ECOWAS bloc promotes economic development

Founded by the Treaty of Lagos in 1975, ECOWAS has served as a force for regional integration in areas ranging from education to security to monetary policy. The organisation is comprised of fifteen neighbouring countries including Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Sierra Leone, Senegal and Togo. ECOWAS aims to promote economic and political stability in the region, and is working to gradually reduce the member states’ dependence upon external capital and markets while expanding regional peacekeeping activities.

The current priorities for the group are the goals laid forth in its ECOWAS Vision 2020 framework, which was first introduced in June 2007. According to ECOWAS Vision 2020, the group aims at “setting a clear direction and intends to significantly raise the standard of living of the people through conscious and inclusive programmes”. The framework is organised into five pillars, each intended to support a holistic approach to regional development and security.

ECOWAS Vision 2020 seeks to increase investment in the development of the region’s human capital, especially as it pertains to women and young people; promote internal peace and a cooperative regional defence and security apparatus; support economic integration through a unified market, common currency, and integrated capital and financial markets; and prioritise private sector growth. Many of these themes are reflected in Nigeria’s own Vision 2020 document previously released in December 2009.

Peacekeeping 

Nigeria played an integral role in the organisation’s establishment, and as the host of the ECOWAS Commission and its largest financial backer, the country maintains a key presence in the grouping. Security is one key area in which Nigeria has played a role in the success of ECOWAS. In the midst of the First Liberian Civil War, ECOWAS established the ECOWAS Monitoring Group (ECOMOG) in 1990. To this day, ECOMOG remains the organisation’s main security apparatus and has led peacekeeping missions in Liberia, Sierra Leone, Côte d’Ivoire and Sudan.

Nigeria has been the largest supporter of ECOMOG operations, a reflection of the country’s considerable military and financial resources relative to the other members of the regional bloc. According to some estimates, Nigeria supplies between 80-90% of the funding to support ECOMOG peacekeeping efforts, resulting in, for example, a bill totalling $8bn for its action in the first Liberian civil war (1989-97).

Trade 

Trade is another key priority for the organisation. Under the ECOWAS Trade Liberalisation Scheme, member states are seeking to establish a Customs union by fully eliminating the barriers to trade within the region and instituting a common external tariff (CET). Once fully implemented, the ECOWAS CET would set a common import tariff schedule for each ECOWAS member state. Importers would need only pay a tariff at the original ECOWAS point of entry. Once the goods have entered the territory, they would then be able to freely travel throughout the region in accordance with the prescriptions of the free trade zone. No additional tariff will be due at the goods’ final destination. However if the need arises, the CET does allow for tariff increases, the institution of anti-dumping measures and other non-tariff barriers designed to protect internal producers.

Nigeria began implementation of the CET in July 2015, six months following the January 2015 target date. The CET sorts imports into five categories, each with its own tariff rate. Rates range from 0% on imports deemed “essential social goods” to 35% tariff on “specific goods for economic development”. ECOWAS members have agreed to a phased approach to the CET rollout, which allows for country-specific import taxes and controls through to 2019.

In the case of Nigeria, the government intends to downwardly revise its internal import controls each year, ultimately falling fully in line with the framework of the CET by January 2020. The World Bank estimates that full implementation of the CET would result in a 2.4% decline in consumer prices in Nigeria, with lower rice prices accounting for most of these savings.

Convergence 

As the ECOWAS Customs union gets off the ground, the organisation is also laying the groundwork for a common currency, provisionally known as the “eco”. From its inception, full economic integration has been a goal of ECOWAS. The first major step in that direction was the establishment of the ECOWAS Monetary Cooperation Programme (EMCP) in 1987, which envisioned a common currency and central bank by 2000.

In the ensuing years, the target date was repeatedly revised, finally settling on the current end date of 2020. To move towards this goal, ECOWAS has set forth four primary “convergence criteria” to ensure participating states have relatively harmonised fiscal and foreign exchange performance. These criteria mandate single-digit inflation, fiscal deficits below 4% of GDP, foreign reserve holdings for at least three months of import cover and a limit on central bank financing of fiscal deficits to 10% of the previous year’s tax revenue. While Nigeria enjoyed the distinction of being the only member to meet all four primary criteria in 2014, with inflation rising well above 10% in 2016, that distinction no longer holds true. Nevertheless, those states that are able to meet the criteria ahead of 2020 will constitute the inaugural members of the currency union, and the remaining member states will be eligible to join when they are also able to meet the criteria.

ECOWAS originally envisioned a two-tier organisation, with those ECOWAS member states who belong to the West African Economic and Monetary Union joining up with the remaining, newly harmonised ECOWAS members, but that was subsequently revised to have all member states join the union within the same timeframe. In support of this decision, the African Development Bank argued in early 2016 that “the single currency is an opportunity for ECOWAS members to pool their monetary resources – which will serve as an indispensable condition for pursuing their individual and collective monetary goals in the current international context”.

However, given the size and diverse nature of the Nigerian economy vis-à-vis the other ECOWAS members, it begs the question of whether relinquishing control of monetary policy to the eventual West African central bank is in Nigeria’s long-term interests. For example, Nigeria has moved recently to lower its inflation. Furthermore, much like Germany in the EU, given the country’s substantial role in financing the bloc’s activities, it will have to be wary of becoming a lender of last resort for other members.

Moving Forward 

With its superior financial and human resources, ECOWAS needs Nigeria in order to achieve its long-term vision of full regional integration. Likewise, Nigeria needs ECOWAS to realise its goals of maintaining peace throughout the region, gaining wider access to markets for the benefit of its domestic producers and expanding its leadership role on the African continent.

Both ECOWAS and Nigeria have bold visions for the future of West Africa and the continent at large. While much progress has been made, significant challenges still lay ahead. While Nigeria and its partner states have successfully navigated the difficult landscape of cooperation for the four decades since the inception of ECOWAS, that task may become increasingly difficult as the region moves towards full integration.

Furthermore, Nigeria may be tempted to reassess the continued financial burden to its national budget posed by its commitments to ECOWAS in the face of a series of mounting challenges and risks that it faces at home. The year 2020 will be a watershed moment for the organisation and for each of its member states. The Nigerian government must continue to adeptly balance both leadership and flexibility through the coming years and beyond if there is any hope of ECOWAS realising its full potential in coming decades.