The Economic Community Of West African States Economics Essay

According to Daniel et al (2009), “Regional integration exist where a group of countries located in the same geographical proximity decide to co-operate”. Boureanane (1997)” believes that regional integration is often perceived as a prelude to unification, understood to represent the existence of homogenous rules and principles governing behaviour in a spatial area”.

In as much as the above definitions clearly pointed out the importance of geographical proximity within countries, they failed to buttress the fact that countries located within the same region have certain cultural similarities, in which case they may speak a common language as it is in West Africa where their common language is English and French.

Regional Integration can therefore be referred to as the fusion of countries within the same geographic proximity who have cultural similarities and share same understanding of achieving a goal for the common good of the whole unit.

This paper begins by reviewing the Economic Community Of West African States (ECOWAS) and continues by identifying the level of integration which ECOWAS has attained .It also goes further to examine the implications of ECOWAS to international business, as well as the benefit and burden ECOWAS has brought Nigeria.

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The Economic community Of West African States (ECOWAS) with its headquarters situated in Abuja is the major economic bloc for my country Nigeria. ECOWAS is a regional group of fifteen countries, founded in Lagos on the 28th day of May, 1975.The countries include Benin, Burkina Faso, Cape Verde,Cote d’Ivoire, Gambia, Ghana, Guinee, Guinee Bissau, Republic of Liberia, Republic of Mali, Republic of Niger, Federal Republic of Nigeria, Senegal, Sierra Leone, Togo.

“Its overall objective is to promote co-operation and integration with a view to establishing an economic and monetary union as a means of stimulating economic growth and development in West Africa. In order to achieve this objective, ECOWAS set up institutions and specialized agencies to serve as a propellant”. (ECOWAS 2010)

The ECOWAS institutions include:

ECOWAS commission

Community Parliament

The Community Court Of Justice and

The ECOWAS bank for Investment and Development

“The ECOWAS Commission and the ECOWAS bank for investment and Development are most times called the Fund are its two main institutions formed to implement policies, pursue a number of programmes and carry out development projects in Member States. Such projects include intra-community road construction and telecommunications; and agricultural, energy and water resources development.

Community Parliament-This is a forum for dialogue, consultation and concensus for representatives of the people of West Africa in order to promote integration. The protocol establishing the parliament was signed in Abuja, August 6, 1994 and entered force since March 14, 2002.

The community Court of Justice-The functions of the court are ascribed by the Article 76 of the revised treaty which may be specific thus ‘any dispute regarding the interpretation or application of this treaty shall be amicably settled through direct agreement without prejudice to the provision of this treaty and relevant protocols’. The decision of the court shall be binding on all member states, institutions of the community and on individual corporate” (ECOWAS 2010)

Countries within the same geographic proximity who seek to come together do not have the intension of forming a customs union, they aim at getting to the level of common market or economic union, but getting to that high level of integration has not been easy so the countries remain at the customs union while struggling to achieve the common market.(Rugman and Collinson 2009). Following a press release from ECOWAS on the 6th day of August 2010, the ECOWAS regional committee finally agreed on Common external Tariff system. This level of integration , an orderly system of description and coding of goods to be used in international trade by member states was taken into account. The common external tariff lays the foundation for a regional customs union which will enhance industrialization and economic growth in the region. (ECOWAS 2010). “A customs union is a form of economic integration in which all tariffs between member states are eliminated and a common trade policy toward non-member states is established” ( Rugman, Collinson 2009). Charges on the different products are done in this format; Zero percent for basic and fundamental social commodities, raw materials and capital goods in which capital goods are not produced for immediate consumption, instead they are used to produce other goods example tool, machineries and equipment; ten percent for intermediate goods, twenty percent for consumer goods and thirty five percent for specific goods for economic development in the fifth band. (ECOWAS 2010).

ECOWAS as a regional economic bloc has been helpful to international business as most companies prefer to trade with blocs rather than individual countries because these blocs tend to have a larger market. The ECOWAS states increased their geographical dispersion as they have been able to attract investors from a number of developed countries, the U.S. Japan, Germany, Italy, Belgium, and the Netherlands in particular.(Greer:1992). The larger and richer the market, the more likely it is to attract foreign investment for example, ECOWAS and Brazil collaborated on the 3rd July 2010 on new initiatives that will boost economic and political co-operation focusing on addressing the issues of poverty, food security, environment, renewable energy, capacity building, biofuel, industrial processing of agricultural products and tourism. The summit agreed to progressively uphold and open fair and free trade and investment opportunities through the promotion of two way trade, investment and business development for their mutual benefit (ECOWAS 2010)

Due to the abundance of oil in West Africa, trade has been created within the oil sector. A good number of oil servicing companies have sprung up in the region and members of ECOWAS have concentrated their efforts on goods and services of which they are more efficient. Production has shifted for reasons of comparative advantage allowing consumers access to more goods at a lower price than would have been possible without integration. This also has created opportunities for individuals seeking to improve their standard of living seek job in these companies instead of leaving the region for greener pastures and as a result of an enlarged market, ECOWAS countries now trade significantly with other non-member countries. Nigeria is currently the fifth largest exporter of crude to the United States, currently exporting between 900,000 to one million barrels of crude to the U.S (Stephen Ellis:2003) of which it has a comparative advantage compared to other products. This makes room for competition in the larger market among other oil producing countries. Companies are therefore not restricted to a particular produce from a particular country, rather they can get products at a competitive price which would enhance their company’s production.

Enlarged market has also led to economies of scale as the same produce which it provided to its member countries will now be extended to members outside the bloc using fixed investment and machines, producing on a larger scale but yet at a lower price.

As much as this bloc has been helpful, it has also been harmful to the fact that big firms that have more experience in a product are able to move to countries that are unable to manage their resources and in the course bring about exploitation of such resources to the detriment of the people and the countries environment. A case in Nigeria in which Shell came to manage their petroleum resources and since then destroyed the farmlands of the Ogoni people as well as polluted their water which in turn led to the death of fishes in the whole of the area, their major source of food.(Richard et al, 2001).The people of Ogoni land where not able to farm on their land nor work in Shell oil company due to their unskilled labour. As a result, there was no job for them and therefore no means to sustain themselves.

If the taking over of smaller firms by advantaged companies can be done in such a way as to appease the formerly employed subjects such as providing a job in such big firms, as well as compensate them for their land as is the case of Nigeria and Shell, by the government proving them with an alternative land, the both parties will then work together to attain the desired integration.

Some disadvantages of ECOWAS to Nigeria will be mentioned now, before, in the next section, discuss the benefits.

The free movement of people has led to the loss of highly skilled Nigerians. Doctors, nurses to migrate to other countries where they earn higher salaries mostly never coming back leaving their country with very few skilled workers (Fadayomi 1996, cited by Adepoju, 2002),most students also move to EU and United States for higher qualification and remain there after their studies instead of returning to their fatherland.

It should be noted that trans-border crime among member states has been on the increase due to the porous nature of the borders. This is as a result of free entry and exit of people in member states from one country to the other. Some of the most threatening criminal activities include smuggling, armed robbery, human and drugs trafficking. In 2003 alone, the Nigerian crime police report revealed that” over 10,000 vehicles were snatched from Nigerians yearly by trans-border criminals, while only 300 of such vehicles were recovered from Benin Republic by Jan-Dec 2003″.(ECOWAS 2003) The guinea Sierra Leone border also witness crime like smuggling, illegal mining of diamond and arm banditry.

Another cause for concern is the overdependence of member countries on Nigeria. ECOWAS ought to be a facilitator of regional trade and integration as well as the concept of co-prosperity; however, Nigeria contributes 60% of the ECOWAS budget without any special considerations attached to it. Also over $60billion of Nigeria’s tax payers money have till date been expended on peacekeeping assistance to West African nations notably Liberia and Sierra Leone through the exertions of the West African Monitoring Group (ECOMOG)(Federal Ministry Of foreign affairs, Nigeria). Also the West African gas line power project involving Nigeria, Ghana, Benin and Togo requires that Nigeria pumps gas to these countries. It’s a deal also tied around ECOWAS. The headquarters’ project begun in 1985 and ought to have been completed in 1997 at a cost of $700 million. It will now gulp $1 billion of which Nigeria is paying a substantial part of it if not all. All these have allowed integration to be a drain pipe on Nigeria.(Federal Ministry of foreign affairs, Nigeria).

There simply cannot be any real disadvantage with regards to Nigerians involvement in the ECOWAS project. Any major disadvantage is brought by Nigeria’s big power prism and ‘Father Christmas’ policy in our engagements.

The following are the advantages of ECOWAS to Nigeria. The integration has brought about suppression of barriers and police checkpoints within member countries. People from Nigeria can move around to other member states for job purposes. Most companies in Nigeria, For instance, Mabon energy, have branches in Ghana and they send their staff for training annually to these countries. This wouldn’t have been possible without free movement of people. Also Nigerians now troop to Gambia which has tourist attraction centres for vacation, while others just relocate.

To enhance this, ECOWAS has produced an ECOWAS Residence Card and ECOWAS Travel Certificate. The ECOWAS residence certificate is issued to citizens of other ECOWAS states that are resident in Nigeria while the ECOWAS travel Certificate is issued to Nigerians desirous of travelling to other ECOWAS member states (ECOWAS 2010)

Although Nigeria bears the cost of ECOMOG as stated above, the security around the borders as well as intra-regional conflict within the member states would not have been this minimal. Nigeria is a major player in economic integration in West Africa and would go to any length to sustain peace, unity as well as ensure the goals of integration are achieved to the common good of every citizen.

Nigeria being the largest trader among the ECOWAS member states of which its main export is oil, cocoa beans, cocoa products, palm product, tin metal, hides and skin, rubber, timber and plywood,(Greer,1992) Prior to this integration in 1975, has had its market been within the confines of the country and with high tariff if sold outside the country. But due to the elimination of trade barriers as well as common external tariff, she now has a larger market for sale of products. and these goods have been very important especially to Ghana, Senegal, Cote d’Iviore and sierra Leone(Greer,1992)

As a member of ECOWAS, Nigeria has been able to gain credibility as foreign investors now see the need to partner with the country. A Finish delegation representing the cream of the country’s business community was at ECOWAS Commission on the 18th of March 2010 to exchange views with the community officials about the prospects of investing in the region. The delegation is part of a larger delegation that also includes officials of Finland’s ministry of foreign affairs which was in Nigeria on a five day visit to explore further areas of bilateral economic cooperation and led by the country’s minister of foreign trade and development, Dr. Paavo Vayryren.(ECOWAS 2010)

ECOWAS on the 29th day of September in Abidjan-cote d’Ivoire called for private sector involvement in the electricity sector. Electricity demand is therefore expected to record a quantum leap of 222,000MW in 2020 from 6,500MWin 2003. A growth rate of 7.6%.Nigeria as part of the member country will gain from this as Small and Medium scale enterprises can use sufficient electricity to sustain their business by reduced production cost. This tremendous increase in the demand for power imposes a responsibility on both governments and the private sector to develop innovative and ambitious projects in the energy sector.(ECOWAS 2010)

As part of the efforts by the ECOWAS commission to recognize innovation and entrepreneurship which are important tools for enhancing regional competitiveness and development, ECOWAS on the first of October 2010 at the third business forum honoured 3 individuals from Nigeria in the different categories,

-Award for Young entrepreneur for innovation in Energy

-Award for Entrepreneurship

-Award for the most outstanding Business man(ECOWAS 2010)

The government of Benin and the world bank signed a Financing agreement in Cotonu for the Abidjan-Lagos Transport and trans facilitation project(ALTTFP).The signing which took place on Thursday the 8th of April 2010 involved five countries ,Nigeria, Ghana, Togo, Benin, Cote d’Ivoire including ECOWAS and is aimed at reducing transport barriers on the road along Abidjan -Lagos corridor which links some of the largest and economically dynamic capitals in Africa(Abidjan, Accra, Cotonu, Lome and Lagos)and serves a population of over 35millon inhabitants. A total of $228million dollars was approved by the World Bank to support the implementation of the first phase of the program which covers Ghana, Benin and Togo.(ECOWAS 2010)

Nigeria has been able to gain support from ECOWAS during crisis as a member of the economic bloc. On Monday the 25th of October, the president of ECOWAS commission, Ambassador Victor Gbeho, handed a cheque of $291 000 US dollars to the Nigerian Government to support victims of the recent flood in the country that displaced over two million persons and caused substantial damages to farmland and other property. This follows an earlier donation by the commission in collaboration with Red-cross, in mid-july 2010 of various items valued at $100,000 US dollars to victims of the Jos crisis in Central Nigeria which claimed over 500 lives and displaced some 5000 persons.(ECOWAS 2010)

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In summary, we can see from the above discussion that regional integration has done more good than harm to member states and international business as a whole. if the recommendations suggested are put into use, regional integration would be a success and except regional integration is achieved, we cannot talk about global free trade.