The Impact of Regional Integration on Nigeria’s Imports: A Case of ECOWAS Common External Tariff on Agro-Processing

Oluwusi, Oluwadamilola Oluwatemilorun (2016-12)

Thesis (MSc)--Stellenbosch University, 2016.

Thesis

ENGLISH SUMMARY : There has been several attempts to foster deep integration within West Africa in times past. Regional integration has notable gains and is vital for any economy. It promotes trade and contributes to growth. Consequently, the Economic Community of West African States (ECOWAS) customs union agreed on a Common External Tariff (CET), which Nigeria started to implement on 11th April 2015. The study particularly looks at the impact of the ECOWAS regional trade agreement on trade and agro-processing in Nigeria. Specifically, the impact of the CET on imports of agroprocessed products was quantified. In view of further liberalization, the effect of a possible ECOWAS-European Union (EU) Economic Partnership Agreement (EPA) on trade, revenue and welfare was also examined. The methodology used for analysis is a partial equilibrium model. Specifically, the Single Market Partial Equilibrium Modelling Tool (SMART) is used at a fairly disaggregated six-digit level of the harmonized system. The analysis makes use of 2014 trade data obtained from the SMART model and the ECOWAS CET schedule obtained from Nigeria Customs Service (NCS). The study defined four tariff liberalization scenarios. The first is a common external tariff on all products imported by Nigeria from ECOWAS. The second scenario takes into consideration a zero-rating on ECOWAS imports of all products. The third scenario considers a complete elimination of existing import tariffs on all members of the EU in addition to ECOWAS partners in the context of an ECOWAS-EU EPA. The fourth scenario imposes the common external tariffs on imports from all trading partners, except ECOWAS and the EU, whose products remain zero rated. Overall, the results indicate that a regional trade agreement with ECOWAS and the EU increases the imports of agro-processed products by Nigeria. This import growth is mostly driven by trade creation as a result of the lowering and/or the removal of tariffs. Cote d’Ivoire had the largest positive trade diversion effects among the ECOWAS partners and as for the European Union it was the Netherlands. Nigerian consumers benefit from reduced prices, but the influx of new imports may not favour producers in the agro-processing sector. This is because expensive local production is substituted by cheaper imports. Though not analyzed in this study, producers within the agro-processing sector may likely witness an impact of diminishing profits because of strong import competition. The analysis also indicates loss of tariff revenue for the Nigerian government but welfare gain in total, as expected. In the first scenario (CET on ECOWAS only) agro-processing accounted for the largest share (60.83%) of tariff revenue loss for Nigeria. Based on the results, agro-processing accounts for 33.83%, 30.01%, 7.35% and 5.17% of the trade creation across the four scenarios as well as some trade diversion 55.82%, 32.81%, 14.91% and 11.88%. The implementation of Free Trade Area (FTA) within ECOWAS serves as a meaningful base provided trade policies are well coordinated and harmonized. The government however needs to come up with measures to enable producers of less competitive agro-processing sectors to remain relevant. The results show that Nigeria needs an approach to generate revenue to offset the tariff revenue losses caused by the implementation of the CET.

AFRIKAANSE OPSOMMING : Daar was reeds verskeie pogings in die verlede om diep integrasie binne Suidwes-Afrika te bevorder. Streeksintegrasie het noemenswaardige voordele en is noodsaaklik vir enige ekonomie. Dit bevorder handel en dra by tot groei. Gevolglik, het die Ekonomiese Gemeenskap van Wes-Afrika State (ECOWAS) doeane-unie ooreengekom op 'n gemeenskaplike eksterne tarief (CET), wat Nigerië begin implementeer het op 11 April 2015. Die studie kyk veral na die impak van die ECOWAS streekshandelsooreenkoms op plaaslike handel en landbou-verwerking in Nigerië. Spesifiek, was die impak van die CET op handel in verwerkte landbouprodukte gekwantifiseer. Met die oog op verdere liberalisering, is die effek van 'n moontlike ECOWAS-Europese Unie (EU) Ekonomiese Vennootskapsooreenkoms (EPA) op handel, inkomste en welvaart ook ondersoek. Die metode wat gebruik is vir die ontleding is 'n gedeeltelike ewewigsmodel. Spesifiek, die Enkel Mark Parsieële Ewewig Modellering Instrument (SMART) word gebruik op 'n redelikegedetailleerde ses-syfer vlak van die geharmoniseerde stelsel. Die analise maak gebruik van handelsdata vir 2014 wat verkry is uit die SMART model en die ECOWAS CET skedule verkry vanaf die Nigeriese Doeane Diens (NCS). Die studie definieer vier tarief liberalisering scenarios. Die eerste is 'n algemene eksterne tarief op alle produkte wat Nigerië invoer vanaf ECOWAS. Die tweede scenario stel 'n nul-tariefop die invoer van alle produkte vanaf ECOWAS. Die derde scenario oorweeg 'n volledige uitskakeling van bestaande invoertariewe op alle lede van die EU bykomend tot ECOWAS vennote in die konteks van 'n ECOWAS-EU EPA. Die vierde scenario stel die gemeenskaplike eksterne tarieweop produkte vanaf alle handelsvennote, behalwe ECOWAS en die EU, wie se produkte teen ‘n nulkoers ingevoer word. Oorhoofs, dui die resultate daarop dat plaaslike handelsooreenkoms met ECOWAS en die EU die invoer van verwerkte landbouprodukte vir Nigeriëverhoog. Hierdie toename in invoere word gedryf deur handelskepping as gevolg van die verlaging en / of verwydering van die tariewe. Die Ivoorkus het die grootste positiewe handelsoordrag effekte onder die ECOWAS vennote en in die Europese Unie is dit Nederland. Nigeriese verbruikers vind baatby laer pryse, maar die invloei van nuwe invoeremag lei daartoe dat produsente in die landbou-verwerking sektor benadeel word. Dit is omdat duur plaaslike produksie vervang word met goedkoper invoere. Hoewel dit nie ontleed word in hierdie studie nie, sal produsente binne die landbouverwerking sektor waarskynlik dalende winste ervaar as gevolg van sterk mededinging tov invoer. Die ontleding dui ook op ‘n verlies aan tariefinkomste vir die Nigeriese regering, maar algehele welvaart neem toe, soos verwag. Vir die eerste scenario (CET slegs vir ECOWAS) maak verwerkte landbou produkte die grootste deel (60.83%) uit van die verlies aan Nigerië se tarief inkomste. Op grond van die resultate, is verwerkte landbouprodukte verantwoordelik vir 33.83%, 30.01%, 7.35% en 5.17% van die handelskeppingvir die vier scenariosonderkeidelik, asook vir handeloordragte 55.82%, 32.81%, 14.91% en 11.88%. Die implementering van ‘n vrye handelsarea (FTA) binne ECOWAS dien as 'n betekenisvolle basis, gegewe dat handelsbeleide goed gekoördineer en geharmoniseer is. Die regering moet egter vorendag kom met maatreëls om produsente van minder mededingende landbouverwerking sektore in staat te stel om relevant te bly. Die resultate dui daarop dat Nigerië 'n benadering benodig om inkomste te genereer om die verlies aantariefinkomste wat veroorsaak word deur die implementering van die CET, teen te werk.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/100242
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