A Handbook on the Ecowas Treaty and Financial Institutions

A HANDBOOK ON

THE ECOWAS TREATY

AND FINANCIAL

INSTITUTIONS

BALA

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© 2012 by MAIYAKI THEODORE BALA. All rights reserved.

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Published by AuthorHouse 08/12/2012

ISBN: 978-1-4772-2315-4 (sc)

ISBN: 978-1-4772-2314-7 (e)

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Contents

Dedication

List Of Statutes

Table Of Cases

Acronyms

Preface

Foreword

Chapter 1

Nature And Origin Of Integration In West Africa

Chapter 2

Models Of Integration

Chapter 3

The Evolution Of Ecowas

Chapter 4

Economic Integration And The Role Of

Financial Institutions

Chapter 5

The Financial Institutions In Ecowas Economic Integration

Chapter 6

The Ecowas Treaty And Financial Institutions

Chapter 7

Challenges And Prospects Of Economic Integration In West Africa

References

Bibliography

Dedication

This Book is dedicated to the Almighty God, and to my late grandmother Nna Mama Kyamsek Maiyaki, who lived all her life striving and toiling that my siblings and I may have a ‘life’.

List of Statutes

1. Dakar Treaty, 1994

2. ECOWAS Treaty, 1975

3. ECOWAS Protocol, 1976

4. EU Treaty

5. Treaty of Brussels, 1948

6. Treaty of Paris, 1951

7. Treaty of Rome, 1957

8. WAMA Statute

9. WAMI Statute 2000

Table of Cases

Kaita Vs. Mali (2009) CCYLR (Pt. 2) Page 63

Olajide Afolabi Vs. Federal Republic of Nigeria

ECW/CCJ/APP/01/03

Acronyms

ACP—African, Caribbean, and Pacific Countries

AEC—African Economic Commission

AFTA—ASEAN Free Trade Area

AfDB—African Development Bank

APEC—Asia Pacific Economic Cooperation

ASEAN—Association of South East Asian Nations

BCEAO—Central Bank of West African States

BOAD—Bank for West African Development

CFA—Communaute Financiere Africaine (African Financial Community)

COMESA—Common Market of East and South Africa

EBID—ECOWAS Bank for Investment and Development

ECA—Economic Commission for Africa

ECSC—European Coal and Steel Community

ECOWAS—Economic Community of West African States

ECOMOG—Economic Community of West African States Monitoring Group

ECB—European Central Bank

EDC—European Defence Community

EEC—European Economic Community

EMCP—ECOWAS Monetary Cooperation Programme

EMI—European Monetary Institute

ESAF—Enhanced Structural Adjustment Facility

ETI—EcoBank Trans International

EU—European Union

FTAA—Free Trade Area of the Americas

FDI—Foreign Direct Investment

GATT—General Agreement on Tariffs and Trade

GDP—Gross Domestic Product

IBRD—International Bank for Reconstruction and Development

IDA—International Development Association

IFC—International Finance Cooperation

IMF—International Monetary Fund

ITO—international Trade Organization

MIGA—Multilateral Investment Guarantee Agency

NAFTA—North American Free Trade Agreement

NGO—Non-Governmental Organization

NTB—Non-Tariff Barriers

OAS—Organization of American States

OAU—Organization of African Unity

OCA—Optimum Currency Area

OEEC—Organization for European Economic Cooperation

RIA—Regional Integration Arrangements

RMC—Regional Member Countries

SADC—Southern African Development Community

SAF—Structural Adjustment Facility

SAP—Structural Adjustment Programme

SELA—Latin American Economic System

STF—Systematic Transformation Facility

UDEAC—Customs and Economic Union of Central Africa

UNECA—United Nations Economic Commission for Africa

UN—United Nations

UNDP—United Nations Development Programme

WAMA—West African Monetary Agency

WAMI—West African Monetary Institute

WAEMU—West African Economic Monetary Union

WABA—West African Bankers Association

WACB—West African Central Bank

WACH—West African Clearing House

WAMZ—West African Monetary Zone

WAUA—West African Unit of Account

WB—World Bank

WTO—World Trade Organization

Preface

In recent times, there have been significant increases in the efforts of developing countries especially in Sub-Saharan Africa to achkieve regional economic integration. In these regions, we have seen the revitalization or the expansion of existing regional economic arrangements and the formation of new groupings. The foregoing initiatives have interestingly coincided with the current developments in the Western and industrialized world who have since taken up the instrument of economic integration as a vehicle to political and socio-economic prosperity.

Regional economic integration is increasingly recognized as the viable space within which small and developing economies can better organize themselves to survive economically and politically in a highly competitive world. The launch of the African Union (AU) and the New Partnership for Africa’s Development (NEPAD) have given new impetus to the global African and regional integration processes and has focused particular attention on the need to take decisive action to tackle the continent’s numerous problems through the instrument of the economic integration strategy.

West Africa is arguably one of the least developed regions in the world with poverty rates on a high scale and with the exception of Nigeria; our individual national markets are debatably too small and unorganized to support scale-sensitive industries or trade. The Agricultural sector, considered to be the main stay of this region is highly undeveloped, unmechanized and unproductive and this has remained so over a protracted period because of a combination of lack of investments, poor investments objectives and strategies, corruption and bad governance and poor resource management by governments.

Generally, the West African sub-region has been unable to develop its capacity in the area of the generation, supply and pricing of energy, health care delivery, education, transportation, agriculture, technology, roads and telecommunications amongst other. Traditional trading practices, the types and volumes of goods traded and the major trading routes cannot meet contemporary regional and global economic realities. The unbridled regional violence plaguing the sub region, the unabated unconstitutional change of governments, the absence of the rule of law and democracy, incessant and rampant armed conflicts that have pervaded the sub-region have left so much to be desired in the attainment of the aspiration of regional economic integration.

On the whole, the sub region is left at the mercy of a disturbing, stunted and truncated economic growth. How then can we achieve the state of economic growth that will increase income to levels that can stimulate our domestic markets, encourage private sector investments and largely eliminate poverty?

In reaching out to solve these problems and more within the perspective of the need for economic integration and collective self-reliance, 15 states of West Africa together signed the treaty of the Economic Community of West African State (ECOWAS) in Lagos on the 28th day of May 1975. Following the singing of the ECOWAS treaty, Akinyemi observed that:

ECOWAS is a manifestation of the desire for cooperation among the people of West Africa. It is the structural embodiment of the people’s belief in a collective attack against the enduring problems of under development in tropical Africa. From Mauritania to Nigeria, the yearnings of the people are the same; they want to be helped out of the valley of poverty in which they are enmeshed. The languages may be different, and the cultures may be diverse, but beyond all, the longing for economic emancipation through cooperation transcends all barriers.¹

From the foregoing, it can be gathered therefore that the most obvious need for an economic union in the West African sub-region derives from the poor economic conditions of all countries within the region. When optimally attained, it is desired that the sub-region would record large scale accelerated economic growth, broad based expansion of its product market which will in turn enable firms to exploit both internal and external economies of scale that will stimulate industrial investment opportunities. It is also desirable that by the strategy of regional economic integration, ECOWAS would reduce or eliminate completely trade barriers, which would engender competition and consequently undermine monopoly. There will also be the incidences of availability, enhanced bargaining power and ultimately the diversification and improvement of the trade-base of the participating states. With these in place, firms, individuals and governments in West Africa are assured of easy access to global capital at the lowest possible cost and under the best terms.²

The Economic Community of West African States (ECOWAS) is the institutional framework and its treaty, positioned to promote the attainment of the economic integration strategy amongst the countries of West Africa. The ECOWAS institution as the driving belt for the economic integration dream was established by an enabling treaty which, as hitherto stated, was signed by Heads of State and Government of the integrating states of West Africa in 1975,³ and accordingly revised in 1993.⁴ With the foregoing positioned as the legal and the institutional framework for the attainment of the economic integration target, this research has evaluated the provisions of the treaty with a view to eliciting the paucity or dearth of provisions in the enabling laws to assign adequate and complementary roles to financial institutions in the strategy for economic integration and to show these institutions as the missing link in the framework and partly accounting for the slow pace in consummating the economic integration programme of ECOWAS.

Although the activities of different financial institutions may vary according to their establishment and mandate, it is undoubted that they have similarities in the broad based contributions they make to capacity building and in the mechanisms through which these contributions are made.⁵However, these mandates are only attainable and sustainable by the complementary and supporting roles that a comprehensive legal framework and member countries play towards achieving economic integration ultimately.

Generally, it is observed that the lack of sufficient provisions for a comprehensive role that financial institutions would play in the West African economic integration bid has remained its bane. These financial institutions (national, sub regional, international, multilateral, development based including the common currency Banks) remain no doubt the pivot of the desire for successful economic integration in the West African sub-region, because of the diverse financial services they must render in the process. The role of financial institutions have been tested and found to be the cornerstone for the success of other economic integration strategies around the world.

It is desirable that these financial institutions should lead in the area of financial capital investment towards the promotion of a balanced development within the region. These institutions would be responsible for raising funds from various sources and on-lend to the needy areas of development and integration towards attaining the priority objectives of ECOWAS States. The financial institutions would also contribute immensely in the area of generating, shaping and enforcing sustainable economic policies for the ultimate development and integration of the sub-region.

It must be noted that the West African Sub-region Currently operates two currency regimes with the Francophone Countries of Benin, Burkina Faso, Cote D’lvoire, Guinea Bissau, Mali, Niger, Togo and Senegal already formed into the common currency of the CFA Franc under the control of the West African Economic and Monetary Union (WAEMU) Central Banks.⁶ On the other hand are the countries of Gambia, Ghana, Guinea, Nigeria and Sierra Leone, which operate their individual national currencies. In the year 2000, these Anglophone countries, in response to the CFA Franc formed a second monetary zone (WAMZ) with a view to harmonizing their monetary and economic policies towards forming a common monetary union and currency to be called the Eco.⁷ It is posited that it would then be easier for the two currencies of Eco and the CFA Franc to merge in the long run into a single West African ECOWAS currency. This second set of countries desire to converge under what is referred to as the second West Africa Monetary Zone (WAMZ) with the sole objective of establishing a common union to be characterized by a common Central Bank and a single currency to be called the Eco in replacement of the current 5 existing national currencies.

Furthermore, as a foundation to the creation of a new Central Bank for the WAMZ which would be charged with the duties of currency and fiscal measures among the 5 countries in the second monetary zone, the West African Monetary Institute (WAMI) was formed as a precursor to the Common West African Central Bank (WACB) which has all the transition and implementation mandate as outlined. Due mainly to the inability of member countries to meet with most of the convergence criteria, despite the earlier postponements, the second monetary zone which was scheduled to have taken off on the 1st day of December, 2009 has now been shifted to the 1st day of January 2015.⁸

An aggregate of the foregoing, a consideration of the outlay of humongous capital investments and services, coupled with the desired diverse macroeconomic and financial activities within the sub-region, make the roles of financial institutions therefore indispensable in the fast-track attainment of the set of goals of economic integration. This book has therefore evaluated the content and provisions of the ECOWAS Treaty, Protocol, and Conventions. This evaluation was carried out with a view to establishing that the financial institutions, when properly positioned can play the critical but missing role of providing the so much needed finance for the capital projects of the community, technical assistance as well as render distilled financial advisory services for global best practices among others.

This book basically seeks to analyze the role legal and financial institutions as the superstructure for economic integration with particular reference to the West African sub-region. Therefore, emphasis has been laid on the roles that concern inter alia the provision of loans and grants, the enhancement of payment system for goods and services within the region, facilitation of unhindered movement of persons and labour, creation of favourable environment for the collective pooling of resources for development, enhancement of economic competiveness, derivation of economics of scale and ultimately design and facilitate policies to achieve specific