Monday, 30 September 2013

Why Nigeria should pull out of ETLS



It is my opinion that Nigeria is losing a lot more than it is benefiting from the ECOWAS Trade Liberalisation Scheme (ETLS). I am all for the removal of non-tariff barriers to trade, free trade and regional integration but these must be fair to all parties concerned. Because Nigeria is getting the short end of the stick, it is time, therefore, to urgently take a second look at its continued participation in the scheme.
ETLS was established in line with the objective of the Economic Community of West Africa State (ECOWAS) of promoting cooperation and integration and as one step towards the creation of a common market which, according to the ECOWAS Revised Treaty, should be established, among others, through “the liberalisation of trade by the abolition, among Member States, of customs duties levied on imports and exports, and the abolition of non-tariff barriers in order to establish a free trade area at the Community Level.”
ETLS was first implemented in 1979 with only agricultural products, handicrafts and crude products being allowed to benefit from the scheme. In 1990, however, it opened up to include industrial products. And it was at this point that abuse of the scheme by fellow West African countries set in.
The idea behind ETLS is for goods, originating within the sub-region, to move freely within the sub-region. It is therefore the main ECOWAS operational tool for promoting the West Africa region as a Free Trade Area.

From available literature, the objectives of the creation of the Free Trade Area is to encourage entrepreneurial development in the sub-region, increase intra-regional trade and boost economic activity; increase West African competitiveness on the global market and increase the GDP of member states, thereby creating better welfare for the citizens.
ETLS set out to establish a Customs Union among all member states aimed at the total elimination of Customs duties and taxes of equivalent effect, removal of non-tarrif barriers and the establishment of a Common Customs External Tariff to protect goods produced in the 15 ECOWAS countries.
The group of goods covered under the scheme includes unprocessed goods including livestock, fish, plant or mineral products that have not undergone any industrial transformation, traditional handicraft products and industrial products originating within ECOWAS member states. These groups of goods enjoy concessions including total exemption from import duties and taxes; zero restriction in quantity and non-payment of compensation for loss of revenue as a result of their importation.

Goods that qualify for the scheme must originate in member states and must be accompanied by a certificate of origin and an ECOWAS export declaration form.
This, however, is where the problems lie as Nigerian authorities have no means of ascertaining the origin of goods coming into its territory.
I think we should review our continued participation in the ETLS for the following reasons:
1. Nigeria is the biggest market in West Africa and is a target market by many foreign manufacturers especially from Asia who ship goods to those countries and bring same into Nigeria under the guise that they are produced in West African countries. They benefit from the ETLS and dump goods into Nigeria to take advantage of its huge market. Nigerian industries/manufacturers suffer as a result while Nigeria loses huge revenue and its youths wallow in acute unemployment.
2. There are 15 ECOWAS member states made up of Benin Republic, Burkina Faso, Cape Verde, Cote D'Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo. Nigeria’s population is more than the combined population of the other 14 Member States. Indeed the country’s population is about 55% of the entire sub-region so it is a natural target market for exporting nations and under the present blanket ETLS arrangement, it will be impossible to derive commensurate benefit as other West African nations.
3. Some countries, especially those that are Nigeria’s neighbours, hide under ETLS to encourage and support unbridled smuggling of goods into the country.
4. Cheap Chinese textiles daily flood Nigeria under the guise of ETLS and have destroyed Nigeria’s textile industry.
5. Few Nigerian manufacturers take advantage of the ETLS to sell their products in other West African countries. Even if they want to, it would be difficult to compete with the goods of those countries due to high cost of production.

Just last week, the Tomato Processors Association of Nigeria (TPAN) decried the amount of money spent on importation of processed tomato paste, saying that the country has become a dumping ground for fake and low quality Asian tomato paste. The association in a statement said cheap imports were causing serious damage to the tomato industry. While noting that the international standard is 28 percent brix for canning and between 34-36 percent brix for drumming, the association regretted that majority of tomato paste imported, however, doesn't exceed 26 percent brix, resulting in watery paste.
It is an open secret that most of these processed tomato paste, like many other consumer goods produced in Asia, are imported under the guise of the ETLS.
A Gap Analysis on the Ecowas Free Trade Area conducted by the United States Agency for International Development (USAID) and validated in 2010 revealed that Nigeria there is a general lack of awareness among private sector traders indicating they had limited, detailed information on ETLS protocols. I think it is more of apathy though.
According to the USAID report: “The Nigeria Gap Analysis study revealed that incomplete or inconsistent implementation of ETLS protocols within the country has a host of negative effects, including increasing the costs and unpredictability of trade and discouraging business expansion and investment. There is a gap between the passing of legislation for ETLS protocols and its implementation; likewise between central government’s and border officials’ respective understanding of ETLS protocols. Many issues traders face are simply illegal - tolls, bribes, corruption - and a pervasive attitude of officials preying on traders persist.”

This was in 2010; over 30 years into the implementation of the ETLS. Three years after the report was published, the situation is not any better, so why stick to it?
The Nigeria Customs Service has also reported huge revenue loss as a result of the implementation of ETLS even at it has claimed several times in the past that some importers are hiding under the scheme to smuggle goods that did not originate from the sub-region into the country.
Former Customs Area Comptroller, Seme Border of the Nigeria Customs Service, Abubakar Sahabi, said the command lost N1.2 billion to the abuse of ETLS in the first half of 2012 while N998 million was lost to the scheme in the first half of this year.
Indeed, almost all the Customs Commands lose money, one way or the other to ETLS.
It is my view that due to the monumental loss Nigeria has suffered under the scheme, only agricultural products, handicrafts and crude products be allowed to be traded freely under the ETLS scheme in the sub-region. 

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