Regional economic groupings in Africa of which there are eight (8) today, were formed at different times as a prelude to establishing the African Economic Community (AEC). Amongst the first regional economic communities was The Economic Community of West African States (ECOWAS). ECOWAS was established on 28 May 1975 and has 15 member states; 319 million people; 5 million square km in land area; 45 percent urban population and US$396 billion GDP (pre-rebasing of Nigeria’s GDP).
The Lagos Treaty that established ECOWAS aimed to strengthen economic integration in the sub region through progressively freer movement of goods, capital and people. As of today, ECOWAS is arguably not as close to the hearts and minds of we the people of the bloc. In this regard, the ECOWAS Commission will soon set up ultra modern TV and Radio stations to draw us closer to its ambitions and achievements. The purpose of this piece is to chronicle the milestones, challenges and outlook for ECOWAS.a
Free Trade, Customs Union, Common Market, Currency Union followed by Economic Union – these are the different steps leading to economic integration. Apart from Free Trade, there has also been visible effort by the authorities to create the ECO as common currency for non francophone member countries of ECOWAS (Nigeria, Gambia, Ghana, Sierra Leone, Liberia and Equatorial Guinea – together the West Africa Monetary Zone (WAMZ)). This will be discussed further subsequently.
Africa intra regional trade is most advanced in South Africa Development Community (SADC), which in 2011 accounted for 44 percent share of intra-regional trade in Africa. However, excluding unrecorded informal trade, intra Africa total merchandise exports was an average of 11 percent between 2007 and 2011 compared to 70 percent in Europe, 50 percent in developing Asia and 21 percent in Latin America.
ECOWAS is reputed to have countries with the most open borders in Africa (visa free entry for up to 90 days) through the instrumentality of the ECOWAS passport and the Travel Certificate. The Authority of Heads of States in ECOWAS also recently agreed to abolish the requirement for residence permits, deciding instead to introduce biometric identity cards for citizens of the community.
Infrastructure, in particular roads and power, facilitates trade and exchange. A review of the operations of ECOWAS Commission suggests a bureaucracy that is burdened with simultaneous pursuit of several objectives using very limited resources, but success recorded in the West Africa Power Pool (WAPP) in particular speaks volumes. Progress is also being made in respect of construction of the coastal six-lane dual carriage Lagos-Abidjan-Dakar superhighway. ECOWAS is collaborating with Nigeria Export Import Bank (NEXIM) to facilitate sea trade through the creation of Sealink Shipping Company under a Public-Private-Partnership. Furthermore, if the Common External Tariff takes effect on 1 January 2015 as planned and the controversial Economic Partnership Agreement with the EU is definitively concluded, then we could speak of a Customs Union.
It is important not to lose sight of by far the most salutary achievement of ECOWAS, especially if pursued to its logical end – the integration of West African capital markets. The integration commenced in 2010. The task was approached modularly and the outcome will be the Nigeria Stock Exchange integrated virtually with Ghana Stock Exchange, Bourse Regionale des Valeurs Mobilieres in Cote d’Ívoire and the Sierra Leone Stock Exchange which represents a combined 297 operating companies with total market capitalisation of US$120 billion accessible to all 319 million people across all ECOWAS countries. When the three integration phases are completed, the capital markets it is important to note, will be integrated but not merged. However, a merger is desirable and achievable. It will result in a single point of entry to the West Africa opportunity, reduce cost arising from multiplication of infrastructure, address all the risks inherent in the integration arrangement and improve daily market liquidity at a faster rate.
ECOWAS has not progressed beyond a Free Trade Area (FTA) to a currency union because for instance, only Nigeria has complied fully with the minimum required WAMZ convergence criteria – 31 years after commencement of the process. A new target date for achieving the ECO has been set for 2020. It is important to state that the plan is for the ECO to subsequently “combine” with FCFA to yield a central currency for the entire sub region. But will the francophone sub bloc, i.e. L’Union Economíque et Monetaire Ouest-Africaine, l’ÚEMOA be inclined to combining with WAMZ? It would perhaps be easier for l’UEMOA to combine with Communaute Economique et Monetaire de l’Áfrique Centrale (CEMAC) with which it has closer affinity and subsequently create a West and Central Africa region – a nomenclature that is already frequently used in the corporate world by the likes of MTN. Going further, if the Bitcoin digital currency becomes ubiquitous as some analysts are bound to believe it would, will there still be a need to have common regional currencies? In light of current realities and salient learning points from the prevailing Euro crisis, it is worth re-examining the pros and cons of each of the possible approaches to regional currency integration.
The more an economic grouping progresses from an FTA to a full union, the louder the questions on politics and sovereignty become. The key challenge to ECOWAS integration is fear of domination by Nigeria which in turn appears to engender a lack of political will at highest levels of government in member countries. Presidents Jonathan, Ouattara and Mahama as leaders of the three biggest economies in ECOWAS need to speak with one another more frequently with a view to building consensus and ultimately be the model for the union we seek. ECOWAS needs to consider a reprioritisation of its objectives and possibly focus only on key impact areas of food/agriculture security, energy and power security, education and public enlightenment, rapid roll out of regional road networks and strengthening of intra Africa air travel and safety (only 38 African airlines meet global safety standards out of about 200 currently in operation on the continent). If Nigeria, Ghana and Cote d’Ívoire forge closer ties and lead the way to the union, others will follow.
MAYOWA AMOO
