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TRADE-WEST AFRICA: Nigeria Is Out to Protect Its Industries

Aileen Kwa*

GENEVA, Jun 2 2008 (IPS) - Nigeria took a strong stance on determining its own economic development recently when it rejected an economic partnership agreement (EPA) with the European Union. The country has also adopted a different approach towards its neighbours regarding protection for its nascent industries.

The West African Economic and Monetary Union (WAEMU), consisting of eight francophone members, put in place a common external tariff in 2000. The eight members are: Benin, Cote d’Ivoire, Mali, Senegal, Burkina Faso, Guinea Bissau, Niger and Togo.

In 2001, the heads of states of the Economic Community of West African States (ECOWAS) took the decision to harmonise their import tariffs with those of WAEMU. The countries that belong to ECOWAS but not WAEMU include Nigeria, Ghana, Liberia, Cape Verde, Sierra Leone, Gambia and Guinea.

The WAEMU common external tariff has four tariff categories: zero percent for essential social goods; five percent on essential or basic raw materials, capital goods and specific inputs; 10 percent for intermediary products; and 20 percent for final consumer goods.

According to a memorandum by Ken Ukaoha, president of the National Association of Nigerian Traders (NANTS), Nigeria had announced its intention in 2004 to comply with the harmonised common external tariff but demanded the creation of a fifth tariff band of 50 percent in addition to the existing WAEMU common external tariff.

‘‘It was upon the realisation of the fact that the WAEMU tariff rate is not protective of a young and aspiring economy like Nigeria’s with its prospects and plans for industrialisation, coupled with loud cries of Nigerian stakeholders, (that) the Nigerian government officially applied for the creation of a fifth band’’, wrote Ukaoha.

According to Ukaoha, Nigeria’s request ‘‘appears to have gradually snowballed into controversies as some countries in West Africa have continued to reject this appeal’’. As a result, even though January 1, 2008 was the formal date for the harmonisation, the region remains without a common external tariff.

Ukaoha also argues that the fifth band of tariffs at 50 percent is not just in Nigeria’s interest but will benefit ‘‘all industrially aspiring countries of West Africa’’.

He wrote, ‘‘why must we continue to import everything we need without the plan for possible self-reliance? Shall we remain forever under the illusion of donating raw materials to already developed countries whilst we import finished goods (made) from the same raw materials we sent out? A level of protection is necessary to ensure diversification of our resources in our region’’.

Ndiogou Fall, from a West African farmers’ organisation known as ROPPA which is based in Senegal, told IPS, ‘‘Nigeria understood the importance of the regional market (during the EPA talks) and that the EU was trying to access the West African markets through the EPAs.

In contrast, Cheikh Dieye of the Senegalese non-governmental organisation known as ENDA (Environmental Development Action in the Third World) told IPS that in initialling the interim EPA, Cote d’Ivoire ‘‘was just thinking about the EU market. They forgot about the local and regional markets’’.

‘‘Nigeria is one of the largest markets in the region. It wanted to protect its own market, as well as to keep its access to neighbouring markets. It has a very powerful position in West Africa. Five neighbouring countries depend on the Nigerian market,’’ said Fall.

Nigeria was able to reject an EPA last year because oil supplies 98 percent of its foreign exchange and 95 percent of its revenues. As one West African official explained on condition of anonymity, ‘‘whether Nigeria signed an EPA or not, the EU could not penalise them on their exports of crude oil’’.

However, oil aside, its productive industries are not doing well. Ukaoha pointed out in a paper on the implications of EPAs for agro-based industrialisation in Nigeria that these industries in Nigeria ‘‘are on a general downward trend’’. This is of concern since 70 percent of the workforce is engaged in the agricultural sector.

When IPS spoke to Ukaoha about adding a fifth band to the tariffs, he said that it was discussed at the ECOWAS ministerial meeting in February this year. The ministers mandated ECOWAS to ‘‘go back to look at the viability and the modality’’ of a fifth band. The study is to be completed by this month.

Apart from looking at whether or not to introduce a higher band of tariffs, ECOWAS also needs to decide which tariff level the band would be pegged at, if it is decided to go ahead with this plan.

The WAEMU’s common external tariff is at a lower level than other similar regimes in Africa. The East African Community’s common external tariff goes up to 25 percent. The central African common external tariff has bands up to 30 percent, which seems to be the highest tariff band in the African region.

In addition to these tariff bands, sub-regions have also agreed on a small ‘‘exceptions’’ list where some sensitive products enjoy higher tariffs. However, these tend to be limited. In the case of the East African Community, for example, only 58 tariff lines (less than half a percent of all tariff lines) have tariffs higher than 25 percent. Tariffs for such lines range from 35 to 100 percent.

However, despite these attempts to integrate regionally, Godfrey Kenyenze noted in his book called ‘‘Free Trade and Regional Integration in Southern Africa’’ that ‘‘open regionalism’’ benefits African countries less because African economies are less developed and primary production dominates. ‘‘In this situation, tariff reduction or elimination does not lead to increased regional trade, integration or the efficient utilization of the region’s resources’’.

Most countries in Africa, including the WAEMU, are following an ‘‘open regionalism’’ approach where a region’s states collectively come together to open up their borders to each other.

*This is the second in a series of two articles. Aileen Kwa is a specialist writer on trade policy who is attached to the non-governmental organisation Focus on the Global South.