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Mali, Burkina Faso, and Niger have intensified their separation from the regional economic bloc by imposing a 0.5 percent levy on imported goods, a move anticipated to adversely affect the already low intra-regional trade and undermine the Economic Community of West African States (ECOWAS).
Experts have indicated that this decision also poses a challenge to the African Continental Free Trade Agreement (AfCFTA), which has been sluggish in its implementation a decade post-adoption.
Intra-continental trade remains low at around 14 percent, raising concerns among trade experts that the hasty actions of these Sahel states could undermine inter-governmental initiatives aimed at addressing tariff barriers.
Even if these unfortunate events do not significantly alter the absolute volume of intra-West African trade, the region may forfeit the advancements made in trade formalization, which saw Nigeria significantly increasing its documented trade with some countries last year.
This decision comes at a time of rising apprehension over the global tariff war's potential threat to Africa, which must bolster regional connections to hinder further economic oppression.
The newly imposed levy will target all goods imported from outside the three nations, taking effect immediately and intended to support the formation of their new union following their collective departure from ECOWAS.
The trio of West African nations, all under military governance that emerged from recent coups, initiated the Alliance of Sahel States in 2023 as a security agreement.
Over time, this alliance has evolved into a potential economic union, intending to foster closer military and economic integration, including the introduction of biometric passports.
Notably, none of the Sahel countries ranks among the top 10 African countries from which Nigeria imports. Last year, South Africa, Ivory Coast, Senegal, Cameroon, and Togo represented 90.95 percent of Nigeria's exports to Africa. Nevertheless, Nigeria's trade with its neighboring countries has seen recent growth.
Trade with other ECOWAS countries remains minimal for Nigeria. Its imports surged from N164 billion to N600 billion last year, but this growth, while seemingly significant, accounted for only one percent of Nigeria's total imports. Furthermore, exports amounted to N5.28 trillion, a rise from N2.24 trillion recorded in 2023, with exports to ECOWAS countries, including the Sahel region, constituting 6.8 percent of total exports.
The Republic of Benin and Niger are positioned seventh and ninth among Nigeria's top 10 export partners. Last year, Nigeria's total exports to Benin reached N32.55 billion, while exports to Niger were N25.91 billion, figures that are relatively insignificant compared to Nigeria's exports to South Africa.
Experts warn that this emerging tariff conflict in the sub-region could undo the positive trends and evolving trade patterns, with the Alliance of Sahel States (AES) now becoming a new frontier for trade barriers in West Africa.
The three countries accused the regional bloc last year of not offering sufficient support in the fight against Islamist insurgencies and addressing insecurity within their regions.
In reaction to the latest developments, Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, stated that trade within the sub-region, especially between Nigeria and its neighboring countries, tends to be predominantly informal.
"I believe the levy will not greatly influence informal trade, which is, in this instance, more prevalent than formal trade. The borders are porous, and a significant portion of trade occurring there is informal and undocumented.
"The formal trade will indeed be impacted by this new levy, but the effect is limited when examining trade within the subregion and with our principal trading partners in the area. Observing our trade statistics with Niger; it is not substantial enough to have a significant impact on us," he noted. He emphasized that total trade, including imports and exports, within the sub-region accounts for less than 10 percent of Nigeria's overall trade, rendering it not particularly material.
"Considering the livestock and animals imported during festive seasons, how is that trade documented? Do people pay taxes on those? Niger is landlocked; most of their goods are sourced from Nigeria and the Republic of Benin, much of which remains undocumented. This levy will affect those nations more than it will Nigeria," he added.
Regarding the potential impact on AfCFTA, he remarked that non-tariff barriers pose even greater challenges and pressures to ECOWAS states compared to levies and tariffs.
"In order to transport an export cargo through Benin Republic and Togo, exporters incur what is termed a 'transit levy,' which can amount to millions of naira. I believe the transit levy exceeds the newly established 0.5 percent levy introduced by the Sahel countries. Benin has already prohibited some of our goods, defying the ECOWAS protocol and treaty. The adherence to the protocol within the sub-region is alarmingly weak, and this levy could be the final blow to the ECOWAS treaty and protocol," he concluded.
Director-General of the African Centre for Supply Chain, Dr. Madu Obiora, remarked that the move was anticipated.
"Since they have exited ECOWAS, treaties like the ECOWAS Trade Liberalisation Scheme (ETLS) no longer apply to them, which was to be expected. This implies that imports from ECOWAS countries will be affected, and I view the 0.5 levy as manageable.
"I am uncertain about the efforts to reintegrate them into the regional bloc, but any further significant trade tariffs would substantially disrupt trade flows in West Africa. Previous economic sanctions imposed upon them were ineffective, and what we witness now is a deeper fragmentation.
"For traders previously engaged in transactions with these countries, this levy could disrupt their trading facilitation processes. Historically, ECOWAS has been somewhat divided between English-speaking and French-speaking regions, and this will only exacerbate those divisions. Additionally, they might begin seeking partnerships outside of ECOWAS and Africa, which, if successful, would bolster their position and likely lead to an increase in duties and levies," he warned.
Expressing concern over the declining intra-African trade rates of about 14 percent, he stated that this figure is likely to drop further in light of these new barriers.
"Intra-African trade is already significantly low, particularly when compared to other continents. Africa holds the lowest numbers for intra-continental and regional trade globally.
Conversely, instead of exploring fresh ways to eliminate ongoing tariff and non-tariff barriers, new ones are being erected atop the existing issues. Our regional trade will be under even greater strain," he cautioned.
He also mentioned that this situation presents a security risk not just for trade but across various sectors.
"The countries have voiced grievances about the lack of action surrounding insecurity in the sub-region; however, this maneuver could exacerbate insecurity and cause further disruptions in cross-border trade.
These three landlocked nations may find themselves searching for alternative trade routes if neighboring countries, such as Togo, a key trading conduit between West Africa and the wider continent, impose tariffs as well," he added.
