30 November 2012

West Africa: Nexim and Ecowas Inter-Regional Trade

Inter-regional trade within West African countries has continued to remain low, partly due to lack of road network to link the countries in the sub-region and partly because of high cost of moving goods from one country to the other.

Because of the high cost of clearing goods at ports, states within the sub-region engage in more trades with Europe and American than among themselves.

Another reason why trade volume between the countries in the sub-region is low is because of the low quality of what is produced. For instance, Nigerian exporters were paying attention to the American market and Europe, but they didn't have the new or clean technology to be able to produce goods that will make them competitive in those markets.

To strengthen trade relations with the African sub-region, the idea of having what is called sea link was conceived to ease trade relations within the ECOWAS sub region. This was extended to the Central African region due to the high trade volume that also go on there.

The sea link project is private sector driven in terms of ownership and operations. Many private sector operators have so far shown interest to invest in this project. The Nigerian Export-Import (NEXIM) Bank is the facilitator of the project.

The justification for the sea link, according to the promoters has to do with the challenges of road infrastructure as well as absence of rail link within the region. It is also needed because of a comparative low budgetary cost and short implementation timeline for the sealink project compared to either a regional road or rail projects.

In Nigeria, just like in many other West African countries, a lot of informal trade, is going on and they need to be developed so that whatever is produced can meet international standards.

What is required involves a product or process of machinery that will encourage Nigerian exporters to export within the sub-region.

NEXIM and others in 2010 developed the ECOWAS support trade facility, which is meant to achieve two purposes, one is to formalise trade since there is a lot of informal trade in the sub-region.

A typical example of how informal trades are not accounted for in the region is where a group of people have been doing some particular business over the years without a record to show for it.

Because the trades are not formalized, it becomes hard for regulators to promote them. These same people walk across borders, sell their goods, put their cash in their pockets and walk back.

The idea of the sea link could help in formalizing such transactions, encourage them by deepening the payment system and urging them to begin to make payment through the banking channel.

NEXIM said it is developing a strategy which requires support to make export more competitive by 2013- 2014. This way, NEXIM can be able to support potential buyers of Nigerian products.

"This means that for instance, if you are manufacturing in Nigeria to sell to somebody in Ghana who unfortunately does not have the financial capability, we should be able to support that person in Ghana to buy your goods," the Managing Director of NEXIM Robert Orya had said.

But NEXIM can only do that if exporters are encouraged to begin to make payments through the banking channel. There is now an ECOWAS support trade facility for that.

But a greater challenge is the time taken to move goods from one end to the other. For instance, to move goods from Apapa to Tema port in Ghana, will take a minimum of 60 days.

What happens is that under that situation, it is will be very difficult to enhance the trade volume of non-oil because the goods will first go to Europe and then a trans shipment is done to bring them to Tema Ports in Ghana.

This problem happens both within the West and Central Africa. The level of trade that goes on between Aba - from people that are producing shoes and leather products - and the West Coast is huge.

"But you cannot enhance the trade volumes because we don't have a shipping line that can move these goods. If you have five containers that take you like six or seven days, first it will eat into your margin, and secondly you won't be able to have your trade volumes," the managing director of NEXIM said.

When the sea link is operational, it is possible to enhance Nigeria's present 8 percent of the total non-oil export within Africa to may be about 15 or 20 percent.

Copyright © 2012 Daily Trust. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.