Tag: ECOWAS

The original plan of the ECOWAS, a 44-year old union, as at May this year, is the facilitation of regional economic growth. That was patently defined in the Treaty of Lagos of May 25 which gave birth to the community. The roadmap to this objective includes; free trade, movement of goods and people and investments among the 16 state members at inception and now 15. But that has been mainly in words than in action.

So far, the most pronounced achievement of the ECOWAS has been free movement of peoples across the borders over the years without any visa requirement or sometimes without passports needed, other than any valid identification.

Today and for many years, the ECOWAS countries have the same international passport with assigning countries indicated on the back of the booklet. That has been a major landmark.

However, goods have been moving but with a lot of restrictions and undermining rules created by countries in violation of the ECOWAS agreement which allows movement without tariffs and duties. These are or should actually be goods produced within the ECOWAS states. But the problem is that local manufacturing among ECOWAS states is very low and poor.

About 92 percent of the goods traded in the region are foreign to the region and imported. Only Nigeria has a higher local production volume. I am aware of a friend in Nigeria who manufactures confectionery in Nigeria and has had terrible times in the hands of the government of Ghana for instance, developing a market in Ghana. These countries rather prefer goods from outside the region and would mount obstacles to stop the Nigerian domestic goods from their market but with fewer restrictions on those from Asia or Europe or America.

They rather frustrate the Nigerian manufacturers and allege dumping plans while accepting ‘dumping’ from the outer world. They impose these restrictions and instead ask the Nigerian manufacturers to move their production base over to their countries.

At the continental level, it’s just 16 percent of the goods traded in Africa and among African countries that are made in Africa against the EU that has about 62 percent and Asia with about 67 percent. So the implementation is the major issue, otherwise it will just be another rhetoric.

The effect, to the best of my knowledge, would be minimal because the implementation won’t be as smooth as the pronouncement just the same way free movement of goods made in ECOWAS hasn’t been possible.

When the discussion came some 12 years ago, the Central Bank of Nigeria governor, Prof. Chukwuma Soludo and the Finance Minister, Dr. Ngozi Okonjo-Iweala advised Nigeria against it. They said the deal would put pressure on the naira which was the strongest currency in the region due to its volume in use in the largest economy of the region that controls about 45 percent of the economy and at least 50 percent of the consumption market.

The fear is that since one of the currencies must be the redeeming medium or what the World Bank calls the facilitating currency in the drawing basket, the pressure on the naira, would be enormous. They raised the alarm when the naira had better value than now and local production cost also lower. So, if done now, Nigeria and the naira should be ready to brace up for real impact.

Right now, the surprise is that whereas Nigeria has been dragging feet about signing the Africa Continental Free Trade Agreement, AfCFTA because it wants to protect local manufacturing, it supervised the ECO currency decision without letting us know how it benefits local production.

On the larger ECOWAS, I would not see any positive impact until one gets an assurance of how it could assist in local manufacturing in those countries that rely heavily or even solely on imports from France etc. The proposed ECO I am sure is not going to be an international medium of settlement like the yuan, dollar, pound sterling or the euro. So it makes no sense to many watchers.

How the ECO coming into operation would help take away the bombardment of Nigeria’s local market with foreign goods from outside Africa which come in through the porous Nigeria-Benin borders that Aliko Dangote even complained about last month is what remains to unveil. It’s dubious to argue that the common currency would stop that and protect us here.

The only sure way ECOWAS economy would come stronger is facilitating local production and this common currency won’t add much to that.

Now the agreement on June 29 in Abuja is that the ECO common currency takes effect in January 2020. But we watch to see how it plays out. In my humble opinion, the ECO plan may just be another copycat policy by Africa from Europe the same way it did copy to change from the OAU to the AU on June 9, 2002, after the EEC changed to the EU. We have not witnessed any impetus that name change to the AU gave Africa because the implementation has been with the same people and with little political will.

Concerning external influence on the operation, I don’t think any country would be so keen about stopping it because the ECOWAS of some hundreds of millions of consumers is not a wealthy region to command world political influence. ECO’s influence would depend on foreign reserves, or the common pool of the ECOWAS disparate countries which are not strong enough.

Presently also, the strongest economy in the region is Ghana with about 5.2 percent GDP growth, yet a small volume at the gross index. If the ECO isn’t going to be an international currency, then its use won’t be of any threat to the outer world. The problem would still be that of the internal ECOWAS working order regarding implementation.

Above all, the ECOWAS with about 360 million people and PPP GDP of USD1.483tr, USD675b nominal GDP in 2015 and per capita GDP of USD4,247, is not a strong global economic puller.

Monetary ‘disunity’ as some put it, is never and has never been any barrier to the growth of the ECOWAS economy. What stops the region growing is the absence of basic economic enablers that should drive local manufacturing. Nigeria battles poor electricity and other factors of production just like the rest 14. Most of them trade away raw materials and lack means of processing and adding value at home.

A good instance is the cocoa which the ECOWAS region of Ghana, Senegal and Nigeria supplies the entire world that runs the chocolate sub-industry of the world. Without these ECOWAS countries, the world chocolate industry ceases to be. If ECOWAS would find means to process some 70 percent of her cocoa into chocolate, or the gold in Ghana and Nigeria or crude oil, the economy will fare better with the different currencies in operation.

The strongest economic triangle in the world today is China-Japan-South Korea that controls some 35 percent of world annual GDP. When added to India, these four Asian giant economies control 39-40 percent of world GDP with different currencies.

• Emewu, journalist is Executive Director of the Afri-China Media Centre, Lagos.