Impact of Expedited Trade on Private Sector Investment in ECOWAS

Trade has been the life-blood of the West African landscape for generations. It connects markets and people and dispenses goods and services throughout the vast and diverse West African region. Since independence, many governments have strived to make trade better organized and more efficient. Among recent attempts, the Economic Community of West African States’ (ECOWAS) Trade Liberalization Scheme (ETLS),  enacted in 1993, was expected to be in full force in 2005. However, it has yet to fulfill its objective of promoting free trade within the region, thereby benefitting producers, traders, transporters, consumers and ECOWAS member states (Member States/States), alike.  Some Member States may resist ETLS’s implementation out of fear that ETLS interferes with their efforts to generate trade-related revenues and build national industries. Due to uncertainty over ETLS implementation and the high cost of moving goods within the region, many existing and potential investors have shied away from investing in the region. This “underinvestment” has thwarted Member States’ goals to promote economic and social development.

Africa and the ECOWAS sub-region are on the cusp of unprecedented, demand-led economic growth, offering investors a “window of opportunity”. Freer access to markets encourages trade and private investment. Private investment, whether foreign direct investment (FDI) or domestic direct investment (DDI), can play an instrumental role in spurring economic growth and creating tax-based revenues and allay, in so doing, some Member States’ concerns over the potential “loss” of trade-related revenues. This trade growth model is being successfully implemented in several free trade areas (FTAs). MERCOSUR, of South America, is a particularly relevant example of a successful Regional Economic Community (REC) and one that shares several similarities with ECOWAS.  These include the presence of one dominant economic power in the case of Brazil for MERCOSUR and Nigeria for ECOWAS. 

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