ETLS damaging gains in Nigeria’s CPO sub-sector
The Economic Trade Liberation Scheme (ETLS) is a well-known path to economic prosperity for many countries, but in Nigeria, its warped practice, marked by smuggling and evasion of duties, has become destructive drainpipes for an ailing economy.
The central government appears too pre-occupied to protect the nation from economic predators both within and outside the country, leaving the nation constantly exposed to violation.
The swift crash of crude oil per barrel in the international market to $45.89 should be a wakeup call to the Nigerian government on the need to revamp the other sectors of the economy especially the Crude Palm Oil sub-sector. This can be done by increasing the internal and local production which will help meet up with the internal demand of the product and subsequently boost the export of the commodity.
In 1990, the Economic Community Of West African States (ECOWAS) launched the Economic Trade Liberation Scheme (ETLS) among its member states 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 ECOWAS Trade Liberalisation Scheme (ETLS) is a trade instrument designed by the Regional Economic Community and administered by the ECOWAS Commission to encourage Intra-ECOWAS trade. The ETLS is the main ECOWAS operational tool for promoting the West African region as a Free Trade Area and the Commission’s first step towards the realisation of the objective 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).
The ETLS was established as a medium for increasing productivity and market access for products originating from the region’s domestic economy. The concept was originally intended at benefiting the private sector in particular, and ultimately boosting the West African economy. It was also targeted at reducing the massive importation of goods which West Africa has been known for. Its ultimate goal targets at generating employment among the member states of ECOWAS and increasing intra-regional trade.
Unfortunately, practical experiences from the private sector engaged in cross border operations have rather continued to show that the implementation of the ETLS despite its enviable goals has remained shoddy and has led to the unattainable realisation of the noble objectives of the founding fathers. The result is that West African intra-regional trade has remained abysmally poor revolving around 10-12 percent. The foregoing predicament coupled with unattractive reports on the ETLS implementation among member states, goes to show how much West Africa may be the architects of her poor performance at the global trade arena.
Crude Palm Oil (CPO) under ETLS is classified under processed goods hence enjoys certain concession upon entry into a different ECOWAS state. 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.
To however qualify for these concessions, certain conditions must be fulfilled by member states one of which being that the country of origin of such goods shall be from the community with specified percentage of value addition.
Although many of the member countries cultivate oil palms there is a need to increase potential production of palm oil in order to meet both the domestic and the regional demand, particularly the needs of ECOWAS member countries with vulnerable economies and high rates of hunger. ECOWAS still experiences a deficit of edible oil, which requires the importation of an estimate of 1.5 million metric tons per year and is foreseen to increase to some 2.0 million metric tons by 2020.
However, in year 2014, Nigeria alone was reported to have a deficit of over 900,000 metric tons which is about 60percent of the total ECOWAS current imported volume.
Despite the glaring benefits of the ETLS, 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.
The Federal Government of Nigeria on June, this year in another publication confirmed the illegal flooding of the Nigerian market with large volumes of Crude Palm Oil (CPO) imported from neighboring West African nations, under the guise of the ECOWAS Trade Liberalisation Scheme (ETLS).
According to the report, most of the palm oil imported from Malaysia, Indonesia and others actually end up in the Nigerian market duty-free; thereby displacing locally produced palm oil from the market and suffocating the Nigerian oil palm plantations
The article continued to report that the aggregate of locally produced and imported palm oil in these neighboring West African nations by far surpasses what they require both for their domestic and industrial consumption, therefore making the massive Nigerian market the dumping ground for these cheap CPO, which also comes into Nigeria duty-free under ETLS; making it by far cheaper than the CPO produced within Nigeria.
“Nigeria”, it said, “should be producing and exporting into those countries. We should not be using those countries as transit areas. Regional trade does not mean that we should import. Neighboring West African countries import crude palm oil far higher than their needs. For Benin Republic, between the period 2003 to 2013, their production was stagnant, but their export increased by 1,018 per cent. Their import increased by 1,084 per cent of crude palm oil.”
Text Box: Production Dynamics West Africa
Text Box: • West Africa: Average: 90% Small holders • Nigeria: > 80% small holders though large chunks cannot be used in the FMCG industry Reasons for slow progress Low private participation due to Government’s lack of interest Outdated technology Outdated production knowledge
It is a known fact today that in every part of the world where agriculture is growing, it is because their governments are supporting them in various ways including the implementation of favorable agribusiness policies and practices.
In Nigeria for example, in the last one year, the government distributed 1.4 million sprouted nuts to farmers free. These hybrids sprouted nuts are high-yielding Tenera seedlings of greater yielding capacities that will benefit and improve production.
Howbeit, this requires that the farmers have to recapitalise their plantations which, is the responsibility of the government. As we today look at the Nigerian Stock Exchange, we are getting excited because two of the best performing stocks are from the Oil Palm Industry sector and we should encourage these companies to stay in that profile.
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 is transported into Nigeria under the guise of the ETLS must be checked and eradicated.
In as much as the objective of the ETLS is to promote industrialisation 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 with the continual falling value of the Naira against Dollar and the dire need to create jobs for our jobless teaming youths.
Also rather than our continual focus on the Dollar, Nigeria should make physical policies that give strength to the Naira rather than the dollar. Ethiopia over the years gave strength to its currency and have survived to maintain a steady exchange rate despite the many socio economic challenges on that country. A prompt attention of government to providing succour to those investors in the development of Agricultural produce such as Palm oil should be seen as the right step in the right direction.
ADEOLU ISADIRAN