By maxwell odinaka

International trade is a well-known path to economic prosperity for many countries, but in Nigeria, its warped practice, marked by smuggling and evasion of duties, have become destructive drainpipes for an ailing economy. At issue is the Economic Trade Liberation scheme (ETLS).

Economy
Economy

Battling with smuggling through the international trade alliance of the ECOWAS for various products, recently, the Central Bank of Nigeria (CBN) announced the shut out Crude palm Oil with the 41 items from the foreign exchange (forex) window.

Though the CBN maintained that its action was necessary for economic stability, members of the organised private sector believe the move may have been wrongly conceived without the apex bank properly appraising domestic capacity for production of some of the excluded items.

The ECOWAS ETLS

In 1990, ECOWAS launched the Economic Trade Liberation Scheme (ETLS) with the primary objective of establishing a Customs union aimed at the total elimination of Customs duties and taxes of equivalent effect and removal of non-tariff to protect goods produced in Member States.

The ETLS is the main tool for promoting the West Africa region as a Free Trade Area. This is in tandem with one of the objectives of the community which is the establishment of a common market through “the liberalisation of trade by the abolition, among Member States, of customs duties levied on imports and exports, and the abolition among Member States, of non-tariff barriers”. – Article 3 of ECOWAS Treaty

Implication of CBN forex policy on ETLS

Although in Nigeria, a lot of well- intentioned economic instruments are abused and instead of being used to promote the growth and development of the country, they end up helping the rich and powerful and those close to the corridors of power line their pockets.

If the ideal situation thrives in respect of the ETLS, it should lead to economic prosperity for most ECOWAS member states and especially Nigeria where there is a lot of indigenous investments in manufacturing, processing and other value-adding economic activities. But with the forex restriction on Crude Palm Oil (CPO), smuggling will increase to avoid tariff payment (through re-exportation).

In this case it becomes illegal under the ETLS for a company or an individual to import crude palm oil from a region outside the ETLS to a neighbouring country like Republic of Benin and then refine to palm oil with the intention of bringing the products into Nigeria. Under ETLS a large percentage of the product to be moved from one member state to another must originate from that country.

For example palm oil produced in Nigeria can be moved to Ghana duty free under ETLS and steel produced from iron ore in Togo can be moved to Nigeria duty free under the ETLS. In principle, the overall gains from trade could be used to compensate for the effects of reduced trade barriers by appropriate inter-party transfers.

As Crude Palm Oil (CPO) under ETLS is classified under processed goods enjoys certain concession upon entry into a different ECOWAS state which includes Nigeria. The three groups of goods under the scheme enjoy the following concessions:

Total exemption from import duties and taxes No quantitative restriction, Non-payment of compensation for loss of revenue for unprocessed goods and traditional handicraft product as a result of their importation. Despite the glaring benefits of the ETLS,  the forex restriction policy has started to show its effect on ETLS as some importers and local producers of CPO at a low capacity have started exploring the ETLS as a means of bringing in the products with the agenda of reselling it to the manufacturers in Nigeria.

Certain stakeholders of the industry have taken undue advantage of the scheme to indulge in sharp practices by importing CPO from member states through round tripping from other countries. These CPO round tripped into these member states are then imported into Nigeria under ETLS zero duty regime which negates the CBN objective for the restriction of the forex policy “in order to promote development of our local production.”

For manufacturers in the country, there are just two options; either close up and relocate to neighbouring ECOWAS member countries like Ghana, Togo or Benin where this raw material is being smuggled from or join the bandwagon and start patronising the smugglers. It is a known fact today that in every part of the world where agriculture is growing, it is because their governments are supporting the sector in various ways including the implementation of favorable agribusiness policies and practices.

In Nigeria for example, in past years, the government has distributed more than 1.4 million sprouted nuts to farmers free. These hybrid sprouted nuts are high-yielding Tenera seedlings of greater yielding capacities that will benefit and improve production.

However, this requires that the farmers have to recapitalise their plantations which, is the responsibility of the government. There is no doubt that Nigeria can become self-sufficient in palm oil production and consumption although we currently pay a higher price due to the weakened strength of the Naira each time we import CPO or any other agricultural produce.

It is therefore important that if government is to encourage and promote private sector participation in its current transformation efforts in palm oil plantation development, the current lapses in the ETLS where round tripping of CPO from other countries are dumped into the nearby country and subsequently the same into Nigeria under the guise of the ETLS must be checked and eradicated and this could only be achieved with the removal of CPO from the Forex Policy list with a proper roadmap of backward integration for the manufacturing companies.

In as much as the objective of the ETLS is to promote industrialization within the sub-region, the current practices are totally counterproductive to this objective and there is a need to have a review of the ETLS in its journey so far. Government should not ignore the cry of the industry especially the CPO sector with the continual falling value of the Naira against Dollar and the dire need to create jobs for our jobless teeming youths as the manufacturing sector is gulping more than 70% of the unskilled and skilled labour forces in the country.

Odinaka, a public affairs analyst, wrote from Lagos.

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