our intra-Regional trade is unknown both in volume and pattern and it is a useless exercise trying to guess whether trade volume is rising or falling. Ultimately, national currencies must find their true values and levels, if this particular problem is to be solved especially at this time, if the Banks are to take their rightful place in financing trade in ECOWAS countries. Whatever institutional arrangements that could be put in place for this purpose – a payment union, Bankers Acceptance, Swap Arrangements, Export/Import Schemes and Branch Banking in one another’s’ territories – would be stultified so long as the currencies of member state are out of alignment with the result that traders shun the traditional and customary channels of export financing and are enticed into the parallel market.

The obstacles appear formidable, but therein lies our challenge. Nigeria, if it is to benefit from the opportunities presented by the ECOWAS market must mobilize itself to produce competitively priced. High quality, manufactured goods. It must also work hard to remove the obstacles impeding exports, which I had earlier identified.

The Federal Government has done a great deal by providing incentives to exporters, such as the duty drawback scheme, export licensed waiver, export credit guarantee, exemption from exercise tax and the additional capital allowance to “Manufacturing Exports”. The Government is also working with other Government within ECOWAS to remove the infrastructural and non-tariff but unofficial impediments to trade such as the abolition of Visas for short trips, and the development of Telecommunications and road links within the sub-Region. Various arms of Government are co-ordinating their efforts to ensure a smooth transit for the export of goods and services across our national territory.

Within the Ministry of External Affairs, a Trade and Investment Department has been established to assist the private sector in its export drive. This Department acts as a Secretariat to the Committee on Exports to ECOWAS countries. This Committee brings together on a regular basis, economic operators from the public and private sectors to explore ways and means of increasing Nigeria’s export to the ECOWAS sub-region. Already, the committee has organized two highly successful trade Missions to Ghana and Liberia. The Ministry of External Affairs realizes, of course, that business can only be conducted in a stable political environment and continues to cultivate good relations and to promote peaceful co-existence in the sub-region.

The Ministry of External Affairs has endeavored to use the challenge of the times in refocusing its priorities towards economic diplomacy. In order to increase our expertise in the help that we can render to exporters, the Ministry is sponsoring some of its officers to participate in seminars and courses on Export Promotion and Financing so that our outposts abroad can be better able to assist our economic operators generally especially as regards exports and investment promotion. Our Missions are also being pressed into action in this crusade. Of course, we are not alone in these endeavors. We are in constant dialogue with the Nigerian Export Promotion Council on which the Ministry is represented at various other meeting points in order to render positive service to our exporters.

I must emphasize, however, that Government can only provide the regulatory framework to facilitate trade. The private sector has a more direct stake in the expansion of Nigeria’s export trade. It should therefore take advantage of the incentives and ambience provided by Government. The private sector must gear the production base of manufacturing in the country towards the production of high quality and competitive goods. It must also engage in aggressive targeting and marketing. Only recently, a Western European Diplomat informed me that during a recent trip to neighboring Benin, he had requested for Nigerian spring water, believing our brands of this product to be one of the best in the world. Imagine his surprise when he learnt that the Management of the Hotel where he was staying was unaware that spring water was bottled in Nigeria.

The Nigerian Banking sector as a prime mover in the economy also has a major role to play in the expansion of our manufactured export. Banks can contribute to export promotion by entering into correspondent relationship with other banks in the sub-region in order to facilitate payments arrangements. They should also contribute by rendering consultancy services on export markets and providing export finance to their smaller clients. Indeed, the banks possess a reservoir of information useful to our exporters. The development of correspondent relationships with other banks in the sub-region should increase this reservoir which should benefit the banks and their clients. The banks can only thrive and prosper if their clients also prosper although I understand, that, of latter, the banks seemed to have become more profitable in spite of the fact that the economy is passing through hard times.

The public and private sectors of the Nigerian economy have a common state in the success of our export drive. There is a crying need for a greater inflow of foreign exchange not only to service our debts, but also to import the capital and intermediate goods necessary for production for exports. Successful efforts at exporting will enrich successful exporters, benefit the nation, augment our foreign reserves and engender a “virtuous” circle.