THE REALITY OF TRADE IN WEST AFRICA

2012 ANNUAL REPORT

African Center for Trade Integration and Development THE REALITY OF TRADE IN WEST AFRICA 1 2012 Annual Report This report on the situation of trade in West Africa is commissioned and coordinated by the African Centre for Trade, Integration and Development (Enda - CACID). It was conducted by the Laboratoire d’Analyse Régionale et d’Expertise Sociale (LARES) - Cotonou. It triggers a tradition of annual reporting on trade and development in West Africa.

Management and coordination: Dr. Cheikh Tidiane DIEYE

Writing: Dr. Bio Goura SOULE, Dr. Borgui YERIMA

Scientific collaboration: Samba KANOUTE, Roger BLEIN

Mapping and illustration: Dominique Joel YALLOU

Editing and publishing: Noma Camara

Cover photos: National Refining Company (SONARA), Douala (Cameroon Picture: http://sonara.unblog.fr/ Cattle and hydrocarbon traffic. Images: D. Joel Yallou-LARES bags of grain. Roger Blein (ISSALA), SOS Faim-AL and JL Brocart Herd of oxen. http://www.journalducameroun.com

2 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report THE REALITY OF TRADE IN WEST AFRICA

2012 ANNUAL REPORT

African Center for Trade Integration and Development

The editing and printing of this annual report on trade in West Africa was made possible thanks to support from the Friedrich Ebert Foundation and financial support from Oxfam Novib.

THE REALITY OF TRADE IN WEST AFRICA 1 2012 Annual Report © 2012 African Centre for Trade, Integration and Development (CACID)

Published by ENDA CACID

73 rue Carnot, BP 6879 Dakar-Etoile, Sénégal Tél : (221) 33 821 70 37 Fax : (221) 33 823 57 54 Email : [email protected] Website : www.endacacid.org

Member of ENDA Third World international network

Director: Dr. Cheikh Tidiane DIEYE

Quote: ENDA CACID, «The Reality of Trade in West Africa», 2012 Annual Report, Dakar, Senegal, 112 pages

Reproduction of this report for non-commercial purposes, including for educational purposes, is authorized without prior permission by the author, provided the source is fully acknowledged.

2 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report TABLE OF CONTENTS

ACRONYMS AND ABBREVIATIONS ...... 5 PREFACE ...... 7 GENERAL INTRODUCTION ...... 9 PART ONE: THE GENERAL CONTEXT OF TRADE IN WEST AFRICA ...... 15 SHEET #1: THE ENVIRONMENT OF TRADE IN WEST AFRICA ...... 16

PART TWO: GENERAL TRADE IN WEST AFRICA ...... 23 SHEET #2: GENERAL TREND OF WEST AFRICAN TRADE ...... 24 SHEET #3: OIL-DOMINATED EXPORTS ...... 28 SHEET #4: EXPORTS DOMINATED BY CONSUMER GOODS ...... 32 SHEET # 5: POSITIVE BALANCE OF TRADE ...... 36 SHEET #6: TRADE WITH THE EU/EUROPE ...... 39 SHEET #7: TRADE WITH NAFTA/AMERICAS ...... 48 SHEET #8: TRADE WITH BRIC/ASIA ...... 57 SHEET #9: TRADE WITH THE REST OF AFRICA ...... 68

PART III: INTRA-COMMUNITY TRADE ...... 75 SHEET #10: RECENT TREND OF INTRAREGIONAL TRADE ...... 76 SHEET #11: THE FIRST THREE IN INTRA-COMMUNITY TRADE: CÔTE-D’IVOIRE, NIGERIA, AND SENEGAL ...... 81 SHEET #12: WEST AFRICAN TRADE CLUSTERS AND ROUTES ...... 85 SHEET #13: GEOGRAPHY OF INTRA-COMMUNITY TRADE FLOWS ...... 89 SHEET #14: THE PLAYERS IN THE INTRAREGIONAL TRADE ...... 94 SHEET #15: INFORMAL CROSS-BORDER TRADE...... 97

CONCLUSION ...... 101 LIST OF FIGURES ...... 105 LIST OF MAPS ...... 108

THE REALITY OF TRADE IN WEST AFRICA 3 2012 Annual Report 4 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report ACRONYMS AND ABBREVIATIONS

ACP Africa, Caribbean and Pacific Group of States AGOA African Growth and Opportunity Act NAFTA North America Free Trade Agreement EPA Economic Partnership Agreement ASEAN Association of South East Asian Nations BOA Bank Of Africa BSIC Banque Sahélo-Saharienne pour l’Investissement et le Commerce BRS Banque Régionale de Solidarité BRIC Brazil, Russia, India and China BTP Bâtiment et des Travaux Publics CEAO Communauté Economique de l’Afrique de l’Ouest/West African Economic Community EEC European Economic Community ECOWAS Economic Community of West African States CSE Compagnie Sahélienne d’Entreprise du Sénégal REC Regional Economic Community ECCAS Economic Community of Central African States CEMAC Communauté Économique et Monétaire de l’Afrique centrale CILSS Permanent Interstate Committee for Drought Control in Sahel CIMA Inter-African Conference of Insurance Markets CNPC China National Petroleum Corporation UNCTAD United Nations Conference on Trade and Development COMESA Common Market for Eastern and Southern Africa EAC East African Community FBN First Bank of Nigeria GATT General Agreement on Tariffs and Trade IFPRI International Food Policy Research Institute LARES Laboratoire d’Analyse Régionale et d’Expertise Sociale MGS Mutuelle Générale Santé MISTOWA Market Information Systems and Trader’s Organizations in West Africa SSM Special Safeguard Mechanism NSIA Nouvelle Société Interafricaine d’Assurance OECD Organisation for Economic Cooperation and Development

THE REALITY OF TRADE IN WEST AFRICA 5 2012 Annual Report OHADA Organisation pour l’Harmonisation en Afrique du Droit des Affaires WTO World Trade Organisation GDP Gross Domestic Product LDC Least Developed Countries SAAR Société d’Assurance Africaine SADC Southern African Development Community SGB Société Générale des Banques HS Harmonized System GSP Generalized System of Preference UMAC Union Monétaire de l’Afrique central/Cenetral African Monetary Union UBA United Bank for Africa UBN United Bank of Nigeria EU European Union WAEMU West African Economic and Monetary Union USA United States of America USAID United States Agency for International Development ECT External Common Tariff ZIB Zenith International Bank

6 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report PREFACE

By initiating this first publication of the «Annual Report on trade in West Africa» the African Centre for Trade, Integration and Development (CACID) is initiating a shift, and an action of anticipation at a time, which prompts, on the one hand, to correct the pathway for the construction of economic integration in West Africa, and on the other hand, to correct some weaknesses in the process. This report, which is designed and coordinated by CACID is an unprecedented and original starting point inaugurating a tradition of annually publishing facts and figures on trade in West Africa, which I hope to be robust, and permanent.

The decision to annually publish reports on trade in West Africa is not a coincidence. It is the result of the commitment of Enda Third World in the field of research and advocacy on trade in West Africa for over fifteen years. Acting closer to the social and economic realities of West Africa, and working as a watchdog for civil society, we have seen that the region lacked an information tool, which could be useful to national and regional policymakers, researchers, civil society and the private sector, among others.

The idea of producing this report on trade in West Africa emanates from that context. Its mission is to bring together in one place, sound and intensive information about facts and figures on trade in West Africa, business processes and arrangements that countries of the region have committed to, the design and implementation of regional trade policies, in coordination with other sectoral policies. It also allows to analyze and put into perspective the trends in trade, the strengths and weaknesses of the sector and how it can promote growth and development in West Africa.

Taking these objectives into account, we have developed this first publication as an overview of trade in West Africa. Starting from the second edition, in 2013, we will have a thematic or sectoral approach that will touch on issues such as «Trade, Environment and Development in West Africa»; “the diversification of trading partners in West Africa”, etc.

A milestone toward quality contribution by West African Civil Society For a long time, the design, development and implementation of integration and development policies in West Africa have been entrusted to public authorities, and national and regional government institutions. This conception of governance, maybe consistent with the structure of relations between actors in national and regional spaces at a certain time of the evolution of societies, is now

THE REALITY OF TRADE IN WEST AFRICA 7 2012 Annual Report neither productive, nor defensible. Although the unipolar state- and institution-based construction of the West African integration has achieved some significant results, these achievements could have been more numerous, faster and more decisive if all players were engaged.

Today, it is commonly admitted that the regional institutions alone cannot sustain and promote the heavy and complex processes of regional integration. This awareness has not only facilitated the opening and democratization of rulemaking and policymaking spheres, but have also made possible the contribution of national and regional non-state players to the production of knowledge, to mobilizing people, and defending the interests of the entire region. This opening has given more meaning and content to regional integration.

It is within this space marked by a plurality of approaches and multipolarity contributions that CACID fits in as a place of production and dissemination of knowledge, place of dialogue between stakeholders and strengthening and coordination of the civil society. This grounding is the fundament of legitimacy of the report on trade in West Africa, and substantiates its relevance. CACID comes both as civil society think-tank and as a point of junction, facilitating encounter and dialogue between official actors, civil society organizations, the private sector, the media, parliamentarians, unions, etc. This approach – based on the plurality of sources of inspiration for integration and development policies and the ongoing quest for consistency in those policies – is the step that CACID is trying to promote in the West African economic and social spaces.

This report would not have been possible without the contribution of our partners, namely Oxfam Novib and the Friedrich Ebert Foundation. I would like to sincerely express gratitude to them for their continued commitment on our side towards building strong, sustainable integration of benefit to West African populations.

I would also like to thank the ECOWAS Commission, in particular, the Department of Commerce, Customs and Free Movement for positively welcoming the project.

Finally, I would like to commend the experts of the Laboratoire d’Analyse Régionale et d’Expertise Sociale (LARES), of whom the contribution to this work goes well beyond the role of consultancy, and reflects a sincere commitment to economic, social and political construction in West Africa. This report is the property of all stakeholders individually, or collectively who strongly believe in the virtues of regional integration, and the strength of intra-regional trade as growth and development drivers, as we do. It can therefore be used, quoted, reproduced and widely distributed at all time, provided that such uses are likely to advance regional integration in West Africa.

Enjoy reading it, until the next publication is issued! Dr Cheikh Tidiane DIEYE Executive Director African Centre for Trade, Integration and Development

8 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report GENERAL INTRODUCTION

The role of trade in economic and social development of countries, territories and regions is undeniable. It has been the fundament of progress since ancient times. Trade was behind the division of labor in primitive communities. Around the world, trade is positioned as one of the main drivers of economic growth, and a gauge of the economic situation of States, or even regions. Many studies have shown that a single digit increase in the exports of agricultural products, for example, could generate about 0.5 to 1.8% additional overall growth rate in the economy of some developing countries (IFPRI, 2005). Trade is also seen as a powerful instrument for consolidating social relations, bringing people together, and fostering sociability (AGIER, 1985) between groups, and strengthening ties between countries. It fosters strong intra-community and trans-state, or transcontinental networks. The creation of the GATT in 1946, after the Second World War, was based on the belief that the development of trade between nations would not only be an important source of prosperity, but also a powerful factor in the consolidation of peace.

The West African region is a trading region par excellence. Beyond intra-regional transactions, the area was opened very early to the world through its integration into the global economy. While trade between primitive communities is poorly documented, we now know that the internationalization of trade in West Africa has two major sequences, of which the effects and impacts on the regional economy are perceived in many ways. In fact, the trans-Saharan trade involving forested areas and savannas of West Africa with the Mediterranean coastal areas covered trade in a wide range of products based on ecological complementarities (salt, beads, cotton for cola, Ivory) and comparative advantages (trade in gold from Koumbi Salleh and Ghana). These transactions had several impacts, including restructuring settlements in the area with the emergence of prosperous caravan stop- over towns (caravanserais), the enrichment of kingdoms and empires, the formation of powerful endogenous merchants networks (Hausa, Dioula, Yoruba, among others). They were followed by the Islamization of much of the region, in particular the populations of northern countries, and particularly by the slave trade by the Arabs.

From the 16th century, a shift operated in the West African trade with the emergence of the triangular trade dominated by the slave trade. This integration was for long confined to the trafficking whereby the continent provided raw materials that were swapped for manufactured products. For several decades, West Africa had been a major source of supply for raw materials to industries in metropolitan France, Great Britain, and Portugal. The results of this form of integration into global trade were far from complimentary. At the attainment of the majority of states to independence in 1960, Africa

THE REALITY OF TRADE IN WEST AFRICA 9 2012 Annual Report represented less than 2.5% of global trade, and the western part then contributed less than 0.5% to international trade transactions.

The post-independence period was marked by the emergence of some inclination to change through two complementary approaches: the consolidation of trade relations with Europe, and the promotion of regional economic groupings designed as a vehicle for the development of intra- Community trade. Regarding the first approach, a free trade area was tacitly established between Europe and African countries, supported by the Yaoundé and Lomé conventions. Under these agreements, Europe granted trade preferences to ACP countries in general, but to African countries in particular: the raw materials from ACP countries could enter the EEC markets free of customs duties. The preferences came along with stabilization mechanisms supposed to help mitigate the effects of market imperfections and internal shocks (drought, and flooding in particular). Butin reality this was intended to ensure some uninterrupted level of supply in raw materials for industrial units. The European Development Fund was also established to finance basic infrastructure. The results were inconclusive; even worse, these relationships have contributed to the marginalization of the continent in the global market with less than 1.7% of global trade in the mid 90s. They have confined the continent in a sort of begging, reflected through the untold poverty of the population, despite the huge potential of the region.

The second step was to initiate regional economic groupings as one of the most effective ways to promote regional market and intra-community trade. This strategy was part of the general perspective of promoting regional integration, as most leaders realized that this was acredible alternative to develop the region. West Africa has been one of the most dynamic regions of the continent in the construction of the integration process. Indeed in 1959, the states of the French- speaking area created the Monetary Union which was to be coupled in 1964 with the Customs Union of West Africa later on replaced by the Economic Community of West Africa (ECWA) in 1973, which in turn was superseded by the West African Economic and Monetary Union (WAEMU) in 1994. These regional arrangements have not unduly promoted intra-Community trade, the level of which the Abidjan meeting, held in 1969, estimated around 10% for the commercial transactions of all states in the Customs Union. Without a strong regional economic base, most markets of the Member States of the Union have functioned as outposts of trading houses: collecting low-cost unprocessed raw materials, and distributing manufactured goods from the metropolis.

In 1975, all West African states together decided to create a large regional economic bloc: the Economic Community of West African States (ECOWAS). After being limited for a long time to handling political and security-related issues, the ECOWAS began the construction of the regional market in 1993, following the revision of its Treaty. It then launched the project of the trade liberalization scheme. After its completion in 2003, unprocessed animal and agricultural produce, and crafts- based products were to circulate free of customs duties within the Community. As for processed products, they must incorporate at least 35% local value added to enjoy the same trade conditions in the Community. This scheme overlapped with the West African Economic and Monetary Union (WAEMU), created in 1994. Since 1997, WAEMU began the construction of its Customs Union which

10 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report led in 2000 to the establishment of a common external tariff, considered the central mechanism of the common market.

The combination of these two approaches enabled all 15 countries in the region to have a free trade zone to facilitate the free movement of people and goods. However, the many divisions the region is still facing (fragmentation of monetary, fiscal, budgetary and trade policies) confronted the harmonization attempt during the 2000s, partly dictated by the negotiations of the Economic Partnership Agreement with the European Union and the acceleration of the regional integration process (start of the definition of several macroeconomic and sectoral policies). The project for the creation of a customs union formally started in 2006 following the decision of the Heads of State in Niamey to extend the WAEMU CET to all states in the region, which extension was supported by some rearrangements. Concurrently, the region opened other negotiations intended to lead to the conclusion of an economic partnership agreement for the establishment of a free trade area between West Africa and the European Union.

The non-completion of the negotiations for the Customs Union, and the Economic Partnership Agreement with the European Union maintains the region in a kind of tangle of trade regimes, which has been much complicated by the measures taken by States to address the 2008 crisis (tax exemption on imports, banning exports of food products) in breach of the Community regulations, particularly in WAEMU member countries. Currently, in addition to the Everything But Arms initiative granted to twelve LDCs in the region, we have the interim EPA signed by Côte-d’Ivoire, the one initialed by Ghana, Nigeria’s GASP, and Cape Verde’s GASP +. This also adds to the concessions made to some countries by the U.S. government through the African Growth and Opportunity Act (AGOA).

These dynamics are showing some heavy trends in the West African trade that is torn between three main trends, of which the magnitude and social and economic gains for the region are difficult to measure, although that trade has significantly grown in value and volume over the last thirty five years:

a. Intraregional trade which – as many recent studies recognize – have won market shares, while remaining way below the political ambitions and the potential of the region. Its magnitude is not well known because of the “informalization” of entire sections of some transactions. This is the same for some types of products traded (agricultural produce, livestock, manufactured products and services). Indeed, while the trade in fuels, animal products and local grains comes on top in the regional trade, the trade in services (finance, construction) is growing. Correlatively to this dynamic, the actors of regional trade are experiencing significant changes in relation to their connections to regional and international networks. The contribution of trade to the promotion of regional integration and development in the region needs to be documented.

b. Trade with traditional partners, including Europe and America, seems to have stalled, despite the «concessions» or more specifically the preferences granted to certain categories of countries under the Everything But Arms initiative of the EU, or the AGOA of the United States. The current nature of trade between the two blocs, and its complexities should be analyzed to

THE REALITY OF TRADE IN WEST AFRICA 11 2012 Annual Report better understand the adjustment challenges facing players in the negotiations of the EU/WA Economic Partnership Agreement. This trend raises questions about the relevance of the trade and monetary policies pursued by some countries in the region. c. Trade with new emerging countries, including Brazil, India, China and the countries of Northern Africa (Morocco, Tunisia and Egypt) and the Middle East, is outlining a new form of integration of the region in the international market, the profitability of which is still questioned. In fact, China and India have become major partners in some countries of the region, both for exports and imports. The form of these transactions, sometimes bartering (infrastructure construction for concessions of resources, including minerals, forestry and fishery products) often raises controversy.

Major reform projects and negotiations are underway in West Africa; the concurrency, scope, diversity, pace and complexity of which are such that policymakers and other stakeholders often do not have enough leeway to take appropriate measures to anticipate their short, medium and long term impacts.

Why an Annual Report on Trade in West Africa?

This first publication inaugurates a tradition of annual or bi-annual reports reviewing the situation of trade in West Africa. The point is to take stock of the past ten years to reflect a comprehensive picture of trade in West Africa. This responds to the need for evaluating the performance of the regional market, as a main instrument for measuring the economic integration level of the fifteen states in the region. The aim is to provide regional decision-makers with a tool to guide the trade policies of the Community so that they best respond the current changes.

From the second edition, the reporting will focus each year on a specific theme relating to economic and social development in West Africa: trade and migration; trade and employment; trade and food security and sovereignty; trade and gender, etc.

Exceptionally, the 2012 edition elaborates on three dimensions of trade in West Africa: • The foundations of regional trade. This chapter reviews the basics of West African trade, with particular attention to (i) the dynamics of productive sectors (agriculture, industry, services), the regulatory framework and the ongoing reforms to create an enabling environment for the expansion of regional trade. That chapter examines the potential of trade in the region and recent trends in terms of products in the market. It also looks at the market regulatory environment through a review of major policies and measures affecting both regional and international trade. • The recent overall dynamics of trade in West Africa. That chapter discusses recent developments in trade in West Africa. It deals particularly with the structure of trade, the balance of trade, the geographical distribution of transactions (origins and destinations of commodities). The chapter also spotlights the weight of the new dragons (China and India) in the West African trade through a specific analysis of the structure of the trade between the region and emerging markets.

12 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report • Intra-regional trade. That chapter primarily deals with regional trade in tradable commodities, the structure of transactions, the weight of each country – in particular, the four non-LDC countries: Nigeria, Côte-d’Ivoire, Ghana and Cape Verde – in the regional trade. An emphasis is also placed on the trade actors through an analysis of their level of organization, their strategies to adapt to the environment often strewn with obstacles of any kind. Indeed, the persistence of the dual economic structure of states through the coexistence of traditional and modern sectors, and the complexity of the rules and policies are confining much of the trade in the informal sector. Transactions that are not captured either partly or totally by official statistics remain high, despite the efforts made by state institutions.

Approach

• Background of the study The paper mainly deals with the trade in the geographical space that polarizes the Economic Community of West African States. The term “West Africa” here refers to the fifteen ECOWAS countries. This community, created in 1975, currently covers an area of 5,113,000 sq. km, and had a population of some 308 million people in 2012. According to the International Monetary Fund, the Gross Domestic Product in parity with the total Purchasing Power of ECOWAS member states amounted to 564.86 million U.S. dollars, making it the 25th economic power in the world.

It is a region with huge economic potential, but largely under-exploited. Countries with such contrasting economic and demographic resources as The Gambia and Cape Verde on one side, and Nigeria and Côte-d’Ivoire on the other side are cohabiting. While, by the size of its population (55% of the population of the region), its economic potential (48% of the regional GDP) Nigeria stands as the economic engine, Cape Verde remains the country with the highest income per capita with U.S. $ 4,000 per capita.

Map 1: Population and GDP of ECOWAS countries

THE REALITY OF TRADE IN WEST AFRICA 13 2012 Annual Report • Processing of statistical data The analysis is based primarily on the use of secondary data from statistical databases of ECOWAS, WAEMU and UNCTAD, the information holdings of the Laboratoire d’Analyse Régionale et d’Expertise Sociale (LARES) and information collected on the Internet. To simplify or facilitate the analysis, only the values of goods in United States dollar (U.S. $) are considered.

The three trade flows – imports, exports, and re-exports – are considered. Statistics on the types of general and special trade are taken into account. Those on the type of business scored “0” or non- business are excluded; the databases were cleared. So, all exports from, and exports to the same ECOWAS country are deleted as well as flows of unidentified countries.

To refine the analysis, food and non-food commodity imports are differentiated. A distinction is also made between the total ECOWAS trade that we call “total trade”, and intra-community trade. Total trade is defined as “all business transactions conducted both internally and with third countries.” “It includes re-exports.” The statistics cleaning was based on the two digits level of the Harmonized System Nomenclature (HS2). But in regard to foodstuffs, products under the “food items” chapter, but which are not intended for human consumption are excluded from the chapter. For example in Chapter 15 on animal or plant fats and oils, all products of the digits 1511, 1518 to 1522 etc. are excluded from the food items, but included in the total imports.

The removal was done manually. So, there may be errors. But these errors do not fundamentally change the general trends of food imports and exports.

14 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report PART ONE

THE GENERAL CONTEXT OF TRADE IN WEST AFRICA

THE REALITY OF TRADE IN WEST AFRICA 15 2012 Annual Report SHEET #1: THE ENVIRONMENT OF TRADE IN WEST AFRICA

This section analyzes both the foundations and the regulatory framework of trade in West Africa. It outlines the production of the main tradable commodities, both on regional and international markets. It then analyzes the trade policies with a focus on harmonization efforts to promote the West African regional market, particularly the establishment of the ECOWAS Customs Union.

1.1 The foundations of West African trade The sectoral structure of the West African economy has not changed much, despite the reforms undertaken over the past twenty five years, under the seal of structural adjustment programs. It includes the primary, secondary and tertiary sectors that contribute respectively 45%, 22% and 33% to the formation of the regional GDP.

1.1.1. Basic commodities a. Mineral resources. West Africa has plenty of mineral resources, most of which are exported in raw state. These include mainly: • Oil is exploited in four countries – Nigeria, about 2.25 million barrels per day; Ghana, 120,000 barrels per day; Côte-d’Ivoire 50,000 barrels per day; and Niger, 20,000 barrels per day. This product is the first traded commodity in the region. Oil resources include gas, which is abundant in Nigeria. • Manganese. Over 45% of the world production of manganese is provided by Africa, including 34% from West Africa. • Iron. West Africa produces more than 27% of Africa’s production of iron ore. • Bauxite. West Africa produces almost all of the bauxite traded on the global market (Guinea Conakry). • Uranium. Through Niger, the region has one of the largest uranium reserves in Africa. In 2007, Niger’s reserves were estimated at 243,000 metric tons, ahead of Namibia 176,000 metric tons. • Gold: produced in Ghana, Mali where it represented 15% of the GDP and 70% of exports in 2006, and in Burkina Faso, which exported the equivalent of 180 billion CFA francs, compared to 120 billion for cotton in 2009.

Mining contributed 19.3% to the formation of the gross domestic product of West Africa in 2006 (WACIP, 2010). b. Agricultural produce traded on the international market Agricultural production covers a very wide range of products, the number of which dwindles over years. The most prominent products are: • Cocoa, for which West Africa takes the lion’s share on the international market. Four countries in the region are producing to varying degrees: Côte-d’Ivoire, the world’s largest producer;

16 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Ghana; Nigeria; and to a lesser extent Togo. Cocoa is the lead agricultural export commodity of West Africa. The volume of production increased from 880,000 metric tons in 1980 to 2,672,000 metric tons in 2006, representing 66% of the world supply. • Cotton, for which West Africa – through Burkina Faso, Mali, Benin, and to a lesser extent Togo, and Senegal – has positioned itself for a long time as one of the largest exporter regions in the world. Cotton production is experiencing a downward trend due to the combined effects of the incompleteness of reforms, the difficulties in entering the international market because of the subsidies by the North to their farmers, and finally due to the impact of climate change and variability hardly felt in the region. The West African production increased from roughly 500,000 metric tons in 1980 to almost 2,800,000 metric tons in 2006, before falling to around 2,000,000 metric tons in 2010. The region is the 5th largest supplier, but only contributes 5% of international production. • Coffee is produced mainly by Côte-d’Ivoire, Ghana, Nigeria and Togo. West African coffee production remains modest. It has been characterized by a downward trend over the last thirty years. The volume of production declined from about 300,000 metric tons to 220,000 metric tons between 1980 and 2006. • Rubber is produced mainly in Liberia, Nigeria and Côte d’Ivoire, and Guinea Conakry incidentally. Although Liberia has the largest plantation in the world (48,000 ha managed by the U.S. firm Firestone), West Africa accounts for only 5% of the world market. • Fruits, mainly bananas, which Côte-d’Ivoire (250,000 metric tons in 2010) and to a lesser extent Guinea Conakry (5,000 metric tons) are the largest producers and exporters. The production and exports of pineapple seem to have stalled, with the drastic drop inthe supply by Côte-d’Ivoire (180,000 metric tons in 2000 to less than 30,000 in 2010). However, production from small family farms is growing in Benin and to some extent in Nigeria. In addition to these fruits, we have cashew for which Guinea-Bissau, Nigeria and Benin are the largest producers.

c. Other agricultural market products The diversity of agro-ecological systems provides West Africa with a wide range of agro-pastoral products that drive regional trade. • Tubers and roots, among which, yam and cassava. West Africa is the world leading producer of yams, with an estimated supply of 50 million metric tons in 2010. The production of cassava (72 million metric tons in 2010) and its many derivatives, including value-added products such as starch, tapioca, has turned it to a strategic regional commodity. • Coarse grains (millet, sorghum, corn) and rice for which the regional production was multiplied by 3.5 between 1980 and 2010, rising from 16 million metric tons to 56 million tons. Cereals are an essential component of trade in West Africa. • Animal products. Livestock in West Africa is estimated at 60 million heads for cattle and 160 million small ruminants mainly from Nigeria, Niger, Mali and Burkina Faso. Together with oil-related transactions, live animals are a major component of intraregional trade.

THE REALITY OF TRADE IN WEST AFRICA 17 2012 Annual Report 1.1.2. Manufactured products Industrial production in West Africa is still relatively low, a situation that maintains the volume and value of intra-Community and international trade in the region at a low level. The share of manufactured products in total exports from West Africa is estimated at 0.1%. While the secondary sector contributes 30.3% to the GDP, manufacturing, also dominated by agribusiness, contributes only 7.3% to the creation of regional wealth (WACIP 2010). The production is dominated by four countries: Nigeria 39.7%, Côte d’Ivoire 23.4%, Ghana 10.0%, and Senegal 9.3%. Manufactured products on the market are ranging from foodstuffs (canned fruit juice, beer) to fuels (refined oil, motor oil) through chemicals, cement and cotton fabric etc.

1.1.3. The rise of services Trade in services is experiencing a rise, although it is still difficult to assess its magnitude. Financial transactions come on top of the trade in services thanks to the regional expansion of major banking groups: UBA (United Bank of Africa), EcoBank, Bank of Africa, Diamond Bank, Atlantic Bank. Some, like the NSIA Group, are combining banking and insurance services. The construction and tourism sectors are also beginning to make inroads into the Community market with the emergence of major regional groups. This is the case for the Compagnie Sahélienne d’Entreprise (CSE) of Senegal, and Kanazoé of Burkina Faso in the construction sector, and the AZALAI Group of Mali in the hotel sector. The basics of trade in services are consolidating with the creation of large West African groups.

1.1.4. The regulatory framework of trade The regulatory framework for trade in West Africa has evolved over the last twenty years. Several reforms to promote the common market were made by the two major regional integration organizations: ECOWAS and WAEMU. While the free trade area is working to its best, initiatives aimed at integrating markets are still facing various barriers: differences in policies, persisting technical barriers of any kind.

1.1.5. The fragmentation of taxation and customs policies They result from the difference in the historical trajectories of states, differences in levels of resources of countries and in the development potential, and fiscal policies implemented by governments. Policy fragmentation is evident at three levels through trade, currency, and border or internal taxation measures.

• Disparities in trade policies. They were amplified over the past five years by the measures taken by states to curb the effects of the food crisis that resulted from the soaring prices of commodities. Many infringements were made, not only to community commitments, but also to the process of internal economic liberalization: price control, re-establishment of some monopolies, the ban on export of food commodities deemed strategic, etc. On another level, the differences in the level of consolidation of tariffs by the states of the region can be a challenge for the establishment of a customs union with a common external tariff, without violating WTO rules. Finally, there are marked differences in the business laws between OHADA countries (the eight WAEMU countries, plus Guinea) and the other ECOWAS countries.

18 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report • With respect to monetary fragmentation, the ECOWAS region has seven currencies: the CFA franc used by the eight WAEMU countries, the Naira for the leading regional economic power – Nigeria – the Cedi for Ghana, the Guinean Franc for Guinea, the Dalassi for the Gambia, the Leone for Sierra Leone, the Liberian Dollar, and Escudo for Cape Verde. The problem is less about the existence of these currencies than the impossibility of transactions between them without going through the central banks. The receivables payment facilitation mechanism established through the clearing house of Freetown did not last long. Despite new payment systems developed by the major banking groups, including Ecobank through Ecotrade, many operators still have to use the parallel exchange market to pay for their purchases on the regional market. This increases transaction costs in the region. The advent of a single currency for the ECOWAS region is a long time coming. It is now scheduled for 2020.

Category Products Customs duties 0 Essential social goods 0% 1 Essential goods ; essential raw materials ; capital goods; specific inputs 5% 2 Intermediates 10% 3 Final consumer goods and other products not specified elsewhere 20% 4 Specific goods for economic development 35%

• The Taxation practiced by countries sometimes vary widely, both from the point of view of customs duties, and domestic taxes. At that level, between the WAEMU bloc that has a customs union with a common external tariff and the other seven ECOWAS countries, there are some persisting significant disparities. As a general rule, Nigeria that has the largest manufacturing industry has significantly higher customs duties than other countries. The imports of some products are prohibited. However, the value added tax is very low (5%) compared to 18% in the WAEMU countries.

1.1.6. Technical barriers to Trade They are a major cause of the low level of trade in the region. Several factors are usually presented as technical barriers to the development of intra-Community trade in general, and particularly in West Africa. These are mainly:

• The low value-added to the products of the region. Indeed, the products of the region brought to the local, national, regional and international markets are poorly processed, poorly standardized and poorly conditioned. They do not meet the increasingly sophisticated standards and requirements of many consumers. This explains the low proportion of West African manufactured goods found in the international market (0.1%) according to the UNCTAD.

• Corruption resulting from the complexity of business rules, insufficient information of actors on the laws, rules and regulations governing regional trade, among others. But we should

THE REALITY OF TRADE IN WEST AFRICA 19 2012 Annual Report add the greed of control agents, resulting into the proliferation of checkpoints along national and regional corridors. The conclusions of the 11th report of the observatory of abnormal practices, published in 2010, highlighted an increase in such extortions operated by control forces: (i) the minimum number of inspections per 100 km is around two. This number is 3 in Côte-d’Ivoire, 4 in Senegal, and (ii) the minimum amount of racketeering per 100 km amounts to 999 FCFA as noted in Ghana, the maximum being 7,443 FCFA as recorded in Côte d’Ivoire; (iii) the control time per 100 km ranged from 7 minutes (in Togo) to 26 min (in Côte- d’Ivoire).

1.1.7. Towards an ECOWAS Customs Union In line with its primary purpose of promoting regional integration, the Economic Community of the West African State undertook, under the revision of its Treaty, the construction of its common market. Thus, between 1993 and 2003, it developed a pattern of trade liberalization that led to the establishment of a free trade area. Since 2006, it initiated the negotiations on a customs union. After negotiations, the ECOWAS customs union should include five Common External Tariff bands:

At the present state, the structure of the Common External Tariff (CET) project has 5,794 tariff lines distributed within five (5) categories as follows: • Category 0: 85 tariff lines; • Category 1: 2,108 tariff lines; • Category 2: 1,242 tariff lines; • Category 3: 1,966 tariff lines; • Category 4: 393 tariff lines.

The customs union is also supported by safeguards. The Commission seems to have opted for two mechanisms: • Countervailing tax on imports (mechanism close to the SSM/WTO). This is the Safeguard Tax on Imports that seems closer to the Special Safeguard Mechanism (SSM) being negotiated at the WTO. • The countervailing duty to counter the subsidies by competitors of ECOWAS, and calculated on the basis of the AMS (aggregate measure of support, as calculated by the OECD).

1.2 - International arrangements West Africa has concluded or is negotiating a number of economic and trade agreements with numerous partners. Among the major agreements, we have those being negotiated by the European Union and developing countries.

The Economic Partnership Agreement that Europe offers to the West Africa region is in the context of creating a free trade area between the two regions. The principle of the free trade agreement is based on reciprocity. It aims to reform the trade regime from the former Yaoundé and Lomé conventions and make it compatible with the WTO agreements.

20 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report However negotiations are stumbling on many issues, including the degree of market opening and the content of the development component of the agreement. Relative to the first point, West Africa has proposed a market access based on 60% market opening, while the European Commission proposes an asymmetric liberalization which would cover 100% of EU imports from the ECOWAS region and 80% of imports into the ECOWAS zone from the EU. The European Union considers that liberalization in the 12 years after the entry into force of the new regime on an average of 90% of trade between the two areas can be considered compatible with Article XXIV of the WTO. The last round of negotiations held in Brussels in April did not move the lines. ECOWAS defends its market access offer with an opening on 70% of tariff lines and 70% of the value of imports within 25 years.

After unsuccessfully asking for compensation, West Africa prepared an EPA Development Programme to the tune of 14 billion Euros that, unfortunately, the European Union is not prepared to fund.

The non-conclusion of the Agreement in December 2007 maintains the region in a confusion of trade regimes: Everything But Arms Initiative for LDCs, Generalized System of Preferences for Côte-d’Ivoire and Ghana that have initialed interim agreements, and the Generalized System of Preferences Plus for Nigeria.

THE REALITY OF TRADE IN WEST AFRICA 21 2012 Annual Report 22 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report PART TWO

GENERAL TRADE IN WEST AFRICA

THE REALITY OF TRADE IN WEST AFRICA 23 2012 Annual Report SHEET #2: GENERAL TREND OF WEST AFRICAN TRADE

West Africa’s share in international trade is tiny. Indeed, despite the progress made in recent years, it contributes very weakly to international trade. In value terms, it represents only 0.7% of world exports and 0.5% of imports. However it should be noted that it is the largest exporter of cocoa in the world.

2.1. Recent developments in West African trade The recent total trade of ECOWAS has increased by an average of 18% per year between 2005 and 2010. But this was a switchback progress. In 2006, trade grew by 28% compared to 2005, and only increased by 1% in 2007. It later soared by 57% in 2008, before plummeting to -33% in 2009. It again resumed its growth in 2010, increasing by 36% compared to 2009.

Figure 1: Recent developments in total trade of ECOWAS

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0 2005 2006 2007 2008 2009 2010 Years

The sharp increase in 2008, over 100% compared to 2005, all things being equal, is justified by the exacerbation of the economic and food crisis that led to massive imports of non-food items, including production factors to contain future soaring of prices of basic commodities noted in 2007. Imports reached US$ 108,002 million, while exports were U.S.$ 102,068 million, and re-exports $ 3,178 million. But food imports fell in 2008 to U.S. $ 10,215 million compared to U.S. $ 11,862 million in 2007. Their recovery in 2009 and 2010, respectively, U.S. $ 10,474 million and U.S.$ 10,500 million, shows that imports of ordinary consumer goods did not have a very significant immediate effect in controlling the food crisis. But, while the crisis reduced exports, thus limiting internal cash flow of ECOWAS to sustain its imports in 2007 and 2009, it paradoxically favored an upturn in trade in 2008, mainly induced by fuel exports by Nigeria with U.S.$ 74,839 million as opposed to U.S.$ 51,998 million in 2007 and U.S.$ 44,942 million in 2009.

24 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report 2.2. The winners in the West African trade Overall, the trade in the West African economic community is characterized by an asymmetric, bipolar structure composed of a quartet represented by Nigeria, Côte d’Ivoire, Ghana and Senegal dominating regional trade through their economic weight, and a “trading fringe group” comprised of the other ECOWAS member countries. This is true both for intraregional trade, and global trade where their weight is 87% (U.S. $ 133,312 million per year) as opposed to 13% for the remaining trading fringe group. The quartet accounted for 79% of regional imports (U.S. $ 55,520 million per year) and 94% of exports and re-exports (U.S.$ 77,792 million per year). They are undeniably the engine of the West African Economic Community and delineate a concentrated market structure. But no hierarchy is respected, neither among members of the quartet, nor in the trading fringe, considering the analysis of trade flows so much so that some countries in the fringe group are sometimes neck and neck with some members of the quartet. For example, Ghana, the second largest importer of the community after Nigeria, ranks third in exports behind Nigeria and Côte d’Ivoire. The latter comes fourth in imports after Senegal.

2.2.1. Nigeria: the heavyweight of regional trade The ECOWAS is just the shadow of Nigeria which alone accounts for 77% of the exports and re- exports of the community for all products. The country alone accounts for 60% of regional trade (U.S. $ 92,696 million per year) and 79% of exports excluding re-exports within the ECOWAS (U.S. $ 63,702 million per year). The asset of Nigeria builds on oil exports, representing 73% of the total exports of ECOWAS, on the one hand, and on its domestic market, on the other. It remains the largest importer of food products in the region (40%). Its imports of non-food items are almost equivalent in relative value to its imports of food products, representing 41% of regional imports of such goods, or U.S.$ 28,994 million per year.

But Nigeria is a giant of which the economy is heavily exposed to the shocks of oil, as oil represents 93% of its exports. Thus the country is less prominent in the trade of manufactured goods. If it were not exporting oil, it would be ranked second with 20% of West African exports, behind Côte d’Ivoire 40%. The great weakness of Nigeria is its dependence on oil. But this weakness is partially offset by its large domestic market supplied by a somewhat dense industrial sector. Manufactured goods in Nigeria have a large internal market – more than half of the West African population – so much so that external export opportunities are not yet major issues for manufacturers in the country. The Nigerian domestic market is still under-supplied by its domestic industry with a relatively low operating capacity.

2.2.2. Côte d’Ivoire: the regional agricultural power Côte d’Ivoire, the second economic power in the region, still holds its position despite the decade of political crisis that destabilized the economic production. It currently comes in third position as a result of the crisis, behind Ghana and Nigeria with 10% of regional trade. But it remains the second regional exporter: 11% of total exports excluding re-exports to ECOWAS, representing U.S.$

THE REALITY OF TRADE IN WEST AFRICA 25 2012 Annual Report 8,649 million per year, behind Nigeria. This second position overall does not change if we consider re- exports. Finally, Côte-d’Ivoire imports less than its partners in the quartet with 10% of total imports of the ECOWAS, all sources included. It imports 13% of food items, and 9% of non-food items of the region, which ranks it fourth behind its partners in the quartet.

2.2.3. Ghana: breakthrough of a new regional power Although it is the second largest trading country of the ECOWAS with 11% of general trade, all flows considered (U.S.$ 16,234 million per year) after Nigeria 60%, Ghana hardly maintains its position among the quartet dominating the West African economy. It provides 4% of overall exports and re- exports to the ECOWAS, just before Senegal (2%), and behind Côte-d’Ivoire and Nigeria, respectively 10% and 77%. But the weight of Ghana could increase gradually with oil mining, and the resulting increase in its energy exports. However, the country is the second largest regional importer behind Nigeria, and comes before Senegal and Cote d’Ivoire with 18% of imports, representing U.S.$ 12,587 million per year). The food imports of the country account for 13% (U.S.$ 1,294 billion per year) of the regional imports, and non-food imports are 19% (U.S. $ 11,293 million per year).

2.2.4. Senegal – weighed down by food imports Senegal represents 6% of the total ECOWAS trade and 5% if re-exports are excluded, which means respectively U.S.$ 8,893 million per year and U.S.$ 8,054 million per year. Its weight in the total ECOWAS imports, all sources considered is 10%. It represents only 2% of regional exports, and 1% excluding re-exports. But it comes second (14%) behind Nigeria in food imports from the region and ranks third for the imports of non-food items – approximately 9% of the region’s imports (or U.S.$ 5,688 million per year).

2.2.5. Other ECOWAS countries, or countries in the “trading fringe group” The other ECOWAS members, which we call the countries of the trading fringe in contrast to the quartet, depict a very mixed picture. Together, they represent only 21% of the total imports of ECOWAS, 6% of exports, 13% of the total trade in the region.

The situation is however very contrasted across countries. Five countries (Benin, Burkina Faso, Guinea, Mali, and Togo) in the group account for 10% of the total ECOWAS trade, the others represent only 3%.

26 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Map 2: The shares of countries in the total recent trade of ECOWASÊ Map 2: The shares of countries in the total recent trade of ECOWAS

THE REALITY OF TRADE IN WEST AFRICA 27 2012 Annual Report SHEET #3: OIL-DOMINATED EXPORTS

The general pattern of trade is dominated by fuels which account for 51% of the total trade on average. They are followed by vehicles, tractors, cycles and accessories (5%), machinery, mechanical appliances and accessories (5%), electrical devices for sound and pictures recording and reproduction (4%). Cocoa and its preparations, cast iron, iron, steel and items thereof and cereals, represent each 3% of the total ECOWAS trade. Finally, two other major products appear in the structure of the total trade in the West African Community: plastics and items thereof (2%), and precious stones and metals, and jewelry (2%). The other products represent only 22% of the trade.

Local unprocessed products such as cotton, rubber, hides and skins as well as cement, fishand shellfish, sugar, represent each about 1% of the total trade in the ECOWAS.

Figure 2: Structure of the external trade of ECOWAS

22% 2% 2% 3% 51% 3% 3%

4% 5% 5% Fuel Boilers, machinery, mechanical appliances and accessories Cars, tractors, cyles, other vehicles and accessories Machinery, electrical and mechanical appliances, and accessories Cast iron, iron, steel and articles thereof Cocoa and its preparations Cereals Stone, precious metals, jewelry Plastics and items therefo Other products

3.1. Overall export structure The ECOWAS exports are highly concentrated in a small number of products and generate little local added value due to the predominance of fuels from mining. These represent three-quarters (75%) of exports, re-exports excluded, and provided mainly by Nigeria (73%). Cocoa and its preparations (5% of exports), precious stones (3%) and incidentally, cotton, edible fruit, rubber, plastics, wood and wooden products, fish and shellfish (about 1% each) together with fuels, are the major export products of the West African Economic Community. Schematically, ECOWAS can be considered as a fuels mono-exporter Regional Economic Community (REC).

28 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Figure 3: Structure of West African exports

1% Fuels 1% 1% 1% Cocoa and preparations thereof 1% 1% 1% 11% Fine pearls, gemstones, precious metals, 3% jewelry cotton 5% Maritime and river navigation

Leather skins

Plastics and items thereof

75% Timber, charcoal and wooden works

Rubber and rubber items

Edible fruits, citrus peel and melon

Other products

The regional economy suffers the poor development of an export-oriented manufacturing sector as a major driver of growth, of wealth creation and improved income. The manufacturing industry intended to provide final goods to the local population also seems inefficient or battered, given the difficulties it faces in resisting imports from Europe, Asia and America that are generally more “competitive.”

3.2. The geographical focus of exports Europe accounts for about 28% of ECOWAS exports with 23% to the European Union (EU 27). The Americas account for 40%, including 34% to the Northern America Free Trade Agreement Area (NAFTA) involving the United States, Canada and Mexico. Thus, Europe and the Americas are the main destinations of West African exports (68% of exports), with 57% to the EU and North America, confirming in this way the persistence of historical links. By purchasing 34% of the exportsof ECOWAS, NAFTA steals the show from the first traditional partner of the community, i.e. the EU. The trade opening promoted by globalization and the decline of historical relationships have led to a substantial breakthrough of Asian countries and those of Oceania that capture 16% of the exports, including 0.3% for the Near and Middle East. The ECOWAS itself captures 9% of the exports, a little more than what Africa buys from the Community (7%), including 1% for Northern Africa, and 6% for the rest of Africa (the regional economic communities of Central, Eastern and Southern Africa).

THE REALITY OF TRADE IN WEST AFRICA 29 2012 Annual Report Map 3: Main destinations of exports from ECOWAS member states

These exports are dominated by Nigeria and Côte-d’Ivoire which together account for 87% of transactions. Nigeria provides 77% of regional exports and Côte d’Ivoire 10%. The other two leaders of the region, Ghana and Senegal come in third and fourth position with 4% and 2% respectively. Mali follows these traditional leaders with 1.7% of regional exports. Five countries (Benin, Burkina Faso, Guinea, Niger and Togo) account each for 1% of regional exports.

The structure of West African exports differs depending on the large areas of destination. Thus, exports to the EU are 79% dominated by fuels (65%) and cocoa products (14%). These two commodities are 98% of the exports to North America. In Africa, 91% of ECOWAS exports to all three Regional Economic Communities (RECs) – COMESA, SADC and EAC – are based on fuels and precious stones, plus skins (3%) and cocoa products (1%). On average, exports to these RECs are dominated 95% by the four commodities. Exports to Asia are made up of fuels (80%), cotton (4%) and cocoa (3%). But in all cases, fuels are the bulk of West African exports, of which 73% come from Nigeria.

The ranking of the main clients of the ECOWAS region sets the Americas (North America, Central America and South America) as the lead export destination of ECOWAS. They buy 40% of ECOWAS exports, including 34% for the North America Free Trade Agreement (NAFTA) area, which includes the United States, Canada and Mexico. Europe is the second largest export hub of the ECOWAS, with 28% of the exports, including 23% by the EU, followed by four BRIC countries (Brazil, Russia, India and China (15% of the exports), just behind Asia (16%) and the ECOWAS itself (9%).

30 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Figure 4: The major customers of ECOWAS in the world

45% 40% 35% 30% 25% 20% 15% 10% 5% 0% America NAFTA Europe Asia and BRIC ECOXAS Africa Oceanie

A more detailed breakdown of West Africa’s exports desti nati ons highlights the low rank held by African economic communiti es. Indeed, exports to other parts of Africa are sti ll very low. Economic communiti es of southern and central Africa and EAC regions – COMESA, ECCAS, CEMAC – are the largest customers with 7% of exports. Regarding other parts of the world, we could menti on the ASEAN that absorbs 2%. Apart from India and China, ECOWAS exports very litt le to the rest of Asia.

3.3. Exports trends per desti nati on The analysis of the recent trends in the ECOWAS exports shows a very large fl uctuati on depending on desti nati on areas. Exports to the Americas, which essenti ally consist of fuels, have experienced the highest fl uctuati ons. Those towards Europe have experienced the same dynamics with a climax in 2008 in connecti on with the soaring prices of commoditi es, and a sharp decline in 2009.

Figure 5: Trends in ECOWAS global exports per major desti nati on area 50 000 45 000 40 000 35 000 30 000 25 000 20 000 15 000 Value in $US million Value 10 000 5 000 - 2005 2006 2007 2008 2009 2010

America Europe Asia-Oceania BRIC ECOWAS Africa

Exports to other regions have experienced more or less regular curves. However, two contrasti ng trends are noted. While exports to Africa have been steadily increasing, those towards West Africa itself, appear to have stalled, with a downward trend between 2009 and 2010 compared to 2008.

THE REALITY OF TRADE IN WEST AFRICA 31 2012 Annual Report SHEET #4: EXPORTS DOMINATED BY CONSUMER GOODS

4.1. Overall structure of exports West Africa’s imports are dominated by a dozen products, the value of which is above U.S.$ 1 billion per year. Fuels are still on top of the list, representing 24% of total imports, followed by motor vehicles, tractors and other vehicles (2nd place), machinery, mechanical appliances and boilers (3rd), machinery and electrical appliances (4th), cereals (5th), plastics (6th), iron, cast iron and steel products (7th), iron, cast iron, steel (8th), pharmaceuticals (9th) and fish and shellfish (10th).

Figure 6: Structure of West African exports

Fuels

Automobiles, tractors, cycles

21% 24,0% Boilers, machinery, appliances and mechanical equipment Machinery, electrical, sound and image appliances Plastics and items thereof 14% 11% Works in cast iron, iron and 2% steel 2% Cast iron, iron, steel and items 3% 11% thereof 4% 8,0% Pharmaceuticals

Foodstuffs

Other products

West African imports were on average US.$ 71 billion over the last five years. They experienced a very significant development in the past five years, from a total value of US$ 40 billion in 2005 to US$ 82 billion in 2010. Imports reached a record level in 2008 – US$ 110 billion – before falling to US$ 70 billion.

Food products hold a large share in the total imports of West Africa. They represent 14% of the value of external supplies. They are primarily composed of 6% of cereals (rice, wheat, etc.), fish and shellfish, milk and dairy products, and miscellaneous food preparations.

4.2. Geographical focus on imports The total imports of the Community are dominated by Nigeria, which alone accounts for 41% of transactions, and 18% for Ghana, 10% each for Senegal and Côte d’Ivoire. Nigeria and Ghana together total 59% of the Community’s imports, compared to 36% for the eight countries of the West African

32 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Economic and Monetary Union (WAEMU). The other fi ve member countries of the ECOWAS only capture 5% of the Community’s imports. In volume, these imports are dominated by cereals, fl our- mill products and preparati ons from cereals. These three groups of products accounted for 57% of imports in volume, including 52% for cereals and 3% for mill products and 2% for preparati ons from cereals. Europe is the main source of supply for the ECOWAS. It contributes 40% to the region’s imports, averaging U.S. $ 28,541 million per year. Approximately 30% of imports come from the European Union in parti cular. Thus, the commercial imports of the ECOWAS originate mainly from the EU, representi ng U.S. $ 21,486 million per year. Asia and Oceania are in second place with 29%,or U.S.$ 20,945 billion, ahead of the Americas (14%, representi ng U.S.$ 9,613 million, including 9% from the NAFTA). These three regions – Europe, Asia-Pacifi c and the Americas – provided the Economic Community of West Africa with an average of 84% of its imports, representi ng U.S. $ 58,949 million per year during the period 2005-2010.

Figure 7: The main sources of the ECOWAS imports

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EU BRIC NAFTA AFRICA EUROPE AMERICA ECOWAS

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The BRICs are the third import source of the ECOWAS with 16% of total imports, ahead of the Americas (14%, including 9% for NAFTA). Compared to the 2005 level of U.S. $ 4,912 million, imports from the BRICs were multi plied by 2.42 in 2007, 2.86 in 2009 and 3.55 in 2010. However, those from traditi onal trading partners, namely the EU, have increased by 1.75 from 13,923 million in 2005 to U.S. $ 24,424 million in 2010. Thus, the BRICs provide on average U.S. $ 11,841 million in goods per year to the ECOWAS, representi ng 16% of its commercial imports. Between 2005 and 2010, the ECOWAS imported from the BRICs U.S. $ 68,884 million in goods, including imports from Africa, with North Africa representi ng 5%.

THE REALITY OF TRADE IN WEST AFRICA 33 2012 Annual Report Map 4: Sources of the ECOWAS recent total imports Map 4: Sources of the ECOWAS recent total importsÊ

4.3. Evoluti on of ECOWAS imports per major economic region and community The imports by ECOWAS from Asia-Oceania are growing faster than those from other regions, indicati ng the rise of Asian countries (China and India) in the external supply of the Community. Imports from the BRICs follow the same patt ern. They are growing, unlike those from other regions. Asia and the BRIC countries are taking an important lead over historical ECOWAS partners, although exports to these regions are sti ll low. The contributi on of Europe in general and the EU in parti cular is declining, though this contributi on experiences a modest recovery aft er the great fall of 2009. Imports from the rest of Africa and the Americas are also growing, even though they are sti ll low.

Figure 8: Evoluti on of ECOWAS imports from major economic regions and communiti es around the world

35000

30000

EU 25000 BRIC 20000 AMERICAS

15000 ECOWAS

Value in $US million Value AFRICA 10000 ASIA-OCEANIA 5000 EUROPE 0 2005 2006 2007 2008 2009 2010

34 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report 4.4. Geographical focus on food imports The food imports are relatively concentrated. Indeed eight (8) categories of the existing twenty from the Harmonized System (HS) of product classification make up 85% of food imports from the EU and Asia that are the two main suppliers of the ECOWAS in food. Various food preparations, cereals and their derivatives, fish and shellfish, dairy products, sugars and sweets are the major components of these imports.

Among the partners of the West Africa region, we have the four BRIC countries (Brazil, Russia, India and China) that are in a particularly important position marked by the growth of their exports. The Americas provide an average of 27% of food imports to West Africa, including nearly 14% from NAFTA. Europe dominates in the two flows, capturing 34% of the demand for food imports of the ECOWAS, of which 30% come from the EU.

Asia and Oceania come almost in equal position with the Americas, with 28% of transactions, mainly dominated by imports of grains. The rest of Africa contributes only 6% to supply the ECOWAS in foodstuffs. Similarly, food items only represent 5% of intra-ECOWAS trade.

MapMap 5: 5: ECOWAS total total food food imports imports per region per region

THE REALITY OF TRADE IN WEST AFRICA 35 2012 Annual Report SHEET #5: POSITIVE BALANCE OF TRADE

5.1. General trend in the trade balance of the ECOWAS The trade balance surplus of the ECOWAS has been low over the 2005-2010 period. Exports accounted in value for 52.5% of total trade, against 45.9% for imports and 1.6% for re-exports. Between 2005 and 2006, the trade balance was high, before declining in 2007, 2008 and 2009 as a result of the global economic and fi nancial crisis.

Figure 9: ECOWAS total trade balance

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0 2005 2006 2007 2008 2009 2010 -20000

I: Imports E: Exports R: Reexports

In fact, the relati ve balance in the overall West African trade hides a profound imbalance in the nature of producti ve exchanges: West Africa mainly exports commoditi es (primary goods with litt le or no processing) and imports processed products. The trade balance of fuels, which represent the fi rst element of transacti on, is largely positi ve. For fuel exports of about $ 62 billion, the region imports for only 17 billion, representi ng a coverage of imports by exports of around 364%. Therefore, the balance of trade in primary goods of West Africa is positi ve overall. However, the trade in processed goods is sti ll in defi cit, refl ecti ng the nature of the West African economy itself.

The surplus is overall achieved with the United States and Canada, to which the region mainly sells fuels (the United States is one of the main desti nati ons of the Nigerian crude oil). Trade with Africa is also positi ve, even if they are on small values. The balance of trade between West Africa and Europe “has deteriorated over the past 15 years. It is globally negati ve, but its food segment is positi ve by

36 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report € 1.34 billion. Very recently, the trade balance turned positi ve in favor of the increase in oil prices; Nigeria being a major exporter” according to Blein et al, ECOWAS, 2006. On the other side, the trade balance with Asia has deteriorated due to the low penetrati on capacity of the Chinese market by products from the region.

Figure 10: Trade balance of ECOWAS with key partners

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0 EU BRIC South Asia Africa -5000 America

-10000

Exportations Importations Balance

5.2. Countries’ contributi on to the regional trade surplus Nigeria alone accounts for 3/5 of the total trade in ECOWAS, including or excluding intra-community re-exports which are recorded in the stati sti cs of the country. Its trade surplus due to oil exports is on average U.S. $ 34,708 million per year.

Côte d’Ivoire, the second regional economic power, also has a trade surplus of U.S. $ 1,809 million per year, although its weight has fallen sharply in recent years due to the politi cal crisis that reduced its coff ee and cocoa exports in parti cular. It represents an average of 1/10th of regional exports.

Apart from these two countries, all members of ECOWAS have a trade defi cit ranging from U.S. $ 8,949 million on average in Ghana to U.S. $ 75 million in Guinea Bissau. Ghana and Senegal have the highest trade defi cits in the ECOWAS region. Senegal’s trade defi cit averages U.S. $ 5,295 million per year.

THE REALITY OF TRADE IN WEST AFRICA 37 2012 Annual Report Map 6: Coverage of imports by the exports of ECOWAS states Map 6: Coverage of imports by the exports of ECOWAS statesÊ

Ê Ê

The impressive trade deficit of Ghana, third West African economic power, can be explained by the massive imports for the preparations of the African Cup of Nations soccer tournament in 2008. Except from these exceptional imports, the country has a deficit level almost half that of Senegal, averaging U.S. $ 3,126 million per year. Three countries (Benin, The Gambia and Sierra Leone) have a trade deficit of more than 500% of their exports, considering re-exports. In excluding re-exports, there are five countries with trade deficits more than 500% of their exports: Benin, Cape Verde, The Gambia, Sierra Leone, and Senegal.

Except Nigeria and Côte d’Ivoire, all ECOWAS countries are net importers. Their economies are, therefore, very vulnerable.

Finally, the trade surplus of ECOWAS is an illusion. It is mainly due to fuels accounting for 75% of exports, excluding re-exports, the weight of which in global trade is 51%. It therefore rests on a fragile foundation. ECOWAS is a giant with feet of clay, vulnerable to the shocks or risks of the international market, mainly for food and production factors.

38 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report SHEET #6: TRADE WITH THE EU/EUROPE

The analysis of the dynamics of the ECOWAS trade with Europe and particularly with the European Union reveals the recent situation of global trade. In fact, since 2005, global trade has been experiencing some turmoil resulting from several factors, the main ones being the soaring prices of oil and the global economic crisis, including the bankruptcy of Lehmann Brothers in September 2008, which drove the world trade to a downfall until the first quarter of 2009. The trend then reversed in the second quarter and continued until 2010, the year in which global trade grew by 22%. However, this growth was not the same across different regions of the world. Asia has been a major driver of the recovery with a growth rate twice as high as the world average (WTO, 2011). The Least Developed Countries (LDCs), after a fall in their trade in goods by 24% in 2009, boosted exports by 30% while imports increased by 13% in 2010. But trade flows are mainly within regional groupings, except Africa. Intra-regional exports in Asia accounted for more than 53% of the total exports of this region, while the North American Free Trade Agreement (NAFTA) area exported nearly half of its total exports to its members. The European Union, in the meantime, achieved 65% of its trade in-within; 71% of total EU exports and 79% of agricultural exports remained in Europe. As for Africa, only 12% of its total exports went to countries in the continent.

The Economic Community of West African States (ECOWAS), in the image of Africa as a whole, is still a small share of global trade. Despite this extraversion (12% of imports happened within the community), the weight of ECOWAS in global trade is low. According to the World Trade Statistics of the WTO, between 2005 and 2010, the ECOWAS has performed an average 0.5% of world imports of goods; its goods exports during the same period represented 0.7% of world goods exports. In this way, ECOWAS during the period 2005-2010, accounted for an average of 0.58% of world trade in goods, representing an increase of about 0.08%. But, in the image of Africa that accounts for only 2.3% of global trade services, the weight of ECOWAS in the world trade in goods and services is even more marginal, and revolves around 0.5%. The ECOWAS trade with the EU is small; for example, total exports of all products from the West African Economic Community to the EU accounted for only 6.5% of agricultural imports of the latter and 6% of those of Europe as a whole.

In this sheet, the analysis of ECOWAS trade with Europe is restrictive, limiting to trade with the European Union. Indeed, the structure of the ECOWAS trade with Europe is in the image of, or – to be more precise – is dictated by the trade with the European Union (EU). The latter accounts for over 80% of ECOWAS trade with Europe.

The largest trading partner of ECOWAS in the world is the European Union (EU). On average, the ECOWAS exported for U.S. $ 19,442 million per year to the EU and imported back for U.S. $ 21,486 million between 2005 and 2010. So overall, the EU accounts for 27% of the foreign trade of ECOWAS, to the tune of U.S. $ 40,929 million per year and U.S. $ 28,272 million excluding fuel exports. This is the most strategic partner in terms of trade balance: the gap between imports and exports is low even if it remains structurally to the advantage of the EU.

THE REALITY OF TRADE IN WEST AFRICA 39 2012 Annual Report 6.1. General structure of trade with the EU The structure of the ECOWAS trade with the EU is almost identical to the one with North America. It is characterized by the predominance of fuel exports and imports of food products. Nevertheless, there are some nuances fundamentally relating to the relative size of transactions and the formation of the basket of imports. In general, the overall structure of trade (imports and exports combined) shows that 40% of trade between the ECOWAS and the EU is based on fuels. All food products are in second place (7.3% of trade) with a predominance of grain. They are followed by machinery and mechanical appliances, vehicles (7%), electrical, sound and image appliances (5%). Other non-food products account for 34% of trade with the EU.

Figure 11: General structure of trade with the EU

Fuels

34% Boilers, mechanical appliances and equipment Automobiles, tractors, cycles

Machinery, electrical, sound or image appliances 7,3% 40% Food items 7% 5% 7% Other products

6.2. Developments and structure of exports Exports to the EU experience a switchback progression. Like the evolution of global trade, the ECOWAS exports were particularly high in 2008 before dwindling in 2009, and again reaching a climax in 2010. Everything happens as if they were drawn by the world trade that also achieved a record level of exports flows in 2010.

Reflecting the general structure of trade, the ECOWAS exports towards the EU are dominated by fuels (65%), representing U.S. $ 12,657 million per year, cocoa and preparations thereof (14%) of U.S. $ 2,724 million. Other products are 21% of these exports.

40 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Figure 12: Evolution of ECOWAS exports to EU countries

30000

25000

20000

15000

Valuein $USmillion 10000

5000

0 2005 2006 2007 2008 2009 2010

Figure 13: Structure of ECOWAS exports to the EU

21%

Fuels

Cocoa and 14% preparations thereof 65%

The main customers of ECOWAS in the EU in order of importance are France 24%, followed by Spain, the Netherlands and Italy that buy 68% of ECOWAS exports. Belgium, Germany, Great Britain and Portugal account for 27% of purchases and other EU countries represent 5%.

THE REALITY OF TRADE IN WEST AFRICA 41 2012 Annual Report Figure 14: Main customers of ECOWAS in the EU

PT:PORTUGAL 5%

GB:GREAT BRITAIN 6%

DE: GERMANY 7%

BE:BELGIUM 9%

IT:ITALY 11%

NL:NETHERLANDS 16%

ES:SPAIN 17%

FR:FRANCE 24%

0% 5% 10% 15% 20% 25%

6.3. Evolution and structure of imports As for imports, they increased steadily overall, unlike exports, which reached a peak in 2007 before declining to 16% in 2009, then increased by 17% in 2010.

Figure 15: Evolution of ECOWAS imports from the EU

30000

25000

20000

15000

10000 Valuein $USmillion 5000

0 2005 2006 2007 2008 2009 2010

Just like exports, the structure of imports is also marked by the predominance of fuels which account for 18%, followed by foodstuffs (14%), machinery and mechanical appliances (13%). Motor cars and other land vehicles and their accessories are in third position before machinery, electrical appliances, and sound or image appliances (9%).

42 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Figure 16: Structure of ECOWAS imports from the EU

Fuels 18,0% 35% Boilers, mechanical appliances and equipment 13% Automobiles, tractors, cycles

Machinery, electrical, sound or image appliances 11% Food items 14% 9,0% Other products

Beyond this overall structure of imports from the EU, cereals are an important component and come in second place, just before machinery and mechanical appliances. They represent 22% of food imports that are relatively diversified (see Figure 17). Furthermore, cereals and their by-products account for 38% of food imports of the region from the EU. Milk and by-products are the second component of food imports of the ECOWAS from the EU, followed by fish and shellfish, meat and edible offal, which together represent 16% of food imports.

Figure 17: Structure of the ECOWAS food imports from the EU Cereals 15% 22,0% Milk and dairy products 6% Fish and seafood 6% Cereal preparations

7% Alcoolic beverages 18% 7% Mirror products

9,0% 11% Miscellanious edible preparations Meat and edible offals

The leading European providers of ECOWAS in foodstuffs are France (29%, or U.S. $ 865 million on average per year), the Netherlands (16%, or U.S. $ 482 million), Belgium (12%, representing U.S. $ 357 million), Great-Britain and Ireland (8% each), Spain (6%) and Germany (5%). As can be seen, the

THE REALITY OF TRADE IN WEST AFRICA 43 2012 Annual Report leading European power provides very little food items to ECOWAS and this is naturally explained by the fact that it is not an agricultural power. The positions of France, the Netherlands, and Belgium can be justified: France, the leading agricultural country of the EU, and the other two because of their capacity to produce milk and dairy products, meat and edible offal, etc.

Figure 18: Main EU suppliers of ECOWAS in foodstuffs

5% 6% 29,0% 8% FR : France NL : Netherlands 8,0% BE : Belgium GB : Great Britain IE : Irland

12% ES : Spain 16% DE : Germany

For non-food items, the leading European supplier of ECOWAS is also France with 26% of imports of such goods, representing U.S.$ 4,728 million per year, followed by the UK (18%), Belgium ( 13%), the Netherlands (11%), Germany (10%) and Italy (8%). The fourth largest economy in the EU (Spain) is in sixth position. Germany, the leading economy in the EU has very low trade with the ECOWAS. This is partly explained by the magnitude of used vehicles imports from France, Belgium and the Netherlands and by the fact that the EU, the U.S., Japan and Brazil, just to name these countries, are privileged partners of Germany. The place of France and the UK demonstrates the importance and persistence of former colonial empires in the economic relations between ECOWAS and the EU. Both countries provide 44% of non-food imports from the EU. The top six countries – France, Great Britain, Belgium, Netherlands, Germany and Italy – provide ECOWAS with 86% of its non-food imports from the EU. Overall, eight EU countries are the main suppliers of ECOWAS (see Figure 19). France also ranks first with 26% of EU exports, ahead of Great Britain (17%), Belgium (13%), the Netherlands (12%), Germany (9%) and Italy (7%).

44 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Figure 19: Main EU suppliers of ECOWAS

PT:PORTUGAL 2%

ES:Spain 4%

IT:ITALY 7%

DE: Germany 9%

NL: Netherlands 12%

BE:BELGIUM 13%

GB: Great Britain 17%

FR:FRANCE 26%

0% 5% 10% 15% 20% 25% 30%

Figure 20: Main EU partners of ECOWAS

PT:PORTUGAL 4%

DE: GERMANY 8%

IT:ITALY 9%

ES:SPAIN 10%

BE:BELGIUM 11%

GB: GREAT BRITAIN 12%

NL: NETHERLANDS 14%

FR:FRANCE 25%

0% 5% 10% 15% 20% 25%

In total, ECOWAS performs the bulk of its business in Europe with eight main EU partners: France with 25%, followed by the Netherlands (14%), Great Britain (12%), Belgium (11%), Spain (10%). The leading European economic power comes in seventh place ahead of Portugal and behind Italy, the third economic power of the Union.

These data show the importance of economic stakes represented by ECOWAS in France as the first partner of the West African Community. The presence of France in West Africa is even more impressive when we include in the Economic Partnership commercial services such as construction services with Bouygues and Colas, port services with Bolloré, telecommunications, and energy, just to mention a few. The balance of trade between France and ECOWAS is highly positive for the first, averaging U.S. $ 850 million per year.

THE REALITY OF TRADE IN WEST AFRICA 45 2012 Annual Report 6.4. Trade Balance The balance of trade between ECOWAS and the EU is structurally in deficit for the former. But, except from 2007, the trade deficit vis-à-vis the EU is small. However, this small portion is only apparent, because the deficit is mitigated by the fuel exports of Nigeria. In isolating fuel exports, we can see the bias they are causing through Figure 22.

Figure 21: Evolution of trade and the trade balance of ECOWAS with the EU

30000 25000 20000 15000 10000 5000 0 Valuein $USmillion -5000 2005 2006 2007 2008 2009 2010 -10000 -15000 Imports Exports Balance

Without fuel exports, the deficit in the ECOWAS trade with the EU is structurally abysmal (see Figure 22): an average of U.S. $ 14,701 million per year, or 217% of exports. The ECOWAS-EU trade balance is very unfavorable for the entire West African economic community. This structurally unfavorable trend partially explains the prudent position of Nigeria in relation to the EU-ECOWAS Economic Partnership Agreements (EPAs).

Figure 22: Evolution of the ECOWAS-EU trade balance (excluding exports of fuels)

30000 25000 20000 15000 10000 5000 0

Valuein $USmillion 2005 2006 2007 2008 2009 2010 -5000 -10000 -15000 -20000 Imports Exports Balance

46 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Nigeria and other countries in the sub-region suspect that EPAs are a way to widen the trade deficit with the invasion of the West African market by European products. They consider that the EPA may hamper the development of productive capacities in the region (all sectors inclusive).

The concerns of Nigeria can be justified in two ways. The country accounts for 39% of non-food imports and 40% of food imports of the ECOWAS from the EU. Figures 23 and 24 show the share of imports of each ECOWAS member country from the EU. Note that Ghana and Cote d’Ivoire import each less than half of Nigerian imports; which may partly motivate their eagerness to sign the so-called intermediate agreement, considering their strong performance in non-fuel exports compared to the Nigerian giant. Indeed, excluding fuels, Nigeria exports for U.S. $ 607 million per year to the EU, representing 10%, compared to 64% of exports (U.S. $ 3,933 million) for Côte d’Ivoire and 20% (U.S. $ 1,245 million) for the Ghana.

Figure 23: Share of ECOWAS member countries non-food imports from the EU

40% 35% 30% 25% 20% 15% 10% 5% 0%

Figure 24: Share of ECOWAS member countries non-food imports from the EU

40% 35% 30% 25% 20% 15% 10% 5% 0%

THE REALITY OF TRADE IN WEST AFRICA 47 2012 Annual Report SHEET #7: TRADE WITH NAFTA/AMERICAS

The structure of trade between ECOWAS and the Americas (North, Central and South) is the image of its trade with the North America Free Trade Agreement (NAFTA) area. The latter accounts for 80% of ECOWAS trade with the Americas, which is the second hub of the global trade of ECOWAS.

But the second largest trading partner of ECOWAS remains NAFTA where the region exports on average for U.S. $ 28,151 million per year and from where it imports for U.S. $ 6,289 million on average per year out the U.S. $ 9,613 million captured by the Americas altogether. The overall trade balance is structurally in favor of West Africa. But it remains an illusion in the way it is dominated by fuels.

7.1. General structure of trade with the Americas

Figure 25: General structure of the ECOWAS trade with the Americas

Fuels 3% 10% 6% Boilers, mechanical 3% appliances and equipment

Food items

Automobiles, tractors, cycles 75,0%

Other products

The structure of the ECOWAS trade with the Americas is identical in the three blocs of that continent. It is characterized by a predominance of fuels and food products, including cocoa as the major component. The ECOWAS trade with the Americas is very concentrated. This concentration reveals the low diversification of the community exports, but also imports of capital equipment to improve the efficiency of production in the West African economic space.

48 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report 7.2. Evolution and structure of exports to the Americas

Figure 26: Evolution of ECOWAS exports to the Americas

50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2006 2007 2008 2009 2010

The ECOWAS exports to the Americas have experienced a gradual growth since 2005. But they did not escape the general decline in global trade in 2009 resulting into a fall in West African exports by 50% compared to 2008 towards the Americas. However the shock was quickly overcome in 2010 with the resumption of exports recording an increase by 90% over the previous year.

Figure 27: Structure of ECOWAS exports to the Americas

2% 3%

Fuels Cacao Other products

95,0%

The general structure of exports shows two major products: fuels which represent 95% and cocoa forming the bulk of food exports (2%). Other products account for only 3% of exports from the West African Economic Community to the Americas.

THE REALITY OF TRADE IN WEST AFRICA 49 2012 Annual Report Figure 28: Structure of ECOWAS exports to NAFTA

2,3% 2,4% 27: fuels

18: cocoa and preparations thereof Other products

95,3%

This general structure is a reflection of exports to NAFTA where the two products (fuels and cocoa) form the bulk of ECOWAS sales.

Thus, the ECOWAS exports to NAFTA consist of fuel to 95.3%, representing U.S. $ 26,825 million, and cocoa and its preparations, 2.4%. Other products represent only 2.3%. ECOWAS hardly sells other commodities than fuels to North America. With only 4.7% of total non-fuel exports to NAFTA, the Community demonstrates the low capacity of member countries to take advantage of the opportunities offered by AGOA through the entry of many raw products, or even locally manufactured products, into the United States duty-free. This raises the issue of the need to upgrade the West African manufacturing sector to increase the eligibility of products originating from ECOWAS into the U.S. market.

7.3. Evolution and structure of imports from the Americas The West African imports from the Americas have been experiencing a remarkable growth since 2005 despite the downturn in trade in 2009. This growth was driven by an increase in purchases of machinery and mechanical appliances from the NAFTA area, which increased by about 60%, the purchase of motor vehicles that increased by 28%, but also food imports, which increased by 23% in the Americas with 28% in South America.

50 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Figure 29: Evolution of ECOWAS imports from the Americas

18 000 16 000 14 000 12 000 10 000 8 000

Valuein $USmillion 6 000 4 000 2 000 - 2005 2006 2007 2008 2009 2010

The structure of imports shows a concentration of the demand of ECOWAS in the U.S. market: food products (cereals – fish and shellfish – edible oils and fats or sugar, milk and dairy products, as appropriate), machinery and mechanical appliances, and vehicles are the main components of these imports.

The structure of imports shows the prevalence of food imports. They form 28% of total ECOWAS imports from the Americas for a value of U.S. $ 2,617 million per year, followed by boilers and mechanical appliances (14%) to U.S. $ 1,347 million, motor vehicles, tractors and other land vehicles (14%) or U.S. $ 1,33 million. Fuels come fourth with 7% of imports.

Figure 30: Structure of imports from the Americas

Boilers, appliances and machinery 14% Fuels 7,0% 24% Automobiles, tractors, cycles

14% Pastics and items thereof

28% Cast iron, iron, steel and items thereof 5% Machinery, electrical, sound or image appliances 4% 4% Food imports

Other products

The share of food items, including cereals, is unambiguous in relation to imports from NAFTA. They are 75% made up of cereals, and fish and shellfish (6%). Four other products – milk and dairy products, meat and edible offal, various food preparations, sugar and sweets – represent 12% of ECOWAS food imports from NAFTA.

THE REALITY OF TRADE IN WEST AFRICA 51 2012 Annual Report Figure 31: Structure of food imports from NAFTA Cereals 3,0% 3% 8% Fish and shellfish 3% Sugars and sugar 3% confectionery 6% Meat and edible offal

Miscellaneous edible preparations 75,0% Milk and milk products

Other products

7.4. ECOWAS-AMERICAS trade balance The evolution of ECOWAS trade with the Americas, as we can see through the foregoing data and charts, shows a strong predominance of exports over imports. The overall trade balance is in surplus. Indeed, while the ECOWAS does not purchase much, it achieves its most significant exports to the Americas. These exports cover 347% of ECOWAS imports from that region. But a detailed analysis of these exports reveals that the ECOWAS trade surplus vis-à-vis the Americas is based on a fragile foundation.

Figure 32: Evolution of the balance of trade between ECOWAS and the Americas

45000 40000 35000 30000 25000 20000 15000 Value in $US million 10000 5000 0 2005 2006 2007 2008 2009 2010

Exports Imports Balance

Indeed, excluding fuel exports, the trade balance is in deficit and the deficit covers 462% of exports. This deficit is structural and worsens over years as shown in Figure 33. It reflects the trend of trade of the West African Economic Community with NAFTA.

52 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Figure 33: Evolution of the balance of trade between ECOWAS and the Americas, excluding fuel exports

20000

15000

10000 Non-fuel exports

5000 Imports 0 2005 2006 2007 2008 2009 2010 Value in $US million -5000 Balance -10000

-15000

The evolution of ECOWAS trade with NAFTA shows a strong predominance of exports that cover 448% of imports. The overall trade balance is in surplus.

Figure 34: Evolution of the ECOWAS trade balance with NAFTA

40000 35000 30000 25000 20000 15000

Valuein $USmillion 10000 5000 0 2005 2006 2007 2008 2009 2010

Imports Exports Balance

The ECOWAS exports to NAFTA totals an average of U.S. $ 28,151 million per year. They come high on the foreign trade of ECOWAS but have a switchback development. They shrank in 2007 to U.S. $ 26,636 million against U.S. $ 29,168 million in 2006 before spiraling down to U.S. $ 15,387 million in 2009 due to the global economic crisis that hit the United States in particular, then, more than doubled to U.S. $ 31,468 million in 2010.

In contrast, the equivalent of U.S. $ 6,289 million in products is imported annually from this region by ECOWAS. And the overall balance of trade with NAFTA indicated an average surplus of U.S. $ 21,861 million per year between 2005 and 2010. But this strong trade surplus of ECOWAS vis- à-vis NAFTA is based on the fuels exported mainly by Nigeria. Excluding fuel exports, the ECOWAS

THE REALITY OF TRADE IN WEST AFRICA 53 2012 Annual Report trade with NAFTA is in deficit of U.S. $ 4,964 million per year. The overall trade with the Americas is still determined by the trade with NAFTA. South and Central America represent only a small segment of the trade.

Figure 35: Evolution of the ECOWAS trade balance with NAFTA, excluding fuel exports

15000

10000

5000

0 2005 2006 2007 2008 2009 2010 Valuein $USmillion

-5000

-10000 Imports Non-fuel exports Balance

The weight of each ECOWAS county in this trade is illustrated in Figures 36, 37 and 38, which reflect the share of each country’s exports and imports with NAFTA. Given the dominant position of Nigeria’s oil exports in West Africa, trade between North America and ECOWAS, and more generally between the Americas and the West African Economic Community, comes down to the bilateral NAFTA-Nigeria trade.

Indeed, of the U.S. $ 28,151 million annual exports of ECOWAS towards NAFTA, Nigeria provides U.S. $ 26,966 million. Despite the existence of multilateral trade agreements under the World Trade Organization (WTO) and bilateral agreements such as AGOA, ECOWAS is still struggling to increase its exports of goods from renewable resources and is a net exporter of fuels to North America. Nigeria’s position is also confirmed in the ECOWAS imports from NAFTA. Imports of non-food items are totaling an average of U.S. $ 4,938 million per year, of which U.S. $ 3,528 million, meaning 71% are ensured by Nigeria. The same applies to food imports of ECOWAS where Nigeria accounts for 68%, meaning U.S. $ 925 million per year. Thus, on an average value of ECOWAS imports of U.S. $ 6.289 billion from NAFTA, Nigeria captures U.S. $ 4, 452 million.

Nigeria provides 98% of exports to South America, and 68% to Central America, followed by Côte d’Ivoire (30%). It also captures 86% of food imports from Central America, followed by Ghana (6%), and 40% of those from South America, followed by Senegal (26%) and Ghana (15%).

54 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Figure 36: Share of each member country in the ECOWAS exports to NAFTA

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% NG: CI: GH: GN: BF: SN: SL: ML: TG: CV: NE: GM: BJ: GW: Nigeria Cote Ghana Guinea Burkina Senegal Sierra Mali Togo Cape Niger The Benin Guinea d’Ivoire Faso Leone Verde Gambia Bissau ML: Mali ML: TG: Togo TG: BJ: Benin NE: Niger NE: GH: Ghana GH: GN: Guinea GN: SN: Senegal NG: Nigeria CI: Cote-d'Ivoir CI: CV: Cape Verde Cape CV: SL: Sierra Leone Sierra SL: BF: Burkina Faso Burkina BF: GM: The Gambia The GM: GW: Guinea Bissau Guinea GW:

Figure 37: Share of each member country in the ECOWAS food imports from NAFTA

70%

60%

50%

40%

30%

20%

10%

0% NG: CI: GH: GN: BF: SN: SL: ML: TG: CV: NE: GM: BJ: GW: ECOWAS Nigeria Cote Ghana Guinea Burkina Sene- Sierra Mali Togo Cape Niger The Benin Guinea d’Ivoire Faso gal Leone Verde Gambia Bissau ECOWAS ML: Mali ML: TG: Togo TG: BJ: Benin NE: Niger NE: GH: Ghana GH: GN: Guinea GN: SN: Senegal NG: Nigeria CV: Cape Verde Cape CV: CI: Cote d'Ivoire Cote CI: SL: Sierra Leone Sierra SL: BF: Burkina Faso Burkina BF: GM: The Gambia The GM: GW: Guinea Bissau Guinea GW:

THE REALITY OF TRADE IN WEST AFRICA 55 2012 Annual Report Figure 38: Share of each member country in the ECOWAS non-food imports from NAFTA

70%

60%

50%

40%

30%

20%

10%

0%

56 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report SHEET #8: TRADE WITH BRIC/ASIA

The global trade of the BRIC and Asian countries has been growing rapidly in recent years. To get an idea of the magnitude of this growth, you only have to refer to world trade statistics published by the World Trade Organization (WTO). In 2010, China overtook the EU and became the main exporter of office equipment: it sells for over U.S. $ 180 billion, which represents 93% of the ECOWAS total global trade in goods. China’s exports of integrated circuits increased by 57%. At the same time, Asia, home to two heavyweights of the BRICs, achieved 63% of global exports in office and telecommunication equipment. Despite a contraction in its textile sector since 2000, China’s share in global exports, still according to a report of the WTO (2011), grew from 18.3% in 2000 to 37% in 2010, making it the leading exporter of textiles, ahead of the EU. China trades more with the Association of Southeast Asian Nations than with ECOWAS. Indeed, the ASEANs are the third largest trading partner of China after the EU and the United States. Trade between China and Malaysia in the ASEAN group reached U.S. $ 90 billion in 2011 and exceeded U.S. $ 100 billion in 2012 according to the Bulletin of China’s Outward Foreign Direct Investment, which represents 278% to 320% of the ECOWAS trade with the BRICs. At the same time, India has become the third exporter of textiles, ahead of the United States, achieving 40% increase in exports. In 2010, Brazil’s agricultural exports accounted for 36% of the total commodity trade of ECOWAS in the same year. Brazil, third largest exporter of agricultural products, after the EU and the United States, has increased its agricultural exports by 17% compared to the level before the crisis. Although these relate to some sub-sectors, these figures show the imbalance of trade capacity utilization and the production potential operated between ECOWAS and the BRIC countries.

8.1. Trade structure The BRICs and Asia-Pacific region are the third emerging, high-growth area of trade with ECOWAS after the traditional European and North American partners. The BRICs capture 15% of the exports of the West African Community, as opposed to 16% for the Asia-Pacific region. The ECOWAS exports to the Asia-Pacific region are primarily intended for two Asian members of the BRICs: China and India. Of the ECOWAS imports, 28% are from the Asia-Pacific region, and 16% are provided by the four members of the BRIC countries.

The general structure of trade shows a relative diversification of the flows of goods despite the predominance of fuels and food.

THE REALITY OF TRADE IN WEST AFRICA 57 2012 Annual Report Figure 39: General structure of the ECOWAS trade with the BRICs

Fuels

23% 46% Cars, tractors, cycles

Boilers, mechanical appliances and 8% equipment Machinery, electrical, sound or image appliances

Cast iron, iron, steel and items 4% thereof 6% Food items 6% 6% Other products

Indeed, except fuels that represent 46% of the total trade, commodity trade is low between ECOWAS and the BRICs. Food trade represents 8%, including 6% of food imports and 2% of exports, ahead of electrical devices, office equipment, sound or image recording/reproduction appliances (6%), machinery and mechanical equipment (6%), motor vehicles, tractors, cycles and accessories (6%). Other products that form some thousand tariff lines account for 23% of trade.

The structure of trade with the Asia-Pacific region also shows a predominance of fuels (33% of trade) and food products (11%, including 6% for grain), ahead of cars (10%), boilers, machinery and mechanical appliances (8%), electrical, sound and image appliances (7%), materials from cast iron, steel and iron (4%), and plastics (3%). Other commodities represent 25% of ECOWAS trade with Asia- Oceania. A breakdown of the structure of exports and imports by type of flow reveals some nuances.

Figure 40: General structure of the ECOWAS trade with Asia-Oceania

Fuels

25% Machinery, electrical, sound or image appliances 33% Boilers, mechanical appliances and equipment Plastics and items thereof

Automobiles, tractors, cycles 11% Cast iron, iron, steel and items 4% 7% thereof 10% 8% Food items 3%

Others

58 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report 8.1.1. Evolution and structure of exports After declines in 2006 and 2007, the ECOWAS exports to the BRIC countries surged in 2008 before plunging in 2009 along with the contraction of global trade in goods in the first quarter of the same year. They then rebounded 66% from their 2009 level, reaching in 2010 a record level since 2005. Overall, they rose modestly on average 15%, reflecting the severe fall of 2006, 2007 and 2009.

Figure 41: Evolution of ECOWAS commodity exports to the BRICs

20 000 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 - 2005 2006 2007 2008 2009 2010

They are dominated 89% by fuels. Six other products account for 1% to 2% of these exports. All other products account for just 3%. The ECOWAS trade with the BRICs is the image of the trade achieved with the Americas. It is very concentrated.

Figure 42: Structure of ECOWAS exports to the BRICs

27: fuels 1% 2% 1% 1% 08: edible fruits 2% 3%

2% 28: chemicals

41: hides and skins

52: cotton 89% 18: cocoa and preparations thereof 44: timber and items thereof Other products

THE REALITY OF TRADE IN WEST AFRICA 59 2012 Annual Report Exports to the Asia-Pacific region as a whole are modeled on the same structure. They are characterized by a predominance of fuels and five other commodities, including four agro-pastoral products: cotton, edible fruits, hides and skins, cocoa. Other commodities represent 7% of exports.

Figure 43: Structure of ECOWAS exports to Asia-Oceania

Fuels

7% Cotton 2,0% 2% 3% 3% Cocoa and preparations thereof*Edible fruits 4% Edible fruits

80,0% Hides and skins

Inorganic chemicals

Other products

8.1.2. Evolution and structure of imports from the BRICs The ECOWAS imports from the BRICs dramatically increased in recent years. They increased by an average of 31%, i.e. twice as fast as exports. Foodstuffs, electrical, sound or image equipment, machinery and mechanical appliances, land vehicles, motorcycles, and cast iron, iron and steel represent the bulk of these imports. Other products account for 36% of imports.

Figure 44: Evolution of imports from the BRICs

18000 16000 14000 12000 10000 8000 6000 Valeurenmillions $US 4000 2000 0 2005 2006 2007 2008 2009 2010

60 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report The structure of imports shows the prevalence of food products, electrical, and sound or images equipment, boilers and mechanical appliances, as well as vehicles and cycles and motorcycles. They represent a total of 52%, or 13% for each product category. Cast iron, steel, iron and articles thereof represent 9% in imports, against 4% for plastics. Other commodities represent 36% (see Figure 45).

Figure 45: Structure of imports from BRIC Machinery, electrical, sound or image appliances 13,0% Boilders, mechanical appliances and 36% 13% equipment Cars, tractors, cycles

Cast iron, iron and items thereof 13% Plastics and items thereof 13% 9% 4% Food imports

The structure of imports from the Asia-Pacific region is similar to the ECOWAS imports from the BRICs. It shows the dominance of China and India among the major Asian trading partners of the region. Foodstuffs (15% of imports, of which 10% of cereals), and motor vehicles (16%), are the main purchases of the ECOWAS region. They are followed by boilers and mechanical appliances (13%), electrical, sound and image appliances (11%). Cast iron, iron and steel and articles thereof and plastics are down on the list of major ECOWAS imports from the Asia-Pacific region.

Figure 46: Structure of imports from Asia-Oceania

Automobiles, tractors, cycles

22% 16% Boilers, mechanical appliances and equipment

13% Machinery, electrical, sound or image appliances

Plastics and items thereof 15%

Cast iron, iron, steel and items thereof

Cereals 11,0% 10% 5% 7% Food items

Other products

THE REALITY OF TRADE IN WEST AFRICA 61 2012 Annual Report 8.1.3. BRIC-ECOWAS trade balance Recent developments in the balance of trade with BRIC reveal a structural deficit trend (see Figure 47) even though the average from 2005 to 2010 shows a slight surplus. The deficit is high when mining products, mainly fuels, are excluded. Figure 48 shows the evolution of exports, fuels excluded, between 2005 and 2010.

Figure 47: Evolution of trade and balance of trade between ECOWAS member countries and BRIC

20000

15000

10000 Imports

exports 5000 Balance Valuein $USmillion

0 2005 2006 2007 2008 2009 2010

-5000

The fuel exports by Nigeria reduce the trade deficit with BRIC, but it does not fundamentally change the trend.

Figure 48: Evolution of the balance of trade between ECOWAS and the BRIC countries (excluding exports of fuels)

20000

15000

10000 Exports, fuels included 5000 Fuels 0 Non-fuel exports 2005 2006 2007 2008 2009 2010 Valuein $USmillion -5000

-10000

-15000

62 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Overall, the balance of trade with the Asia-Pacific region follows the same deficit trend, which worsens over the years since 2006. West Africa recorded its highest trade deficit with that region. Imports from the Asia-Pacific region have steadily increased. They have more than doubled from U.S. $ 11,610 million in 2005 to U.S. $ 29,781 million in 2010. However exports remained low; they even declined between 2006 and 2009, before recovering in 2010 to U.S. $ 18,310 million, of which U.S. $ 2,868 million (2%) stand for the total ECOWAS exports, and U.S. $ 527 million (0, 3%) for the Middle East.

Figure 49: Evolution trade between ECOWAS and the Asia-Pacific region

30000

25000

20000

15000 Imports 10000 Exports 5000 Balance

Valuein $USmillion 0 2005 2006 2007 2008 2009 2010 -5000

-10000

-15000

8.2. Specific case of three emerging BRIC countries

8.2.1. China China is the main supplier of the ECOWAS countries among the BRIC members. It provides 63% of the imports by the West African community from BRIC, ahead of Russia (3%). China provides on average 69% of non-food items and 28% of food products.

Figure 50: ECOWAS imports from BRIC in $US million

RU: Russia 358

BR: Brazil 1599

IN: India 2250

CN: China 7274

0 2000 4000 6000 8000

THE REALITY OF TRADE IN WEST AFRICA 63 2012 Annual Report Despite this leading position in exports, China is the second partner of ECOWAS behind India. China’s exports are mainly based on non-food items (tractors, mechanical appliances, electrical equipment and appliances, telecommunication devices, sound and image recording and reproduction appliances, digital appliances, motorcycles, toys, computer equipment and game consoles, various capital goods, textiles and clothing, etc.). This second position is due to the weakness of Chinese imports from Africa, but which are less focused on fuels compared to other BRIC countries. Indeed, Chinese imports, though small compared to those of India and Brazil are relatively more diversified: fuels (47%), cotton (17%), hides and skins (13%), cocoa and preparations thereof (5%), timber (2%), rubber, plastics, minerals and slag (2% each), grains and oleaginous fruits (1%), pearls, precious stones and metals (1%), copper and copper articles ( 1%), aluminum and aluminum articles (1%), etc.

The commercial presence of China is much stronger than that of the leading European supplier of ECOWAS, namely France. Chinese exports to ECOWAS represent 130% of those of France. China, the lead trading partner of Africa since 2009, is still the fourth largest trading partner of the ECOWAS (U.S. $ 8,171 million per year), after the United States (U.S. $ 31,223 million), France (U.S. $ 10,336 million), and India (U.S. $ 9,184 million per year) over the period from 2005 to 2010.

The Chinese influence in the commercial area occurs in three forms: massive exports of non-food commodities to the ECOWAS, strong presence in the distribution sector (wholesale, and retail sometimes), energy and timber imports, and trade facilitation through the construction ofroad infrastructure, mineral exploration and exploitation (Niger).

China’s presence in the retail sector is so pervasive that West African states are obliged to enact laws to protect local businesses, prohibiting importers to be retail distributors. But these laws are easily circumvented by the Chinese. The energy demand of China to meet the needs of an emerging economy is pushing the country to focus on oil exploration and production in Africa in general, and in West Africa in particular.

The Chinese aid in the agricultural sector through the construction of corridors and decongestion of urban traffic is now a key factor in building productive capacities and trade facilitation in West Africa. Chinese cooperation despite its flaws is increasingly preferred or better accepted by many African leaders who sometimes are undemocratic, especially since it appears to be less politically conditioned or binding. However, some“only consider it under the lens of the geostrategic and energy issues” (Steck, 2012) and feel that it is too predatory of the continent’s natural resources. Although these demands on renewable and non renewable resources are undeniable, and that the flaws need to be corrected, the fact remains that those who are disparaging the influence and predation of the Chinese are not less predators. In the African history, past events and current realities have shown that the same who committed the sometimes heinous damage and predation over centuries in Africa, are the same continuing to date through multinationals in a more or less subtle way. It is now incumbent upon Pan-African institutions in general and West African ones in particular, to devise the best arbitration in order to sustainably tap the resources of the region for development and to discard emotions that have no room in international competition. It is normal that the current Chinese aid – although not supported by knowledge and technology transfer – generally free of any “democracy”

64 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report conditionalities, and at odds with established geostrategic and international competition rules, is disturbing traditional predators of Africa and their African co-opted representations.

But the Chinese breakthrough is undeniable and strong in West Africa. The most important Chinese foreign direct investments in West Africa in 2010 amounted to over U.S. $ 2,000 million (Gabas, JR and Chaponnière, J-J, 2012). Nine ECOWAS countries benefited thereof, including, in order of importance, Nigeria, Niger, Ghana, Guinea, Liberia, Togo, Mali, Senegal, Sierra Leone. Countries in the region must guarantee a win-win partnership as stated in one of the four principles of China’s cooperation with Africa. Commercially, this breakthrough is particularly visible, even devastating in Lome, Accra, Cotonou, Dakar, Bamako, etc. where shops selling Chinese products are legion. In 2009, in Togo, a study by the University of Lomé identified 708 of such shops, 47 of which were owned by Chinese nationals. The Chinese breakthrough results in a change in the strategies of major international ship-owners, including CMA-CGM, Maersk, etc. that are investing to open new direct routes between China and West Africa without going through Dubai to carry higher volume containers (Steck, 2012).

8.2.2. India India accounts for 20% of the ECOWAS non-food imports, and 19% of those food imports. However, India has positioned itself as the first customer of ECOWAS in the group, purchasing 56% of exports, followed by Brazil (36%), and only 7% for China (U.S. $ 897 million) and 1% for Russia.

India, as the sixth supplier of ECOWAS, is the second largest export destination of the Community after the United States. Unlike China, India buys from ECOWAS more than it sells back toit, although, like other countries, India’s imports are dominated by fuels, which represent 89% of total purchases of the country from the ECOWAS. The structure of Indian imports is particularly diverse or concentrated. India is part of the BRIC countries trading a very limited range of products with the ECOWAS: fuels (89%), edible fruits (3%), chemicals (2%), gum and resins (1%), salt, sulfur (1%), hides (1%), timber (1%), etc. despite the antiquity of its trade relations with the West African region. But this concentrated trade makes India the biggest buyer of the ECOWAS in relation to other members of the BRIC countries.

THE REALITY OF TRADE IN WEST AFRICA 65 2012 Annual Report Figure 51: Share of each member in the purchases of the BRICs from ECOWAS

7% 1%

36% 56%

IN: India

BR: Brazil

CN: China

RU: Russia

Indian exports on the other hand consist of pharmaceuticals, machinery, mechanical appliances, motorcycles, milk and dairy products, etc.

Despite the modesty of ECOWAS imports from India (20%), and the rapid Chinese breakthrough (63% of exports to the BRIC region), India is the largest trading partner of the West African Economic Community in the BRIC group before China and Brazil.

Figure 52: Share of each member of the BRIC group in trade with ECOWAS (in US $ million)

RU: Russia 463

BR: Brazil 5992

CN: China 8171

IN: India 9184

Country

0 2000 4000 6000 8000 10000

66 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report 8.2.3. Brazil Brazil is the third largest trading partner of ECOWAS among BRIC countries. But, it is also the fifth partner of the West African Community after the United States, France, India and China. Like India, it buys more from the ECOWAS than it sells back to it; but here, too, fuels are predominant in Brazilian imports (U.S. $ 4,291 million per year, that is to say 98%). Brazilian imports are mainly concentrated: fuels (98%), and cocoa and preparations thereof (1%) are the substance (99%) of these imports. This concentration is also explained by the same main factor that characterizes the West African economy: weak manufacturing and food industries in the production of tradable goods. Brazil is still the first food supplier of the ECOWAS, as shown in Figure 53, among the BRIC countries.

Figure 53: Food exports of the BRIC members to the ECOWAS

1% 19% 52%

BR : Brazil CN : China IN : India RU : Russia 28%

Brazil supplies 52% of food products (U.S. $ 794 million) and 8% (U.S. $ 805 million) of non-food items of the group, against 1% and 3% for Russia.

The dominant quartet (Nigeria, Côte-d’Ivoire, Ghana and Senegal) is the main trading partner of BRIC. Nigeria, in the lead, imports 62% of non-food items and 41% of food items from BRIC. The four countries capture 83% of non-food exports of the BRIC members towards the ECOWAS, and 79% of their food exports.

THE REALITY OF TRADE IN WEST AFRICA 67 2012 Annual Report SHEET #9: TRADE WITH THE REST OF AFRICA

The level of the ECOWAS trade with the rest of Africa is in the image of its intra-Community trade. North Africa and the regional economic communities of Central Africa, Southern and Eastern Africa (COMESA, SADC, EAC and ECCAS) are on the same list of regions with low trade with ECOWAS. Africa captures 7% of exports from the West African regional economic community and provides 5% of imports. This is the weakest trading partners of the ECOWAS. Exports have a switchback evolution with large range of variations. But, the trade situation is not identical between North Africa and Africa south of the Sahara.

9.1. Structure of ECOWAS trade with Africa While the share of intra-regional trade in the global trade in goods and services continues to grow, the general structure of the ECOWAS trade with the African continent discloses poor intra-African trade. The official trade covers a very small number of products. It is dominated by the mining products, including fuels and precious stones which represent respectively 25% and 15% of the trade. Other products represent 53% for a total value of U.S. $ 2,179 million. Despite the vagaries of the food situation in several African countries, intra-African trade in food products is very marginal and amounts to some U.S. $ 558 million on average. This represents 6% of the intra-African trade of ECOWAS, which is 3% made up of fish and shellfish. Hides and skins follow with 1% of the regional trade with the rest of Africa.

Figure 54: General structure of the ECOWAS trade with Africa

25,0% Fuels 53% Pearls, precious stones and metals, jewelry Hides and skins 15% Food Imports 1% 6% Other products

68 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Trade with the various regional economic communities (RECs) reflects the same structural trend. Thus, the structure of trade with the regional economic communities (RECs) in Central, Southern and Eastern Africa (COMESA-EAC-SADC) is a reflection of the general structure and shows the low level of interregional trade in African economic organizations. The ECOWAS trade with African RECs is focused on fuel exports, mainly provided by Nigeria. They represent 38% of the trade. Exports of precious metals and stones are 26%. Imports are on a few food products (3% to the tune of U.S. $ 191 million), mainly consisting of 80% of fish and shellfish, cereals, beverages, sugars and sweets, edible fruit, preparations of various food and milk and dairy products. Other products represent only 37% in the structure of the trade with the RECs (COMESA-EAC-SADC).

Figure 55: Structure of trade with the COMESA-SADC-EAC bloc

38,0% 37% Fuels

Pearls, precious stones and metals, jewelry

Food Imports

3% Other products 26%

Trade with North Africa is among the regions with very low trade. Again, food imports amount to U.S. $ 366 million on average.

But although very modest, trade between ECOWAS and the rest of Africa is in an upward momentum, despite the variability of flows.

9.2. Evolution and structure of exports Exports of the West African Economic Community to the RECs (COMESA-EAC-SADC) are showing an increasing trend, but with a rather chaotic pace since 2007. They have more than doubled in 2008 compared to 2007 before plunging in 2009, and then recovered in 2010 (see Figure 56). The average growth rate was 43%.

THE REALITY OF TRADE IN WEST AFRICA 69 2012 Annual Report Figure 56: Evolution of total exports of ECOWAS to the COMESA-SADC-EAC blocs in U.S. $ millions

7 000

6 000

5 000

4 000

3 000

2 000

1 000

- 2 005 2 006 2 007 2 008 2 009 2 010

The ECOWAS exports to the Regional Economic Communities have increased from U.S. $ 1,478 million in 2005 to U.S. $ 3,056 million in 2006 before falling to U.S. $ 2,911 million in 2007. They then rose to U.S. $ 6,129 million in 2008, and then, fell again to 3,549 million in 2009 before recovering in 2010 to U.S. $ 5,101 million.

The structure of exports is concentrated. Fuels (52%), precious stones and metals (39%) and hides and skins (3%) are the stuff of West African exports to these parts of Africa.

Figure 57: Structure of ECOWAS exports to all COMESA-SADC-EAC

27: Fuels 1% 1% 4% 3% 71: pearls, precious stones 52% and metals, jewelry 39% 41: hides and skins

18: cocoa and preparations thereof 40: rubber and items thereof

Other products

Exports to North Africa (see Figure 58) are dominated by fuels (42%), coffee and spices (20%), cocoa and its preparations (8%), fishery products (5 %), cotton (4%) and timber and wood products (4%). They are very low and amounted to U.S. $ 432 million on average.

70 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Figure 58: Structure of ECOWAS exports to North Africa

27: fuels

09: coffee, thea, malta and 4% 18% spices

4% 42% 18: cocoa and preparations thereof 89: maritime and river 5% navigation products

8% 52: cotton

44: wood, charchoal and items 20% thereof Other products

9.3. Evolution and structure of imports

As for imports, they have continually increased by 30% on average, lower than the growth of exports. They rose from U.S. $ 1,938 million in 2005 to U.S. $ 4,854 million in 2010.

Figure 59: Evolution of ECOWAS exports to COMESA-SADC-EAC RECs

5000 4500 4000 3500 3000 2500 2000 Valuein $USmillions 1500 1000 500 0 2005 2006 2007 2008 2009 2010

These imports are predominated by non-food items (U.S. $ 1,766 million per year). Food items (U.S. $ 191 million per year) mainly consisting of fish and shellfish, cereals, beverages and alcohols, edible fruit, various food preparations, sugars and sweets, milk and dairy products only represent 10% of all imports by the West African Economic Community from the region.

THE REALITY OF TRADE IN WEST AFRICA 71 2012 Annual Report Figure 60: Structure of ECOWAS imports from COMESA-SADC-EAC

Boilers, appliances and 11% mechanical equipment

47% 10,0% Fuels

Cast iron, iron and items thereof

Food Items 13%

10% Automobiles, tractors, cycles 10%

Other products

9.4. Trade Balance ECOWAS achieved with all COMESA-SADC-EAC RECs a surplus in the trade balance over the period 2005-2010. Figure 61 shows the evolution of imports, exports and the trade balance.

Figure 61: Evolution of ECOWAS trade and trade balance with all COMESA-SADC-EAC blocs

6000

5000

4000 Imports 3000 Exports Balance 2000 Value in $US million 1000

0 2005 2006 2007 2008 2009 2010

72 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report The trade surplus of ECOWAS with the COMESA-SADC-EAC bloc can be considered as very beneficial to the regional economy in terms of its magnitude. But it hides a structural problem that characterizes the West African exports to the regions of Central, Southern and Eastern Africa. Indeed, excluding exports of fuels, ECOWAS recorded only trade surplus with this part of Africa in 2006 and 2008. The trade surplus disappears completely in subtracting the products of extractive industry, including fuels, precious metals and stones from the West African exports. Indeed, these two commodities represent 91% of ECOWAS exports to the economic entity, including 52% for fuels, and 39% for precious stones and metals.

Figure 62: Evolution of ECOWAS trade with COMESA-EAC-SADC RECs (excluding exports of fuels)

3500 3000 2500 2000 Imports 1500 1000 Exports 500 Balance 0 Value in $US million -500 2005 2006 2007 2008 2009 2010 -1000 -1500

Admittedly, the ECOWAS trade with the rest of Africa is not specialized, but it is focused on mining products. Its economic base is fragile and unsustainable. Manufacturing and raw products (rubber, hides and skins) represent 9% of the Community trade with the rest of Africa, which is quite low compared to the willingness usually displayed by African leaders to speed up the economic integration of the continent. The problem is that the conflicting interests and power relations of leaders are undermining the ambitions. The extra-African trade appears to be increasingly profitable for the Nation-States on the continent including those of ECOWAS.

South Africa is the engine of the trade with the rest of Africa. It provides 67% (U.S. $ 1,177 million in value per year) of non-food imports (U.S. $ 1,766 million per year), which constitute the bulk of imports from ECOWAS to this COMESA-SADC-EAC bloc, followed by Botswana (11%, representing U.S. $ 188 million per year), Angola (5%).

THE REALITY OF TRADE IN WEST AFRICA 73 2012 Annual Report 74 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report PART THREE

INTRA-COMMUNITY TRADE

THE REALITY OF TRADE IN WEST AFRICA 75 2012 Annual Report SHEET #10: RECENT TREND OF INTRAREGIONAL TRADE

Intra-ECOWAS trade during the past six years, including re-exports, is estimated at U.S. $ 104,614 million (U.S. $ 15,022 million per year), 11% of total trade in the region, which amounts to US$ 922,333 million over the period (U.S. $ 153,722 million on average per year). Intra-community exports and re-exports totaled U.S. $ 9,185 million per year, accounting for 53% of intra-regional trade (U.S. $ 17,436 million per year), and 6% of the total trade of the region.

Intra-regional trade in West Africa is dynamic, although still below the potential of the Community. All transactions together, it rose from 12,406 million dollars in 2005 to 13,632 million in 2010, i.e. a cumulative increase of 10%. Excluding re-exports, intra-regional trade is structurally in deficit. Re- exports are helping to reduce the trade deficits of the Community.

Figure 63: Evolution of intra-ECOWAS trade

14000

12000 Reexport

10000 Exports, excluding 8000 reexports Total exports and 6000 reexports 4000 Total Imports Valuein $USmillion

2000 Balance 0 2005 2006 2007 2008 2009 2010 -2000

Between 2005 and 2010, both exports and imports remained generally below U.S. $ 10,000 million per year. But, they clearly fell in 2008 during the international economic and financial crisis, the impact of which was felt in Africa. This resulted into increased food imports. Between 2007 and 2010, the ECOWAS food imports exceeded U.S. $ 10,000 million in value, even close to U.S. $ 12,000 million, while they were U.S. $ 7,240 million in 2005 and U.S. $ 9,275 million in 2006.

10.1. Structure of intra-community trade The general structure of formal intra-regional trade is dominated by fuels, cement, plastics, cotton, miscellaneous edible preparations, fish and shellfish, tobacco and tobacco substitutes, seaand river navigation equipment. These products add to a series of raw products, including live cattle, cereals, tubers, roots and their derivatives, vegetable oils, etc. which are mainly traded informally, and therefore poorly documented.

76 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Figure 64: General structure of intra-ECOWAS trade

2% Ê fuels cement,Ê lime,Ê sulphur,Ê etc. 1% 22% cotton 0,70% 0,90% MaritimeÊ andÊ river navigationÊ products FishÊ andÊ shellfish 2% tobaccoÊ andÊ tobacco 1,20% substitutes MiscellaneousÊ food 4% 66% preparations PlasticsÊ andÊ itemsÊ thereof

OtherÊ products

10.2. Structure of exports and re-exports Intra-community exports are up to 57% made up of fuels and 5% of cement. Other major products are: plasti c, essenti al oils and cosmeti cs, sea or inland navigati on equipment which together account for 16% of exports – 4% each; cott on, live animals, edible fats or oils, various food preparati ons represent together 8%, and fi nally all other products account for only 19% of exports.

Figure 65: Structure of intra-ECOWAS exports and re-exports

19% 27: fuels 57% 8% 25: cement, lime, sulfur, clay and stones, plaster

89: navigation equipment; 39: Plastics; 33: Essential and cosmetic oils Cotton, live animals, edible fats and oils, miscellaneous food 16% preparations Others 5%

Nigeria generates 45% of intra-community exports, mainly dominated by crude oil. It is followed by Côte d’Ivoire (32%), Ghana (7%), Senegal (5%) and Togo (4%). These fi ve countries account for 93% of the intra-ECOWAS exports.

THE REALITY OF TRADE IN WEST AFRICA 77 2012 Annual Report Intra-ECOWAS re-exports represent 1.6% of the total regional trade, 14% of the intra-community trade, but 29% of the intra-community imports. They are a very significant component of the latter, and sometimes or most often, performed in violation of the trade regulations of destination countries. They are dominated by Senegal, which provides 35% of these shipments followed by Togo (21%), Niger (18%), Benin (9%) and Cape Verde (6%). Re-exports in the ECOWAS are relatively concentrated. The five aforementioned countries account for 88% of this business, the effect of which is positive on social welfare in terms of consumer access to products at reasonable prices. The virtues of re-exports are mixed however: Overall, it is estimated that the community industries, the main sources of growth, are victims of this activity which undermines their competitiveness.

But, contrary to what may be believed, the structure of re-exports shows a limited detrimental impact on the production sector. Re-export activities are dominated by fuels such as petroleum products (35%) as input to the community industrial production, cotton (13%), motor vehicles (6%).

10.3. Structure of imports Intra-ECOWAS imports are based on two major categories of commodities: food and non-food. They are on average U.S. $ 8,251 million per year and account for 55% of intra-ECOWAS trade, excluding re-exports (U.S. $ 90,130 million per year), 47% of total intra-regional trade including re-exports, 12% of total imports by ECOWAS, and 5% of the total trade of the region.

The structure of intra-community imports shows a strong concentration. Non-food imports are dominated by fuels which account for 78%, cement (4%) and cotton (2%) for a total of 84% for these three categories. All other commodities of the Harmonized System Nomenclature (HS) represent only 16% of the intra-community non-food imports.

Figure 66: Structure of intra-ECOWAS non-food imports

16% 2% 4% 27: fuels 25: cement 78% 52: cotton Others

Food imports, on the other hand, have a less concentrated structure, but again, three categories of products account for 63% of intra-community food purchases: various food preparations (30%), fish and shellfish (26%) and cereals preparations (7%). These add to four other products that represent together 20% of food imports. Other food items account for 18%.

78 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Figure 67: Structure of intra-ECOWAS food imports

21: miscellaneous food 18% 30% preparations

20% 03: fish and shellfish, molluscs and other aquatic invertebrates

19: preparations from cereals, flour, starch or milk; pastries

08: fruits; 10: cereals; 15: edible fats and oils; 04: milk and dairy products 7% 26% Others

The spatial representation of intra-community imports highlights four clusters. The first cluster includes Senegal and Côte d’Ivoire, which alone represent 40% of intra-ECOWAS imports. The second cluster just behind the first includes three countries: Mali, Benin and Burkina Faso accounting for 33% of intra ECOWAS imports. The third cluster consists of Nigeria and Ghana, the intra-Community imports of which are not a reflection of their economic leadership in the Community; they perform 13% of intra-ECOWAS imports. The fourth cluster consists of the other countries – half of the members of the Community – with only 15% of intra-ECOWAS imports.

Overall, intra-Community imports are mainly performed by the countries of the West African Economic and Monetary Union (WAEMU). They account for only 80% of these imports. The first economic power in the region, Nigeria, only performs 6% of intra-Community imports, representing 14 points lower than Côte d’Ivoire, the second regional economic power.

10.4. Intra-ECOWAS trade balance

The Intra-ECOWAS trade balance is overall in surplus, except in 2005 and 2007, when soaring oil prices led to record deficits in trade balances of States.

THE REALITY OF TRADE IN WEST AFRICA 79 2012 Annual Report Figure 68: intra-ECOWAS trade balance

14000

12000 Total Imports

10000

8000 Total exports 6000 and reexports

4000

Value in $US million Balance 2000

0 2005 2006 2007 2008 2009 2010 -2000

Only two countries, namely Nigeria and Cote d’Ivoire are recording surpluses in the intra-Community trade. In fact, other countries are outlets for the much diversified productions of these two countries which also perform the most significant transactions between them and import very little from other states.

Map 7: Intra-community trade balance of ECOWAS states Map 7: Intra-community trade balance of ECOWAS statesÊ

80 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report SHEET #11: THE FIRST THREE IN INTRA-COMMUNITY TRADE: CÔTE-D’IVOIRE, NIGERIA, AND SENEGAL

11.1. Weight of the different states in regional trade The structure of intra-regional trade, based on the importance of countries in intraregional exports and imports highlights some country groups. The first group consists of countries that achieve more than 10% of intra-Community transactions. This group includes essentially Côte-d’Ivoire, the leader of intra-regional trade with 25%, Nigeria (23%) and Senegal (13%). These three countries account for 61% of intra-regional trade. They are followed by a small group of countries contributing 5 to 10% to intraregional trade. These are Mali (9%), Ghana (7%), Benin (7%) and Burkina Faso (5%). The leading country among those with low contribution is Togo (4%), followed by Niger, Sierra Leone and Guinea.

MapMap 8:8: Weight Weight of ofthe the different different countries countries in intra- regionalin intra-regional trade trade

11.2. Contribution of the different states to intra-ECOWAS exports Intra-community exports are dominated by fuels (57% of intra-regional exports), cement (5%), maritime and inland waterway navigation equipment (4%), plastics (4%) and live animals (2%). These five commodities or groups of commodities represent 72% of intra-ECOWAS exports. Nigeria and Côte d’Ivoire provide the bulk of fuels (98%), which represent 56% of intraregional exports, all products inclusive.

THE REALITY OF TRADE IN WEST AFRICA 81 2012 Annual Report 11.2.1. The trifecta of intra-community exports

Three countries are dominating intra-community exports: Nigeria, Côte-d’Ivoire and Senegal. • Nigeria is the largest exporter of ECOWAS (with 45% of intra-community exports). It basically sells fuels (87% of its intra-regional exports) to Côte d’Ivoire (55%), Ghana (31%), Senegal (13%) and Benin (1%). As for essential oils, Ghana is the main customer of Nigeria (99.5% of exports of these products). Plastics and articles thereof are mainly exported to Niger (50%), Benin (19%), Burkina Faso (12%) and Ghana (11%). • Côte-d’Ivoire accounts for 32% of intra-community exports. It mainly sells fuel to Nigeria, which represents 54%, that is to say, more than half of its sales in the ECOWAS. The second group of export commodities of Côte d’Ivoire in the community consists of essential oils, which represent 2% of intraregional exports, and 5% of the country’s exports towards its ECOWAS partners. They are largely sold in Nigeria (38%), but also in Ghana (32%) and Togo (10%). • Senegal represents 5% of intraregional exports, or 13% if we consider re-exports, as Senegal is the leader in re-exports within ECOWAS.

Figure 69: Share of the different states in intra-Community exports

NG: Nigeria 0,2% 0,01% 1% CI: Cote d'Ivoire 6% 0,2% 2% 33% GH: Ghana 4% 6% 0,1% SN: Senegal TG: Togo 8% ML: Mali

BJ: Benin

NE: Niger

BF: Burkina Faso 13% GN: Guinea

5% SL: Sierra Leone 25% GM: The Gambia

CV: Cape Verde

GW: Guinea Bissau

11.2.2 The weight of the other States in intra-community exports • Togo makes 8% of intra-community exports and re-exports. Cement is the main commodity exported within the community (43% of the country’s intra-regional exports), which is sold mainly to Ghana (37%), Burkina Faso (36%), Niger (13%) and Mali (10%).

82 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report • Ghana provides 7% of intra-community exports excluding re-exports, and 6% taking the latter into account. It exports plastics to Burkina Faso (70%), Togo (16%) and Benin (6%), wooden products to Nigeria (59%), Burkina Faso (14%), Benin (12%) and Senegal (8%).

• Niger represents 2% of intra-community exports and 6% taking into account re-exports. It mainly exports live animals (69%) of its intra-regional exports to Nigeria (99%) and Benin (0.4%). It re-exports by-products from roots and tubers, as well as some cereals and fruits to Nigeria (92%).

• Burkina Faso represents 2% of the total value of exports and re-exports of the community (1% excluding re-export). It mainly exports live animals, cereals and fruits, tobacco and cotton to the Community market. Most animal products are exported to Benin (67%), Côte-d’Ivoire (19%) and Ghana (11%).

• Benin represents 4% in the community export/re-export trade, and only 2% considering only exports. It exports cotton, including 61% to neighboring Nigeria, essentially in raw state, 11% to Ghana, and 8% to Côte d’Ivoire. Three quarters of the main re-export products from Benin are mainly to Nigeria: meat and edible offal (100%), cereals (94%), fats and oils (91%).

• Mali represents only 2% in the intra-ECOWAS exports. Exports are made up of live animals (46%), cotton (21%), and fertilizers (10%). Live animals are exported to Senegal (57%), Côte d’Ivoire (27%) and Ghana (6%). Cotton and clothing products are exported to Senegal (79%), Côte d’Ivoire (8%) and Togo (8%). Fertilizers are exported to Burkina Faso (73%), Côte d’Ivoire (12%) and Senegal (9%).

• The remaining five countries account for slightly less than 2% of intra-community exports: (i) Cape Verde (0.01%) exports mainly fish and shellfish to Côte d’Ivoire (100%); (ii)The Gambia (0.2%) mainly sells fish and shellfish; (iii) Guinea (1%) exports fish and shellfish; (iv) Guinea Bissau (0.1%) exports some edible fruit to Senegal (94%) and Cape Verde (6%), and wooden products to Cape Verde (91%) and Benin (5%). It re-exports used cars to Cape Verde (80%) and Senegal (13%); (v) Sierra Leone (0.2%) exports and re-exports grain to Liberia.

11.3. Contribution of the different states to intra-community imports

11.3.1. The largest importers

• Côte d’Ivoire accounts for 20% of total intra-community imports and 14% of intraregional food imports to the tune of U.S. $ 69 million per year. It buys fuel, fish and shellfish, and various food preparations from Senegal (87% of its foodstuffs purchases from ECOWAS). Purchases of fish and shellfish account for 82% of these intra-community food imports.

• Senegal also accounts for 20% of intra-community imports, including 9% of intra-community food imports. It buys fuel from Nigeria (94%), dairy products from Ghana (99%), edible fruits and various food preparations from Cote-d’Ivoire (99%), fats and oils from Togo (76%) and Côte d’Ivoire (23%).

THE REALITY OF TRADE IN WEST AFRICA 83 2012 Annual Report • Mali covers 14% of intra-community imports and 20% of intra-regional food imports. It buys from its regional partners some fish and shellfish (6% of total intra-community food imports), but essentially, re-export products: milling products (9%), miscellaneous edible preparations (53%), and preparations from cereals (9%).

• Benin represents 10% of intra-community imports and 4% of food imports. It mainly imports fuels (89%) purchased from Nigeria, dairy products, alcoholic beverages, various food products, edible fats or oils from Togo, its immediate neighbor to the west.

Figure 70: Contribution of the various States to intra-Community imports

1% 1% SN: Senegal 0,5% CI: Cote d'Ivoire 4% 3% 2% 4% 20% ML: Mali 6% BJ: Benin 7% BF: Burkina Faso GH: Ghana NG: Nigeria SL: Sierra Leone TG: Togo 8% 20% NE: Niger GN: Guinea 10% GW: Guinea Bissau 14% GM: The Gambia CV: Cape-Verde

11.3.2. The weight of the other countries in intra-Community imports

• Burkina Faso captures 8% of intra-community imports consisting mainly of fuel and cement. Food imports include fruit, flour, food preparations from cereals, various food preparations.

• Ghana covers 7% of intra-community imports, including 10% of foodstuffs for U.S. $ 53 million per year. It imports fuels, and fish and shellfish from Senegal (37%), Côte d’Ivoire (27%) and Nigeria (14%). Vegetables are imported from Niger (59%), Burkina Faso (39%) and Togo (1%). Preparations from cereals are imported from Nigeria (51%), Côte d’Ivoire (44%) and Togo (4%). Miscellaneous edible preparations are purchased from Côte d’Ivoire (91%) and Senegal (6%).

• Nigeria only represents 6% of all intra-community imports, but covers 21% of food imports. Imports include fuels from Côte-d’Ivoire and foodstuffs, including fish and crustaceans (49%), various food preparations (33%), vegetables and prepared fruit (7%), and edible fats and oils (5%). The main official suppliers are Ghana (98% for fish and shellfish and 83% for vegetables and prepared fruit), Côte d’Ivoire (85% of miscellaneous food preparations), Togo (56% of edible fats and oils).

84 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report • Togo represents 4% of intra-community imports. Food imports include fish and shellfish (48%) from Senegal (22%), Guinea Bissau (59%) and Guinea (10%), preparations from cereals (16%), various food preparations (9%) and alcoholic beverages (6%). The various food preparations are from Senegal (32%), Côte d’Ivoire (39%) and Ghana (26%). Alcoholic beverages are purchased from Ghana (84%), Benin (11%) and Nigeria (3%).

• The share of Niger in intra-community imports is 3%, including 6% of food imports. In addition to fuels, which represent the first import commodity, Niger purchases edible fruits from Nigeria (43%), Ghana (22%) Côte d’Ivoire (19%) and Burkina Faso (15%), and grains, which represent 28% of its intra-community food imports purchased from Benin (37%), Nigeria (29%), Burkina Faso (13%), Mali (7%), but also Togo, Ghana and Côte d’Ivoire (5% each). The milling products are imported from Benin (34%), Nigeria (33%), Togo (18%) and Côte d’Ivoire (9%). Miscellaneous edible preparations representing 29% of its intra-community food imports are from Côte d’Ivoire (53%), Senegal (42%) and Nigeria (3%).

• Sierra Leone represents 0.2% of intra-ECOWAS food imports. It imports fish and various food preparations from Guinea (respectively 98% and 79%), preparations of cereals fromGhana (61%), alcoholic beverages from Nigeria (50%), Ghana (28%) and of Côte d’Ivoire (12%).

• Guinea represents 2% of intra-Community imports. Transactions are mainly from three countries: Côte-d’Ivoire, Ghana and Senegal. These include fuels, plastics, cereals and various food preparations imported from Côte-d’Ivoire, and dairy products and preparations of cereals from Ghana.

• Guinea Bissau (1%), Cape Verde (0.5%) and The Gambia (1%) which represent respectively 1%, 0.5% and 1% of intra-community imports, mainly consisting of fuel from Côte d’Ivoire, Senegal and Nigeria, cement and food products from Senegal.

THE REALITY OF TRADE IN WEST AFRICA 85 2012 Annual Report SHEET #12: WEST AFRICAN TRADE CLUSTERS AND ROUTES

12.1. Trade clusters West African trade is organized around several hubs that do not fit into the pattern of the economic integration in force in the region. Overall, we currently are five main trade hubs, in relation to the level and modalities of organization of actors, the nature of products involved in the transactions, the intensity of trade. These hubs correspond to the way the commercial networks structure the regional market, the extent of their capital, the specificity of what Bach calls“trans-state regionalism” or what IGUE and EGG consider a bottom-up integration process.

• The Western Cluster, called extended Senegambia. This subspace polarized around Senegal includes, in addition, The Gambia, Guinea, Guinea Bissau, Mauritania and Western Mali. It is marked by trade in local rice, millet and sorghum for which Mali is the largest supplier. The Dakar-Bamako railway is a valuable instrument for structuring the space, playing a dual role: opening up Mali, and mitigating the extroversion of the Senegalese economy. Finally, this cluster is the starting point of the Fulani and Murid merchants’ networks nowadays permeating not only Africa, but also other continents. This hub therefore experiences a strong migratory movement, but also a rise in risks: drug trafficking that facilitates and intensifies political crises in some countries, including Mali, and Guinea Bissau.

• The Central Cluster led by Côte d’Ivoire and Ghana with their neighbors: Togo, Mali and Burkina Faso. This subspace has the best equipment supporting regional trade, particularly the port infrastructure of Tema and Takoradi (Ghana), of Abidjan and San Pedro (Côte-d’Ivoire), and of Lome (Togo), together with the Abidjan-Niamey railway, which unfortunately stops in Ouagadougou. Transactions involve both live animals supplied by Mali and Burkina Faso, and manufactured goods from industrial plants in Côte-d’Ivoire. This subspace has suffered over the last fifteen years of political unrest in Côte d’Ivoire. It has been marked by the rise of a new regional power: Ghana.

• The Eastern Cluster polarized by the leading regional power, Nigeria. In addition to Nigeria, it also includes Ghana, Niger and two other states of Central Africa: Cameroon and Chad. More than elsewhere, commercial transactions are distinguished by their magnitude and specificity, with stronger presence of informal channels. While transactions of agricultural and food products mainly from Nigeria are helping to ensure a level of food security in Niger and Chad, the trade of subsidized petroleum products in Nigeria is helping to stabilize the purchasing power of consumers in neighboring countries at an acceptable level.

• The Southern Metropolitan area including southern Nigeria, Benin, Togo, and Ghana, and which extends to Côte-d’Ivoire and is called “shared prosperity zone”. This area is home to nearly 50% of the population of the region is characterized by nearly 60% of the regional

86 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report trade, which involves not only manufactured products from Nigeria and Côte-d’Ivoire, but mostly imported goods from the rest of the world, including Asian counterfeited goods. The trade of used items, including used cars, and rice imported from Asia, is very intense between Benin and Nigeria in particular. However, the exchanges are suffering from the inadequate and poor supporting infrastructure.

• The last cluster is represented by the Sahel, stretching generally from Kano in northern Nigeria to Sikasso in Mali. This subspace is characterized by an intense circulation of dry cereals, particularly millet and sorghum. It includes pockets of intense, live relationships (Kano-Katsina-Maradi) and (Sikasso-Korhogo-Bobo-Dioulasso).

MapMap 9: 9: West West African trade trade hubs hubs

12.2. West African trade routes and corridors The West African trade routes or corridors are mainly the result of the design established by the trading economy. The routes used by the caravan trade, which had led to the emergence of prosperous stopover cities, have been replaced by South-North corridors for the export ofraw materials from the northern regions and countries of the hinterland through the ports of coastal countries. This plan has disorganized the West African trade space, and is a major cause of the low market integration of West Africa.

THE REALITY OF TRADE IN WEST AFRICA 87 2012 Annual Report The main corridors include:

• The corridor from the Calabar free port in Lagos through ABBA, Port Harcourt, Benin City,

• The Lagos-Badagri-Cotonou-Lome-Accra-Abidjan corridor

• The Lagos-Ibadan-Zaria-Kano branching off towards Sokoto from Bida in central-western Nigeria and to Zaria and then Maradi, in southern Niger, going through Katsina; the second turn leads to Maiduguri from Kano

• The Cotonou-Malanville-Dosso-Niamey corridors with a branch to South East of Niger (Maradi and Zinder)

• Cotonou-Djougou-Porga-Fada-Ngourma-Ouagadougou

• Lomé-Kara-Dapaong-Koupéla-Ouagadougou

• Accra-Kumasi-Tamale-Bobo-Dioulasso-Ouagadougou

• Takoradi-Bobo-Dioulasso and extending to Ouagadougou

• Abidjan-Bouaké-Bobo-Dioulasso-Ouagadougou with an access road to Korhogo from Bouaké leading to Bamako in the West

• Conakry-Kankan-Bamako

• The Trans-Sahara road: Kano - Maradi - Niamey - Ouagadougou - Sikasso - Bamako - Dakar - Nouakchott.

Map 10: The main West African trade corridors Map 10: The main West African trade corridors

88 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report SHEET #13: GEOGRAPHY OF INTRA-COMMUNITY TRADE FLOWS

The West African trade flows are supplied by several commodities. Official statistics canhardly capture them for various reasons. Local plant and animal products are particularly poorly recorded in official statistics, because they benefit from free circulation under the trade liberalization scheme in the Community. Similarly, several other products imported from the international market for domestic consumption are re-exported to neighboring countries. These products are not recorded rigorously in regional trade statistics. While we can rely on trade statistics to some extent, due to the fact that we can use several sources, including those of exporting countries, intra-regional trade data are largely biased.

However, the geographical focus of trade is well known, even if the directions of flows change sometimes according to policies, and especially the prices beyond the various borders.

13.1. The flows of locally produced commodities Almost all locally produced items are found in intra-regional trade transactions. However, three categories often catch the attention of players due to their potential for economic integration, for promoting complementarities of production areas, and for ensuring food security and providing incomes to producers.

13.1.1. Transactions on live animals After fuels, they are the top trading items of West African trade. The trade occurs through complementarity between the agro-ecological zones of the region. The Sahel is the leading purveyor of live animals for coastal and forested countries. Supplier countries are Niger, which sells primarily to Nigeria, and to a lesser extent to Benin, Togo and Ghana. The second regional supplier is Mali, exporting its animals to Côte d’Ivoire, Ghana, Guinea, Senegal and Mauritania. Finally, comes Burkina Faso which supplies Côte-d’Ivoire, Ghana, Togo, Benin, and recently, Nigeria. The number of animals traded is estimated at 2.5 million heads of cattle per year, of which about 1.5 million are absorbed by the Nigerian market.

THE REALITY OF TRADE IN WEST AFRICA 89 2012 Annual Report Map 11: Major flows of live animals within ECOWAS

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13.1.2. Cereals and cowpea transactions

Grain flows involve two categories of commodities based on their origin: local cereals (millet, sorghum, maize), and imported cereals (rice). The circulation area of millet and sorghum is almost confined to the Sahel. Northern Nigeria, Mali and Burkina Faso are the main production areas mainly supplying Niger and Mauritania. The volume of transactions exceeds 500,000 metric tons per year. The trade of corn goes mainly from Nigeria, Benin, Togo and Ghana to Niger, and Burkina Faso incidentally. Corn is also traded between Mali and Mauritania.

On the other side, imported rice from the international market is incidentally traded between Benin and Niger on the one hand, and Nigeria on the other hand. The volume of rice imports from the international market in these two countries and re-exported to Nigeria is around 600,000 metric tons per year.

Cowpea is mainly produced in Nigeria, the largest world producer, Niger (where production is highly encouraged by public authorities), and incidentally in Burkina Faso. Only the production of Niger supplies the trade routes to Nigeria. Traded volume exceeded 200,000 metric tons per year over the past five years.

90 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Map 11: Major Flows of rice, coarse grains (millet, sorghum, and maize) and cowpea in ECOWAS

Map 12: Major Flows of rice, coarse grains (millet, sorghum, and maize) and cowpea in ECOWAS

13.1.3. Onion and potato flows The production of potato and onion showed a significant boom in recent years. Niger became the first regional exporter of onion. Sales are high in the coastal countries, including Ghana, Côte-d’Ivoire, Benin and Togo. The MISTOWA project funded by USAID has developed a market opportunity information platform around this commodity. Extra African imports of this product are subject to quotas in some countries such as Senegal, in order to limit the adverse effects of market competition.

Local potato is also traded in the Western and Eastern subspaces. Indeed, Guinean potatoes are sold in Senegalese markets where they are highly priced. Similarly, the production from the developed areas of Kano and Gigawa in Nigeria supplies consumer markets in Benin and Niger.

Map 13: Major flows of onion and potato in ECOWAS

THE REALITY OF TRADE IN WEST AFRICA 91 2012 Annual Report 13.2. Flows of manufactured goods

A very wide range of locally manufactured products are subject to intense trade within the Community. In addition to food items of which the level of development and standardization can be improved, fuels and cement are the most traded commodities in the region.

13.2.1. The hydrocarbons trade flows • The trade of petroleum products is on top of the list of formal and informal trade in the region. Informal trade covers two categories of products: (i) crude oil from Nigeria to supply refineries of Côte-d’Ivoire, Ghana and Senegal. In return, the refined oil from Côte-d’Ivoire, Ghana and Senegal are supplying Nigeria that also resorts to international purchases to cover around 40% of its domestic needs for refined products. The refineries in Senegal, Côte-d’Ivoire and Ghana supply many other countries in the region (Mali, Guinea, Burkina Faso, etc.).

• This official trade adds to the smuggling of petroleum products around Nigeria. Indeed, using the cheap prices in Nigeria, many operators have developed an extensive smuggling of the product towards neighboring countries. In fact, before the 70% reduction of subsidies, the sale price at the pump for a liter of petrol was twice lower than in Benin, for example, and more than three and a half times that of Niger. Map 12: Major hydrocarbon flows in the ECOWAS

Map 14: Major hydrocarbon flows in the ECOWAS

92 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report 13.2.2. The flows of cement Most of the countries have cement plants, but only a handful can claim self-sufficiency in this field. Several countries are resorting to imports from either the international market, or from countries of the Community to meet their domestic needs. Within the Community, only two countries are generating marketable surpluses: Senegal, which exports its surplus to Mali, Guinea Bissau, The Gambia and Guinea; followed by Togo that exports its surpluses to Benin, Ghana, Burkina Faso and Niger. The Dangote Group plans to set up the largest cement works in Nigeria (10 million metric tons per year) to meet the domestic market needs of the country and export to neighboring countries. It also plans to set up another factory in Senegal.

MapMap 15: 13 :Major Major cementcement export export flows flows

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THE REALITY OF TRADE IN WEST AFRICA 93 2012 Annual Report SHEET #14: THE PLAYERS IN THE INTRAREGIONAL TRADE

Intra-Community trade has achieved a clear progression from the stakeholders’ point of view. Adding to traditional networks, a series of new actors are coordinating all transactions, including through informal channels.

14.1. Traditional players Traditional actors of regional trade are ubiquitous in intra-Community transactions. Theyare perpetuating the commercial tradition of the region, including the trade established by the caravan trade. They are distinguished by their degree of network organization, specialization around products and scope of influence of their social capital.

The oldest networks were structured by the Hausa from Nigeria and Niger (Gregory, 1986), the Yoruba from Nigeria and Benin (Igue 1985), the Dioula and Malinke from Côte d’Ivoire, Mali and Guinea, the Murid from Senegal, the “Nana Benz” from Togo, and the Zermas from Niger. More recently, adding to the old networks, the Ibo network emerged, born primarily from the Nigerian civil war (1967-1970).

The networking of these players is interpreted as a form of re-composition of social, cultural groups sometimes separated by state borders emanating from the partition of Africa in 1889. The increased business activities of these networks beyond the borders of the states of origin of the main traders on a kind of “trans-state regionalism” (Bach, 1986) is based on the membership of the players, either to the same socio-cultural group, or a common religion, Islam in this case.

In the latter case, we are dealing with forms of sociability (AGIER, 1987 GREGOIRE, 1986), or the birth of elitist corporation as the “Male” in Porto-Novo, Benin (IGUE, 1985), or a socio-religious hierarchy clearly expressed by the “Halhaji and Babaguida” castes of Hausa brotherhoods of Niger and Nigeria (GREGOIRE, E, 1986). In some cases, the socialization induced by cross-border trade has also underpinned the emergence of various associations: associations of nationals of specific areas (case of Yoruba in West Africa), and groups of tontine in which Women play a major role.

Socio-cultural groups like the Murids from Senegal and the Ibo of Nigeria have combined to the business activities, a tradition of migration, which allowed them to establish strong networks in many countries in the world.

Women have also increased their presence in regional trade in recent decades, particularly in cross- border transactions. They quickly emerged as the leaders of border markets of all kinds of trade, including local food and imported products from the international market. From this moment, the field of women’s businesses began to go beyond the limits of the domestic sphere and nearby trade. Women are getting into transnational markets, tapping into more business opportunities. In some cases, the magnitude of business has propelled some women at the top of the elite, even as comprador local bourgeoisie (the Nana BENZ of Lome, Togo), reflecting a dynamic class of female entrepreneurs.

94 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report These operators were often the competitors, or representations in the best cases, of international trading companies, including some that inherited from major West African trading posts. These companies are at the interface between the world market and domestic markets. They are active on imports/exports, and local distribution, sometimes in defiance of regulations that prohibit the presence of a single actor on several stages of the distribution chain. These branches of foreign companies or domestic companies are present in the import and export sectors, but also in the re-export sectors. They are enjoying all the maladministration linked for instance to voluntary or unconscious inconsistent practices of taxation measures. They may also suffer setbacks of these practices that they are often able to overcome because of the power and effectiveness of their social networks in the customs and tax administrations. Some are particularly specialized like VLISCO in the distribution of upmarket fabrics highly valued by women in West Africa, and the SCOA for vehicles.

The economic liberalization of the region has encouraged the establishment of new players for the most part from either Asia, or the Middle East. These include mainly the Lebanese, Syrian, Indian and Pakistani. The establishment of these networks is old in the distribution of manufactured and trading of agricultural products, including cashew nuts (Indian group OLAM). They now occupy large parts of the market for the distribution of new or used vehicles, office supplies, fabrics, etc.

Adding to these networks established, for some of them, since the end of World War II, we have the Chinese networks since the early nineties. These networks are particularly active in almost every country in the region where they are found in the retail business, sometimes in violation of the national regulations. Their establishment was accompanied by a very strong connection of West African markets with those of Asia, including Dubai and Hong Kong.

14.2. Large groups, emerging networks Intra-regional trade in West Africa is increasingly getting structured around actors and networks, building not only on trade liberalization, but also on the establishment of trade facilitation mechanisms and institutions. Along these lines, several operators’ networks have emerged in the region. Sometimes, they are structured as joint-trade organizations (case of poultry sector actors), or as simple networks. Thus, under the initiative of CILSS and the Michigan State University, a network of operators in the food sector has been established. Other networks, such as the Federation of West African Business-women and Women Entrepreneurs are complementing more formal institutions such as the network of chambers of commerce and industry of West Africa. These networks have been beneficiaries of many programs that have strengthened their capacity for action. These programs have facilitated the implementation of market information systems, working for the advent of a regional Stock Exchange of agricultural commodities, especially grain. These networks also operate for transactions on both local products and imported commodities from the international market. In many strategic products such as rice, some monopolies are developing a privileged relationship with government customers. This collusion explains the very high prevalence of corruption in the business sections of West African governments.

THE REALITY OF TRADE IN WEST AFRICA 95 2012 Annual Report In the distribution of certain types of products imported or manufactured locally under license, there are large international groups involved. Thus, in the field of oil mining and distribution, some major groups are involved: Shell, Chevron-Texaco, Total, BP, etc. soon to be joined by China Petroleum Corporation (CNPC), which is already active in Niger in oil exploration and exploitation. West African mineral resources are also exploited and distributed regionally by international groups such as Lafarge, in almost all countries of the region for cement, or regional Groups such as Dangote in Nigeria and Senegal. The latter has become in a matter of a few decades one of the major groups with most diverse activities ranging from cement to food, transportation, through equity capital in some mobile phone companies etc.

The food-processing industry is dominated by groups such as Heineken, Guinness, Castel, Coca-Cola – that gradually bought out most national and private breweries in the region – Nestle, Flour Mills of Nigeria, and some branches of European or South African distribution hypermarkets that are beginning to penetrate some ECOWAS capital cities: Accra, Cotonou, Abidjan, and Dakar.

The services sector, yet poorly documented, is increasingly entered by major regional groups: Banks, insurance and construction, mainly. In the area of Finance, there are a dozen largest regional banking groups: EcoBank, BOA (Bank of Africa) Group, UBA (United Bank for Africa), Zenith International Bank, First Bank of Nigeria, Citibank, BSIC (Sahel-Saharan Bank for Investment and Trade), Atlantic Bank, SGB (Societe Generale des Banques), BRS (Regional Solidarity Bank), Diamond Bank. But six of the seven most powerful or leading banks in the region are Nigerian banks: Zenith Bank, First Bank, Intercontinental Bank, UBA, United Bank of Nigeria, Oceanic Bank International. Ecobank, headquartered in Togo, is in seventh position, but is the first bank in terms of scope: it is present in 25 African countries, including in most West African countries.

As for insurance companies, they are dominated by SAAR, NSIA that are among the leaders of the CIMA (Inter-African Conference on Insurance Markets), which includes mainly 16 francophone countries in West and Central Africa.

96 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report SHEET #15: INFORMAL CROSS-BORDER TRADE

Informal trade is part of the most complex to investigate, because of the difficulties to statistically capture regional trade. These difficulties are related to the frequent confusion of informal, fraud and official trade even in the case of registered trade, aversion to informal often seen in most states as a plague to the national economy, a thinly veiled hostility faced by the informal sector. The informal sector, in the image of nightly markets and periodic markets where various products are sold on hundreds of stalls (matches, batteries, cigarettes, fish, cereals, meals, cloths, hoes, machetes, bicycles, fertilizers, herbicides, canteens, jewels, clothes, etc.) where non-market social relations are established, and where new encounters are taking place, remains “a cliché, an archaism doomed to disappear with the development of administrative hierarchies, and to be relegated in the museum of curiosities by cost accounting, information technology, the development of means of communication” (Toumi, 2001). Despite these clichés and all these difficulties, the informal sector in general, and Informal Cross-Border Trade (ICT) in West Africa, in particular, is dynamic and is the safety valve in many cases, especially in the context of regional food imbalances. Very responsive to economic shocks, ICT players usually have an edge over those of official trade and governments during crises or market shocks. The rationale and scope of ICT are extensively discussed in the literature on West Africa economy: see for guidance, various documents by LARES (1990-2011), ECA/ARIA IV, 2010; Ellis, S. and McGraffey, J. (1997); Igue, J. and Soulé, BG (1992), IRAM - INRA - LARES (1996); LAMBERT, L. (1995); Meagher, K., Ogunwale, SA (1994); Herrera, J. (1996); Harre, D. and Igue, J. (1989); Galtier, F. (1997); Toumi, M. (2001).

15.1. The foundations of informal cross-border trade

Informal cross-border trade has always been a feature of trade relations between African societies. It occurred through the borders of the great empires of the African continent, those of ancient kingdoms and through the distinctive boundaries of acephalous organized societies. At first, it was initially male-dominated like the caravan trade that connected the Sahara to forested areas of Africa. The transactions on various commodities were performed by men. Some remains of this are still found in West Africa through networks around specific products: the cola-nut networks managed by the Dioula; livestock and salt by the Hausa; fabrics and cotton by the Yoruba. This situation was explained by three main parameters: security issues, the nature of products, commercial transactions over long distances, and finally the specific role which was devoted to women in traditional, very often Islamized, settings. Insecurity was marked by recurrent raids and the abundance of wildlife preventing free movement for women. Similarly, the means of transport – on foot and on donkeys or camels, loaded with heavy products such as salt and cola-nuts, and delivery of live animals – were more reserved for men than women.

The emergence of new frontiers resulting from colonization, and the changes that have characterized the new commercial and economic relations between the new states born of the division of Africa,

THE REALITY OF TRADE IN WEST AFRICA 97 2012 Annual Report have transformed the old forms of commercial exchanges based on complementarities of natural resources in different African ecosystems. The functioning of states emanating from the different spheres of influence has led to disparities in economic, trade and monetary policies that have given cross-border trade some dynamism, often inversely proportional to the degree of harmonization of economic policies in countries. These differences in economic policies in general, and trade policies in particular, have largely formed the basis of informal trade that takes the form of passive or active smuggling. In some cases, it becomes illicit, taking advantage of loopholes in customs and security administrations. In all cases, informal trade in West Africa is the result of imperfect and complex administrative rules, the incompleteness of reforms, and the clear intention of agents to evade rules (fraud). All factors that are likely to constitute an obstacle to official trade are contributing to foster informal trade.

• Differences in economic, monetary, trade and tax policies are the root cause of informal trade in West Africa. West Africa has seven currencies, including the CFA franc pegged to the euro through the French treasury1. The transactions between these currencies are only possible through the central banks. Difficulties in settling transactions as a result are circumvented by actors who developed a thriving parallel exchange market. This also helps to launder some of the funds derived from illegal activities such as drug trafficking, for which West Africa has become a major hub. This disparity in monetary policies is adding sometimes to very marked differences in levels of market protection. In this context, operators are developing opportunistic business, like the re-export of rice and used vehicles between Benin and Niger on the one hand, and Nigeria on the other hand. Finally, smuggling also results from differences in prices on either side of borders. Subsidies on many consumer products (hydrocarbons, agricultural inputs) are also encouraging informal border trafficking of these products (the case of Nigeria and its neighbors).

• The complexity of rules and poor information of actors. Administrative and control rules change much in countries, according to the State budget guidelines. In many cases, control officers are either uninformed or poorly trained for their implementation, or are taking advantage of the ignorance of rules by actors to impose illegal taxes, or undervalue the goods. In either case, the operators are developing smuggling passively (fraud) or actively (with the complicity of agents). For example, the VAT and customs clearance rules are among the approximate practices in regulations that cause traders to operate in the informal sector. The imposition of VAT on imported agricultural products is the most common practice in ECOWAS. But there is often a misunderstanding by a majority of exporters who complain about the payment of VAT when crossing internal borders of ECOWAS. This arises, for example, from inefficient compensation mechanisms between countries (Faivre-Dupaigre et al, 2007). Thus, a trader of cattle who would have paid VAT in the country of origin, and is taxed in the country of destination, often hardly can convince the authorities in the country of final sale that the VAT was paid at the point of departure.

1 These currencies are the Nigerian “Naira”, the Ghanaian “Cedi”, the Gambian “Dalasi”, the Guinean “Franc”, the Sierra Leonean “Leone”, the Liberian “Dollar”, the Cape Verde “Peso”, and the “CFA Franc” in the eight WAEMU countries.

98 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report • Political conflicts, including civil wars are contributing to the development of informal trade. Thus, the Biafran War (1967-1970) in disrupting the marketing routes within Nigeria forced the country to resort to neighboring countries for supplies and the export of its main commodities, including coffee and cocoa. Parallel networks were established to collect coffee, cocoa, peanuts etc. Benin, for example, that is not producing cocoa bean became a net exporter of this product. Between 1970 and 1973, Benin’s exports of cocoa and coffee due to the informal collection represented more than 45% of the value of the total exports of Benin (Igue and Soulé, 1992). More recently the Ivorian crisis has encouraged smuggling of cotton, coffee and cocoa from this country into Burkina Faso and Ghana respectively.

15.2. The magnitude of informal cross-border trade The estimated magnitude, and more precisely the volume, of informal cross-border trade remain a mystery because of the absence of a reliable, credible and robust method of assessment to capture the details of the dealings. However, some studies here and there show that this trade sector involves significant volumes for some products, from 70 to nearly 600% (in the case of rice in Benin) of domestic consumption in a country.

Informal trade involves a wide range of commodities ranging from processed foodstuffs to manufactured commodities. In fact almost all of the products covered by official transactions can be found in the informal channels as long as loopholes are persisting in public policies, including difficulties in supplies resulting from quotas, embargoes, high taxation. Informal trade also relates to prohibited or illegal items such as weapons, ammunition, drugs and prohibited foodstuffs for purposes of economic policies (ECA / ARIA IV, 2010).

The extent of informal cross-border trade is inversely proportional to the degree of harmonization of economic and trade policies of states. In West Africa, informal trade is relatively more significant between Nigeria and its neighbors than anywhere else. This is also the area where policy differences are most pronounced.

• Between Benin and Nigeria, commercial networks have developed a set of trafficking, for which the nature of products involved and their courses are changing over years. Between 1967 and 1970, Benin used to re-export in the informal market some cocoa and coffee collected from Nigeria. In 1970, those transactions accounted for over 45% of Benin’s exports. This trade was replaced by rice re-exports starting from 1987, at the start of the Nigerian domestic adjustment. The trade of this commodity remains very active to date involving an annual volume between 150,000 to 400,000 metric tons. Rice must be added to the lucrative trade of vehicles. In fact, enjoying the ban by Nigeria on imports of old vehicles over eight years, Benin imports between 140,000 and 150,000 units per year to supply the domestic needs estimated at 25,000 vehicles. The rest, i.e. some 120,000 to 130,000 vehicles are re-exported annually, and smuggled into Nigeria. In return, operators are importing petroleum products from Nigeria. The work conducted by LARES (1992, 2005 and 2011) disclosed that informal trade of oil from Nigeria accounted

THE REALITY OF TRADE IN WEST AFRICA 99 2012 Annual Report for 35%, 51% and 83% of the consumption needs of Benin respectively for each of the years mentioned above.

• Informal trade is also very active between Niger and Nigeria on three main products – oil from Nigeria, and rice and used vehicles re-exported by Niger towards its neighbor. Between Senegal and The Gambia, informal trade has experienced mixed fortunes, just like between Togo and Côte d’Ivoire on the one hand, and Ghana on the one hand. The trafficking involves the smuggling of cocoa and coffee.

To get an idea of the magnitude of informal cross-border trade, we could refer to the weight of the entire informal sector in national economies. In West Africa, this weight varies from 20% of the GDP in Nigeria to 75% in Benin. In 2006-2007, Burkina Faso and Mali marketed through informal cross- border trade routes approximately 4 million heads of sheep and more than 1.8 million heads of cattle, mainly to Benin, Ghana, Cote d’Ivoire, Senegal etc. The cattle trade, largely informal in Benin represents 43,125 heads imported and 92,170 heads exported according to official figures from the Livestock Directorate. Field surveys (LARES, 2008) estimate that approximately 331,000 heads of cattle are exported to Nigeria from some key markets in northern Benin.

100 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report CONCLUSION

After this first review of the situation of West African trade, several findings emerge clearly.

• West Africa still has a great potential for the development of its trade, both internally in supporting the process of economic integration and ongoing businesses, and externally to improve and consolidate its position in the international market. Indeed, in both areas, the trade in West Africa still lags far behind; this lag can hardly be explained given the immense economic potential of the region.

• At the international level, West Africa that is considered to be the 25th largest economy and home to 4.2% of the world’s population, accounts for only 0.5% of global trade. This position contributes to exacerbate the marginalization of West Africa, considered one of the least developed regions of the world.

• At the regional level, the volume and value of intra-Community trade are the lowest in the world, compared to the level of major regional economic groupings, except the Economic Community of Central Africa. The value of intra-regional trade is estimated at 12% of exports and 6% of total imports of all ECOWAS. West African exports, which are dominated by transactions on fuels for which Nigeria is alone in the lead, include very few products with high added value. Informal transactions remain significant in connection to the continuing fragmentation of economic, monetary and trade policies.

• Imports consist mainly of consumer goods among which, fuel and foodstuffs. West Africa has become one of the major markets for products from other continents, including recycled products. This trend is explained by (i) the weak productive base of the region, (ii) the strong opening of its market, leading to the breakthrough of new trading “partners” from emerging countries: China, India, and Brazil.

• West African exports are undiversified. They are mainly made up of unprocessed local products (fuels, cocoa, coffee, cotton and minerals). For some commodities such as coffee and cotton, West Africa has lost significant shares of the international market. Fuels account for over 70% of official exports, against 16% for agricultural products and 14% for other minerals. Manufactured commodities are almost absent from the foreign sales of West Africa.

• The current poor performance of West African trade is not only due to international trade rules, which are very unfavorable to developing countries, but especially to the inconsistent economic policies of the countries in the region. The West African economy continues in many areas, to function as an outpost of multinationals, where it specializes in the supply of raw materials and distribution of finished products. To a large extent, West Africa “consumes

THE REALITY OF TRADE IN WEST AFRICA 101 2012 Annual Report what it does not produce and produces what it does not consume”, which is a natural phenomenon that will be acting against it for long, yet.

• It is urgent therefore for West Africa to promote (i) an industrialization policy that allows it to diversify and improve the competitiveness of its export products, (ii) a commercial policy of precaution (better protect productive sectors and the domestic market), and (iii) improved intra-Community trade: removal of technical barriers to trade, elimination of multiple harassment along major corridors, and development of trade infrastructure.

102 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report TABLE OF CONTENTS

TABLE OF CONTENTS ...... 3 ACRONYMS AND ABBREVIATIONS ...... 5 PREFACE ...... 7 GENERAL INTRODUCTION ...... 9 PART ONE: THE GENERAL CONTEXT OF TRADE IN WEST AFRICA ...... 15 SHEET #1: THE ENVIRONMENT OF TRADE IN WEST AFRICA ...... 16 1.1 The foundations of West African trade...... 16 1.2 International arrangements ...... 20 PART TWO: GENERAL TRADE IN WEST AFRICA ...... 23 SHEET #2: GENERAL TREND OF WEST AFRICAN TRADE ...... 24 2.1. Recent developments in West African trade ...... 24 2.2. The winners in the West African trade ...... 25 SHEET #3: OIL-DOMINATED EXPORTS ...... 28 3.1. Overall export structure ...... 28 3.2. The geographical focus of exports ...... 29 3.3. Exports trends per destination ...... 31 SHEET #4: EXPORTS DOMINATED BY CONSUMER GOODS ...... 32 4.1. Overall structure of exports ...... 32 4.2. Geographical focus on imports ...... 32 4.3. Evolution of ECOWAS imports per major economic region and community ...... 34 4.4. Geographical focus on food imports ...... 35 SHEET #5: POSITIVE BALANCE OF TRADE ...... 36 5.1. General trend in the trade balance of the ECOWAS ...... 36 5.2. Countries’ contribution to the regional trade surplus ...... 37 SHEET #6: TRADE WITH THE EU/EUROPE ...... 39 6.1. General structure of trade with the EU ...... 40 6.2. Developments and structure of exports ...... 40 6.3. Evolution and structure of imports...... 42 6.4. Trade Balance ...... 46 SHEET #7: TRADE WITH NAFTA/AMERICAS ...... 48 7.1. General structure of trade with the Americas ...... 48 7.2. Evolution and structure of exports to the Americas ...... 49 7.3. Evolution and structure of imports from the Americas ...... 50 7.4. ECOWAS-AMERICAS trade balance ...... 52

THE REALITY OF TRADE IN WEST AFRICA 103 2012 Annual Report SHEET #8: TRADE WITH BRIC/ASIA ...... 57 8.1. Trade structure ...... 57 8.2. Specific case of three emerging BRIC countries ...... 63 SHEET #9: TRADE WITH THE REST OF AFRICA ...... 68 9.1. Structure of ECOWAS trade with Africa ...... 68 9.2. Evolution and structure of exports ...... 69 9.3. Evolution and structure of imports...... 71 9.4. Trade Balance ...... 72 PART III: INTRA-COMMUNITY TRADE ...... 75 SHEET #10: RECENT TREND OF INTRAREGIONAL TRADE ...... 76 10.1. Structure of intra-community trade ...... 76 10.2. Structure of exports and re-exports ...... 77 10.3. Structure of imports ...... 78 10.4. Intra-ECOWAS trade balance ...... 79 SHEET #11: THE FIRST THREE IN INTRA-COMMUNITY TRADE: CÔTE-D’IVOIRE, NIGERIA, AND SENEGAL ...... 81 11.1. Weight of the different states in regional trade ...... 81 11.2. Contribution of the different states to intra-ECOWAS exports ...... 81 11.3. Contribution of the different states to intra-community imports ...... 83 SHEET #12: WEST AFRICAN TRADE CLUSTERS AND ROUTES ...... 85 12.1. Trade clusters ...... 86 12.2. West African trade routes and corridors ...... 87 SHEET #13: GEOGRAPHY OF INTRA-COMMUNITY TRADE FLOWS ...... 89 13.1. The flows of locally produced commodities ...... 89 13.2. Flows of manufactured goods ...... 92 SHEET #14: THE PLAYERS IN THE INTRAREGIONAL TRADE ...... 94 14.1. Traditional players ...... 94 14.2. Large groups, emerging networks ...... 95 SHEET #15: INFORMAL CROSS-BORDER TRADE ...... 97 15.1. The foundations of informal cross-border trade ...... 97 15.2. The magnitude of informal cross-border trade ...... 99 CONCLUSION ...... 101 LIST OF FIGURES ...... 105 LIST OF MAPS ...... 108

104 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report LIST OF FIGURES

Figure 1: Recent developments in total trade of ECOWAS ...... 24 Figure 2: Structure of the external trade of ECOWAS ...... 28 Figure 3: Structure of West African exports ...... 29 Figure 4: The major customers of ECOWAS in the world ...... 31 Figure 5: Trends in ECOWAS global exports per major destination area ...... 31 Figure 6: Structure of West African exports ...... 32 Figure 7: The main sources of the ECOWAS imports ...... 33 Figure 8: Evolution of ECOWAS imports from major economic regions and communities around the world ...... 34 Figure 9: ECOWAS total trade balance ...... 36 Figure 10: Trade balance of ECOWAS with key partners ...... 37 Figure 11: General structure of trade with the EU ...... 40 Figure 12: Evolution of ECOWAS exports to EU countries ...... 41 Figure 13: Structure of ECOWAS exports to the EU ...... 41 Figure 14: Main customers of ECOWAS in the EU ...... 42 Figure 15: Evolution of ECOWAS imports from the EU ...... 42 Figure 16: Structure of ECOWAS imports from the EU ...... 43 Figure 17: Structure of the ECOWAS food imports from the EU ...... 43 Figure 18: Main EU suppliers of ECOWAS in foodstuffs ...... 44 Figure 19: Main EU suppliers of ECOWAS ...... 45 Figure 20: Main EU partners of ECOWAS ...... 45 Figure 21: Evolution of trade and the trade balance of ECOWAS with the EU ...... 46 Figure 22: Evolution of the ECOWAS-EU trade balance (excluding exports of fuels)...... 46 Figure 23: Share of ECOWAS member countries non-food imports from the EU ...... 47 Figure 24: Share of ECOWAS member countries non-food imports from the EU ...... 47 Figure 25: General structure of the ECOWAS trade with the Americas ...... 48 Figure 26: Evolution of ECOWAS exports to the Americas ...... 49 Figure 27: Structure of ECOWAS exports to the Americas ...... 49

THE REALITY OF TRADE IN WEST AFRICA 105 2012 Annual Report Figure 28: Structure of ECOWAS exports to NAFTA ...... 50 Figure 29: Evolution of ECOWAS imports from the Americas...... 51 Figure 30: Structure of imports from the Americas ...... 51 Figure 31: Structure of food imports from NAFTA ...... 52 Figure 32: Evolution of the balance of trade between ECOWAS and the Americas ...... 52 Figure 33: Evolution of the balance of trade between ECOWAS and the Americas, excluding fuel exports ...... 53 Figure 34: Evolution of the ECOWAS trade balance with NAFTA ...... 53 Figure 35: Evolution of the ECOWAS trade balance with NAFTA, excluding fuel exports ...... 54 Figure 36: Share of each member country in the ECOWAS exports to NAFTA ...... 55 Figure 37: Share of each member country in the ECOWAS food imports from NAFTA ...... 55 Figure 38: Share of each member country in the ECOWAS non-food imports from NAFTA ...... 56 Figure 39: General structure of the ECOWAS trade with the BRICs ...... 58 Figure 40: General structure of the ECOWAS trade with Asia-Oceania ...... 58 Figure 41: Evolution of ECOWAS commodity exports to the BRICs ...... 59 Figure 42: Structure of ECOWAS exports to the BRICs ...... 59 Figure 43: Structure of ECOWAS exports to Asia-Oceania ...... 60 Figure 44: Evolution of imports from the BRICs ...... 60 Figure 45: Structure of imports from BRIC ...... 61 Figure 46: Structure of imports from Asia-Oceania ...... 61 Figure 47: Evolution of trade and balance of trade between ECOWAS member countries and BRIC ...... 62 Figure 48: Evolution of the balance of trade between ECOWAS and the BRIC countries (excluding exports of fuels) ...... 62 Figure 49: Evolution trade between ECOWAS and the Asia-Pacific region ...... 63 Figure 50: ECOWAS imports from BRIC in $US million ...... 63 Figure 51: Share of each member in the purchases of the BRICs from ECOWAS ...... 66 Figure 52: Share of each member of the BRIC group in trade with ECOWAS (in US $ million)...... 66 Figure 53: Food exports of the BRIC members to the ECOWAS ...... 67 Figure 54: General structure of the ECOWAS trade with Africa ...... 68 Figure 55: Structure of trade with the COMESA-SADC-EAC bloc ...... 69 Figure 56: Evolution of total exports of ECOWAS to the COMESA-SADC-EAC blocs in U.S. $ millions ...... 70 Figure 57: Structure of ECOWAS exports to all COMESA-SADC-EAC...... 70 Figure 58: Structure of ECOWAS exports to North Africa ...... 71 Figure 59: Evolution of ECOWAS exports to COMESA-SADC-EAC RECs ...... 71

106 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report Figure 60: Structure of ECOWAS imports from COMESA-SADC-EAC ...... 72 Figure 61: Evolution of ECOWAS trade and trade balance with all COMESA-SADC-EAC blocs ...... 72 Figure 62: Evolution of ECOWAS trade with COMESA-EAC-SADC RECs (excluding exports of fuels) ...... 73 Figure 63: Evolution of intra-ECOWAS trade ...... 76 Figure 64: General structure of intra-ECOWAS trade ...... 77 Figure 65: Structure of intra-ECOWAS exports and re-exports ...... 77 Figure 66: Structure of intra-ECOWAS non-food imports ...... 78 Figure 67: Structure of intra-ECOWAS food imports ...... 79 Figure 68: Intra-ECOWAS trade balance ...... 80 Figure 69: Share of the different states in intra-Community exports ...... 82 Figure 70: Contribution of the various States to intra-Community imports ...... 84

THE REALITY OF TRADE IN WEST AFRICA 107 2012 Annual Report LIST OF MAPS

Map 1: Populations and GDP of ECOWAS countries ...... 13 Map 2: The shares of countries in the total recent trade of ECOWAS ...... 27 Map 3: Main destinations of exports from ECOWAS member states ...... 30 Map 4: Sources of the ECOWAS recent total imports ...... 34 Map 5: ECOWAS total food imports per region ...... 35 Map 6: Coverage of imports by the exports of ECOWAS states ...... 38 Map 7: Intra-community trade balance of ECOWAS states ...... 80 Map 8: Weight of the different countries in intra-regional trade ...... 81 Map 9: West African trade hubs ...... 87 Map 10: The main West African trade corridors ...... 88 Map 11: Major flows of live animals within ECOWAS...... 90 Map 12: Major Flows of rice, coarse grains (millet, sorghum, and maize) and cowpea in ECOWAS ...... 91 Map 13: Major flows of onion and potato in ECOWAS ...... 91 Map 14: Major hydrocarbon flows in the ECOWAS ...... 92 Map 15: Major cement export flows ...... 93

108 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report THE REALITY OF TRADE IN WEST AFRICA 109 2012 Annual Report Achevé d’imprimer sous les presses de l’imprimerie POLYKROME Dakar, JULY 2013

110 THE REALITY OF TRADE IN WEST AFRICA 2012 Annual Report