Tuesday, November 19, 2013

Leveraging on W’African Economic Integration


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President Goodluck Jonathan
Crusoe Osagie reports on the forthcoming implementation of the Common External Tariff system in West Africa and concludes that the resulting customs union could be an opportunity for Nigeria to emerge as a global economic power like Russia and Brazil

With the January 1, 2015 target date for the implementation of the West African Common External Tariff (CET) approaching with menacing speed, Nigeria may yet be racing towards another missed opportunity to stand its ground as the indisputable economic power house of the African continent.

Tariff for All
When a group of countries form a customs union they must introduce a common external tariff. The same customs duties, import quotas, preferences or other non-tariff barriers to trade apply to all goods entering the area, regardless of which country within the area they are entering.
It is supposed to be designed to end re-exportation; but it may also inhibit imports from countries outside the customs union and thereby diminish consumer choice and support protectionism of industries based within the customs union.
The common external tariff is a mild form of economic union, but may lead to further types of economic integration. In addition to having the same customs duties, the countries may have other common trade policies, such as having the same quotas, preferences or other non-tariff trade regulations apply to all goods entering the area, regardless of which country within the area they are entering.
Important examples of Common External Tariff are that of the Mercosur countries (Brazil, Argentina, Venezuela, Paraguay and Uruguay) as well as 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.
The South American as well as the eastern European examples of the CET and the customs union nations stated above each have a country with the characteristics that Nigeria possesses in the West African region. At various social and economic levels, Brazil in South America and Russia in east Europe are to their regions what Nigeria could be in the West African region.

Potential Benefits
Similar to these nations in terms of population, land mass, agro ecological endowments as well as skilled manpower availability, Nigeria potentially could be the biggest beneficiary of the western African customs union expected to kickoff in January 2015.
Brazil and Russia effectively leveraged on size, capacity and resources as well as other more latent factors and have since become the leading powers not just in their sub regions but also in the entire world.
Before they kicked off the economic union with their neighbours, they took all the steps necessary to ensure that they took full advantage of all the nations’ God-given socio economic endowments which, within a relatively short time, helped them emerge as some of the world leading economies resulting in the now popular global economic acronym referred to as BRICS (Brazil, Russia, India, China and South Africa).

Different View
Analysts say the same is not the case for Nigeria, warning that the country appears to be heading into the proposed economic union with its West African neighbours, without properly dimensioning the risks and rewards and how best Nigeria can puts its natural and positional gifts to use to ensure that it takes full advantage of the opportunities inherent in the regional integration move.
With infrastructural condition within Nigeria still a far cry from what is desirable and in most case, 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.

State of Readiness
President of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Goodie Ibru, noted that the ECOWAS Council of Heads of States recently approved the new Common External Tariff (CET), which shall come into effect on January 1, 2015.
He said the move is expected to consolidate the sub-region as a customs union and create a market of an estimated 500 million people, and it offers great opportunities for investors through the advantage of economies of scale.
Ibru is however worried that Nigeria may not have fully prepared itself to embrace the policy, in such a way that it reaps the intended benefits thereof.
According to him, the highlights of the new policy regime include 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.
He stressed that the policy has a downside, which includes high energy costs, high costs of funds, high regulatory charges, and high ports charges and other related charges, and high cost of logistics amongst others.
On the market access for domestic investors, Ibru noted that the manufacturing enterprises in the economy are still grappling with the problem of unbridled importation of consumer products into the country.

Window of Opportunity
Vice President of the Nigerian Association of Chambers of Commerce and Industry Mines and Agriculture (NACCIMA), Mr. Dele Oye, called on the Federal, state, local governments and the private sector to see the forthcoming sub-regional economic policy as a major opportunity.
He also urged them to begin to work towards ensuring that the nation’s economy does not lose market or revenues as a result of its implementation.
“Nigerian leaders both in the public and the private sectors must carefully study the CET and the consequent customs union and work together to ensure that it becomes an opportunity for the expansion of the nation’s economy, rather than one that will result in giant nation that is dependent on smaller one for the supply of value added products,” Oye said.

Plain Truth
Every policy, however appealing it looks, has its side-effects and ripple effects. Nigeria, long regarded as a giant in Africa’s economy and the big brother in West Africa, is trying to protect its local manufacturers and also open up its market at the same time, in line with foreign and international expectation.
Although the situation appears tricky, the country would do well to identify the available spaces to push her products into the region, while retaining some form of protection for the local farmers and manufacturers. Many countries have found a way to balance this act and Nigeria cannot afford to be left out or left behind. This country has the wherewithal to maximise the advantages inherent in the CET process. That is a good starting point.

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