Nigeria and the Danger of Losing Benefits of ECOWAS CET

Funso Olojo |

In May 25, 1975, 15 West African countries came together to form the Economic Community of West African States (ECOWAS), with the aim of making the region a strong economic powerhouse in Africa. The countries are Benin, Burkina Faso, Cape Verde, Cote dIvoire, Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Nigeria, Niger, Senegal, Sierra Leone and Togo.

The lofty objective of ECOWAS was to promote economic integration in all fields of endeavours, particularly industry, transport, telecommunications, energy, agriculture, natural resources, commerce, monetary and financial policies, social and cultural matters. The ECOWAS Common External Tariff (CET) is a precursor to a regional customs union, which is predicated on the harmonisation and
convergence of national fiscal, monetary and trade policies of member states for the attainment of economic integration by the 15-nation economic community with a combined population of about 500 million people.

By definition, the Common External Tariff is a single tariff rate agreed to by all members of a customs union on imports of products from outside the union. Nigeria is a member of the ECOWAS and by this, all imports arriving into Nigeria shall be subjected to the rates contained in the CET 2015- 2019 and 2015 Fiscal Measures without recourse to the rates applicable before the coming into effect of the ECOWAS CET 2015 &2019. It is in furtherance of the objectives of ECOWAS that it much later encouraged the introduction of Common External Tariff (CET) among its members.

In practical terms, the CET means that the sub region will consolidate its customs union and create a market of an estimated 500 million people, with an advantage of economies of scale. The CET also means scrapping of import prohibition list, scrapping of export prohibition list, abrogation of import duty waivers, abrogation of import levies and loss of sovereign authority on tariff policy. The CET is a precursor to a regional customs union, which is predicated on the harmonisation and convergence of national fiscal, monetary and trade policies of member states for the attainment of economic integration by the 15-nation economic community with a combined population of about 500 million people.

Prior to the agreement to embrace CET, member states of ECOWAS were used to the ECOWAS Trade Liberalisation Scheme (ETLS). The ETLS is designed for goods which were manufactured within the West African sub-region. They are allowed to move freely within the sub-region. At its introduction in 1979, the ETLS was only applicable to only agricultural products, handicrafts and crude products.
But, by 1990, industrial products were added to the list.

CET was launched in all member states as the blocs common Tariff on January 1, 2015 as agreed by ECOWAS leaders. It is noteworthy that the CET is not peculiar to West Africa. There are examples of other regional blocs that have embraced it. Important examples of Common External Tariff are those of the Mercosur countries (Brazil, Argentina, Venezuela, Paraguay and Uruguay) and the Common Customs Tariff of the Customs Union of Belarus, Kazakhstan and Russia. Similar to free trade areas, however, external countries have to pay tax on goods and services that are entering.

With her population and being the biggest economy in West Africa and indeed in Africa, Nigeria should reap maximum advantage from the
CET. She should be the biggest beneficiary of the CET. This was what Russia and Brazil did, they leveraged on their population to become the leading powers not just in their sub regions but also in the entire world. One would also have thought that before the eventual kick-off of the CET, the Federal Government would have made conscious efforts to actually leverage on her population.

However, there are indications that Nigeria’s penchant for importation of just anything may put the nation at disadvantage. With infrastructural conditions within Nigeria still a far cry from what is desirable and in most cases, worse than what is obtainable in smaller nations in the sub region; security challenges attaining unprecedented levels and fiscal as well as monetary policy indicators running amok, it is not difficult to conclude that Nigeria will very likely crash-land into the much anticipated customs union and lose the advantage of its mass market to its minuscule neighbours. There is truth in the assertion by some stakeholders, that, the benefits of CET will increase turnover due to a larger domestic market, enlargement of member states industrial sector through higher economies of scale, higher production and productivity, higher capital accumulation and strengthening of national institutions through peer learning among members. However, reports coming in indicate, that, things may not be very rosy for the nation’s economy.

For example, a copy of the ECOWAS Common External Tariff showed that the ECOWAS tariff recommended 20 per cent on vehicle import, but the Federal Government has slammed an additional 50 per cent called Import Adjustment Tax (IAT).
The implication of this is that, importers of fully-built vehicles may be in for a tough time as the 70 per cent duty is not yet inclusive of levy.
In the opinion of a customs analyst, the implication of the new ECOWAS CET is that smuggling will be on the rise in Nigeria.
It is also true that, despite the benefits that the CET is expected to have on the economy of the country, without proper dimensioning of the risks, rewards and how best Nigeria can put its natural and positional gifts to use to ensure that it takes full advantage of the opportunities, it might just bring to the country more harm than good.

Above all, Nigerians who will either implement or be guided by the CET are still largely uneducated about the dictates of the new tariff regime. The nation’s maritime industry stakeholders are still mostly uninformed and ignorant of what the CET portends for the industry.
The enlightenment programme that held in Lagos, Port Harcourt and Kano was good but insufficient. For the sake of putting all stakeholders on the same page with the Customs, it is important to embark on a vigorous enlightenment programme for clearing agents and importers.
Sadly, most Customs officers, especially lower and junior ranks, are still in the dark about the full import of CET.
Without sufficient education about the pros and cons of CET, Nigeria may be the greatest loser by unknowingly killing its local industries and building in some taxes side-by-side CET on goods imported into the country and thereby encouraging smuggling.

Nigeria should therefore leverage on her huge population, abundant resources to take advantage of the benefits of the harmonized regional tariff structure. It should fix its epileptic power and other decaying infrastructural facilities to energize the much needed industrialization that will make the country a less import-dependent nation.