… To enhance intra-regional trade
By: Daniel Nonor
Following the revision of the Economic Community of West African States (ECOWAS) Treaty in 1993, the regional body has had the mission of promoting cooperation and integration, with the view to establishing an economic and monetary union, as a means of stimulating economic growth and development in West Africa.
But, the achievement of these stated objectives has since not come to fruition, mainly due to the bottlenecks which impede smooth trade across the region.
This, according to the Minister of Trade and Industry, Mrs. Hannah Tetteh, is mainly due to the fact that the various governments in the sub-region have failed to implement it.
According to her, the member states would have to strengthen their institutions to be able to effect the needed change.
She was speaking at the maiden Chief Executive Officers (CEO) breakfast meeting, under the auspices of the United Bank for Africa in Accra, under the theme “Intra African trade: the role of banks from the perspectives of the sub-region.”
According to Gabriel Edgal, Managing Director/CEO UBA, one sure way of achieving economic integration among member states was for the region to ride on the back of intra-regional trade and investment, by enhancing the free movement of goods, services, people and “capital.”
He emphasised that the promotion of intra-regional trade and investment greatly depends on ensuring “financial integration,” which would lay a basis for a workable regional payments and settlements system.
Mr. Edgal was concerned that while Africa produces the chunk of the raw materials the world needed, West Africans depend more on imports from other continents than what we exchange among ourselves – 80% of exports and 70% of imports are done with international trade partners.
According to him, while emphasis on cross-border trade is promoted in the continent at every fora, it was still at its infancy, stating that trade between ECOWAS countries and other countries in Africa is just about 14% of their total international trade.
Additionally, Intra-West African trade remains weak, around 10% and 11% of total exports and total imports respectively, with the informal sector doing better than the formal sector. In the Euro zone, exports and imports are over 50% of total trade.
Informal trade, which accounts for most of the regional trade, is currently done via cash [ECOWAS national currencies] across borders with its attendant risks and inconveniencies, while formal trade, on the other hand, is in foreign currency, mostly US dollars and Euro, through the correspondent banking system, making it costly and time consuming.
As a result, West African economies have not been able to make major strides in market integration, and settlement for trade has continued to be expensive, time consuming, and cumbersome.
Financial integration of the region, according to Mr. Edgal, would progress if steps are taken to harmonise and integrate the financial sectors of West African countries, with the eventual aim of the creation of a monetary union.
To achieve this however, he noted, that deliberate efforts must be made by the various governments , central banks and commercial banks to ensure that all intra-regional trade – both formal and informal – are done through banks in the region.
He added that all ECOWAS national currencies should become freely exchangeable and/or convertible in all ECOWAS countries without restrictions as to the quantum of money that may be moved between countries in the region, as long as it goes through the banks.