The benefits derivable from the existence of a large market in the West African sub-region remain a strong reason why there is need for the optimal utilisation of the full potentials of cross-border trading within the sub-region. The market in the sub-region is estimated at a population of 308.66 million out of Africa’s 1.04 billion, with a Gross Domestic Product (GDP) of $359.5 billion (2011).
The West Coast is richly endowed with various agricultural produce and mineral resources ranging from foods, fibres, fuels, and raw materials. Recently, services like education and banking were prominently transferred within some countries in the sub-region. Proximity, cohabitation, similar cultures, democratic governance and the existence of a regional organisation such as the Economic Community of West African States (ECOWAS) are supposed to drive trade within the West Coast. However, the expected positive effects of these factors have been dampened by inhibiting factors which include:
- Cross-border barriers
- Complicities in customs operations across the borders
- Insecurity and terrorism
- Disrespect for ECOWAS protocols and declarations
- Heavy dependence on foreign imports from the West
- Existence of inimical foreign trade policies of some member states
- Poor infrastructural base to support intra-regional trade
GDP Rates Across The West Coast
A major indication of existing investment potentials can be seen in the GDP growth rates recorded and estimated for the West Coast. The latest figures of the world GDP growth rates (as at February, 2012) show that Africa and indeed West Africa has one of the highest rates, with Ghana for instance coming second with 13.50% only after Qatar in the world ranking.
The estimate for Ghana can be explained by the recent discovery of oil in commercial quantity ready for exploration and export. Liberia and Nigeria rank 24thand 25th respectively with 6.90% each. These impressive growth rates can be linked to the economic transformation agenda currently going on in these countries supported by a settling democratic rule system. Other West African countries that are estimated to record a GDP growth rate above the world average of 3.7% are:
Only Cote d’Ivoire is estimated to witness a negative growth of -5.60% likely due to the devastating effects of war in the country in recent past. Estimates from the African Economic Outlook Report, the International Monetary Fund (IMF) and the World Bank are essentially within the same range with the above figures.
Taking a look at the trade statistics of Nigeria, the biggest economy in the West region, it is clear the country trades more with other regions of the world than with its ECOWAS counterparts. Available data from 2009 to 2012 show that Nigeria imports the least from neighbouring countries. A closer look at the data revealed that trade with all the countries in the West Coast was far below trade with individual countries such as Germany, the United States of America, China, Japan, India, Belgium, Brazil etc. This trend can be expected of other West African economies.
The Search For Bigger Markets
Harnessing the potentials of trade within the West African Coast has become necessary in the face of globalisation. The search for bigger markets to accept supplies from various countries in the sub-region that are presently undertaking diversified policies has also become essential.
For instance, the recent transformation taking place in the agricultural sector of the Nigerian economy, if successfully implemented, should lead to the production of goods such as cassava, cocoa, fisheries, and rice in large commercial quantities. Since these reforms make consideration for private sector participation, private investors would definitely be spurred by the availability of a large market that transcends the shores of any country.
The recent discovery of oil in commercial quantity in Ghana opens a new vista of business chains and partnerships for the country to fully harness the potentials of the discovered oil. Ghana especially needs to admit to the fact that they need to learn a lot of lessons from Nigeria that started exploiting oil since the sixties. Countries like Liberia, Sierra Leone and Cote d’ivoire need the helping hands of their neighbours to recover from the devastating effects of war.
The Ease of Doing Business
The 2012 Doing Business Report (see table below) of the World Bank shows clearly that there are inhibiting factors that have not allowed both the government and investors in the sub-region utilise the full benefits of the existing potentials within the West Coast. The rankings in the report, showing by the sub-region, indicate a poor correlation in the ease of doing business in a country, its profile of trade across borders and the level of goods inflow into the country.
Driving The West Coast
Nigeria is expected to drive the West African sub-region similar to what Germany is doing in the European Union (EU), USA in the Americas, and China in Asia-Pacific. Within Africa, Kenya and the Republic of South Africa drive COMESA (Common Market for Eastern and Southern Africa) and SADC (Southern Africa Development Community) to a good extent of serving as major commercial hubs.
Better cooperation between the ECOWAS heads of government is crucial to the development and sustenance of a buoyant trade profile within the West African sub-region. The ECOWAS protocol on free movement of persons, right of residence and establishment should be respected by all the member states.
In considering the full utilisation of the existing trade potentials in the sub-region, removal of the inhibiting factors is paramount. Diversifying away from the present mono-product economies in the West Coast is crucial as this would increase output. Such output also has a way of pushing through the borders in search of larger markets thereby enhancing cross-border trade.
Recommendations On Trade Development
Infrastructure: There is a need for the establishment of a well-networked rail system within the West Coast to facilitate movement of goods and persons. More road networks constructed across the sub-region to link the member countries would surely enhance trading across the borders.
In the meantime, some international development institutions like the World Bank have embarked on supportive projects in the West Coast. On May 31, 2012, the World Bank’s Board of Executive Directors approved $90 million in grant financing by the International Development Association (IDA). The grant is expected to be used to reduce trade and transport barriers in the port and on the roads stretching along the West Africa Coast from Abidjan to Lagos. The World Bank had in 2010 approved $228 million for the first phase of the project which covers Ghana, Togo and Benin coastal corridors.
“The transport sector in West Africa plays a key role in the economic development of the sub-region and generates about six percent of its GDP,” said Anca Dumitrescu, Senior Transport Specialist and Project Manager at the World Bank. Mrs. Dumitrescu further added that “the Abidjan-Lagos coastal corridor was identified as one of the highest priority corridors for economic and social development in the sub-region due to its economic and the large population that it covers.”
Technology: A better penetration and usage of Information and Communication Technology (ICT) in facilitating trade in West Africa is also needed. Online banking possibilities have become requisite backbone that supports regional and intercontinental trading. Definitely, the Internet penetration and widespread usage of ICT apparatus in the developed economies must have contributed immensely to trade promotion within Europe, the Americas and the Asian-Pacific regions. With a sound ICT infrastructure in the West Coast of Africa, international trade would be done with minimal handling of physical cash, thereby reducing corruption and cross border robberies. Nigeria is presently pursuing a cashless economy with more emphasis on electronic payments for transactions. More countries should embrace this concept within the West Coast, considering the enormous development that will emanate from there.
Common Currency: There is an obvious need for a common currency (‘The Eco’ currency) to promote trade among the ECOWAS member states. It is easily accepted today that the introduction of the Euro among the EU countries has facilitated trade within Europe and the rest of the world. Three currencies that are believed to dominate world economy in the near future are the US Dollars, the Euro and the Chinese Yuan. The present disparaging exchange rates of the various currencies do have a way of slowing down trade and commerce.
Customs Services: The Customs Services of the member countries should be re-orientated. They should be trade promoting agencies instead of seeing themselves as merely revenue generating source for their governments. The bid to meet revenue targets and the damning courage of smugglers to bribe their way through the border posts have left genuine traders to suffer in the hands of these customs units. The customs services should actually collaborate to curb cross-border crimes and terrorism, as well as speed up Customs clearance by automation and simple documentation and procedures.
Export Promotion Policy: In addition to what has been mentioned, to fully realise the potentials inherent in intra-regional trade, all the countries in the sub-region should vigorously pursue export promotion policies through established institutions and Public-Private Partnership (PPP) projects. There is also need to ensure effective intra-regional trade facilitation policy through full implementation of the ECOWAS Trade Liberalisation Scheme, the Inter-State Road Transit Scheme (ISRT) which is designed to mitigate multiple tariff/non-tariff barriers, and other integration schemes within the region. Regional PPP arrangements and collaborations to develop dedicated transport/maritime corridor for timely and cost-effective haulage/shipment of cargoes are also essential to promote trade within the sub-region.
Credit Facility: The lack of credit facilities for traders due to high risk perception is also hindering trade across borders in the region, especially for the established but informal merchants. The high risk perception is due to the cumbersome export and import procedures laden with corrupt practices. Each country should have an established export and import financing institution to liaise with regional and continental institutions such as the African Export-Import Bank (AFREXIM), the African Development Bank, and the ECOWAS Commission to arrange structured but flexible credit for traders.