LCCI: How to make ECOWAS trade liberalisation work
The Economic Community of West African States (ECOWAS) Trade Liberalisation Scheme is supposed to be the operational tool for promoting intra-regional trade and boosting economic activities.
However, some aspects of its implementation appear to have made the realisation of its objectives difficult, particularly for real sector operators. But the Lagos Chamber of Commerce & Industry has suggested ways to make the scheme work.
Members of the Lagos Chamber of Commerce & Industry (LCCI), particularly exporters, are literarlly up in arms against the ECOWAS Trade Liberalisation Scheme (ETLS) administration. Their grouse: the ETLS, under its current management by the Foreign Affairs Ministry, is not serving exporters’ and other real sector operators’ interests well.
They noted, for instance, the difficulties in exporting goods from Nigeria to other West African countries as a result of bureaucratic bottlenecks of product registration under the scheme, negate ETLS objective.
The ETLS is the main operational tool for promoting free trade within the West African sub-region. The scheme was in line with the regional trade bloc’s objective of establishing a common market through trade liberalisation by abolishing, among member states, Customs duties on imports and exports and abolishing non-tariff barriers.
It was envisaged that a free trade area will, among others, increase intra-regional trade, boost economic activities and increase the sub-region’s competitiveness in the global market. However, the administration of the scheme, under its current management of the Foreign Affairs Ministry, has come under criticisms by the LCCI and other real sector operators.
Some of them, who spoke with The Nation, lamented that bureaucratic bottlenecks have made product registration extremely difficult for exporters. They insisted that to mitigate exporters’ sufferings, ETLS’s administration should be moved from the Ministry of Foreign Affairs to the Ministry of Industry, Trade and Investment, specifically the Nigeria Investment Promotion Commission (NIPC) to serve exporters better.
LCCI President Mr. Babatunde Paul Ruwase, who pushed that the scheme’s administration be excised from the Foreign Affairs Ministry, however, identified other grey areas that needed to be smoothed if Nigerian exporters must benefit fully from the scheme. He said, for instance, that there is need to address the multiplicity of foreign exchange (Forex) rate in the economy.
Ruwase lamented that the gap between the Central Bank of Nigeria (CBN’s) N305 rate and other rates at N360 and above, has continued to create undue arbitrage for banks and transparency issues. “The supply side of electronic forex market, transfers and card transactions are still being compelled to surrender their forex at N305 rate instead of N360. This will continue to discourage forex supply through these channels,” he said.
The LCCI, according to him, therefore, recommends that this arbitrage opportunity be closed by applying Bureau de Change (BDC) rate to forex supply transactions in the inward transfer and card transactions segments.
Ruwase also said efforts should be made to build external reserves further to hedge against potential decline in the price of oil. “This can be achieved by attracting larger investment inflows from Nigerians in the Diaspora and foreign direct investors looking to participate in Brownfield and Greenfield infrastructure investment in Nigeria,” he added.
The LCCI president also drew attention to excise duty on locally-manufactured goods. While recalling that the government recently commenced the enforcement of the approved amendment to the excise duty rates for alcoholic beverages, spirits and tobacco in Nigeria, he expressed the Chamber’s worry over the move to extend the duty to cover several other basic items.
Ruwase lamented that the Nigerian Customs Service (NCS) excise duty list on its website was inclusive of many basic and essential products such as soap and detergent; toilet papers; cleansing or facial tissue and Spaghetti/Noodles.
Noting that these are products consumed largely by ordinary Nigerians, he, however, argued that any the imposition of excise duty on them would further aggravate the poverty situation in the country and undermine the welfare of citizens. This, according to him, is particularly so, considering the fact that poverty incidence in the country was already over 60 per cent.
He further lamented that the planned extension of excise duty to soaps and detergent will invariably increase their prices, make them inaccessible for the common man, and further heighten their plight amidst the current economic challenges that have reduced their purchasing power.
The LCCI chief said excise duty rates penalises domestic production and incentivises importation, which conflicts with the vision of the Economic Recovery and Growth Plan (ERGP) regarding economic diversification, job creation and local value addition. He also made a case for tax incentives to manufacturing firms.
Pointing out that the manufacturing sector is one of the most vulnerable sectors in the Nigerian economy, he said the sector is already grappling with several challenges that have continued to undermine its productivity and competitiveness.
Ruwase listed some of them to include high operating cost, high energy cost, consumers’ weak purchasing power, unfriendly tax environment, high regulatory compliance cost, and influx of smuggled products and high cost of logistics.
He argued that if the government cannot give tax incentives to manufacturing firms, it should not impose additional tax burden on them, given the challenging operating environment for production in the economy.
According to him, it is even worse when such burden is on necessities consumed largely by the ordinary people. He said the LCCI was requesting an urgent rethink of the proposition to increase or impose excise duty on the production of basic needs in the economy.
He also spoke on the outcome of the recent CBN Monetary Policy Committee (MPC) meeting, noting that although the monetary policy rates were retained, making it the 10th retention of the rates by the MPC, this may not be unconnected to the CBN’s worry about the risks to inflation, exchange rate, foreign reserves and capital flows.
While asking that priorities be given to job creation and poverty reduction, which he claimed are the cardinal programmes of the present administration, he said low interest rate will stimulate investment, impact positively on growth, create more jobs, increase income, and boost output, which will ultimately have a moderating effect on inflation.
Okwy Iroegbu-Chikezie is Assistant Editor of Nigeria’s The Nation newspaper.