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The Distributional Effects of ECOWAS Common External Tariffs in a Rich Country with Poor People

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  • Kareem, Olayinka Idowu

Abstract

The importance of Nigeria’s economic integration with the rest of the world cannot be overemphasized. The integration of developing countries into global market offers the opportunity and potential for rapid growth and reduction in poverty. Nigeria is endowed with abundant natural resources, especially crude oil, from which it derives over 90% of its foreign earnings. The country has been experiencing an average growth rate of around 7% during the last 5 years. However, this economic growth has not trickled down to the majority of the population reinforcing the condition of Nigeria as a rich country populated by poor people. Unemployment rate is increasing and has reached 24% in 2011 (NBS, 2013) and the share of population living below the poverty line has increased from 43% in 1985 to 55% in 2004 (World Bank, 2013). Explaining this situation requires a careful analysis of the government policies and their effects. This study will focus in particular on the trade dimension and analyze the impact on households’ welfare of the adoption of Economic Community of West African States’ Common External Tariffs (ECOWAS-CET). In its attempt to further integrate the economy to global market, particularly in the ECOWAS sub-region, Nigeria in 2005 committed itself into adopting ECOWAS’ CET, which reduces tariff rates from 0%-150% to 0%-50% during the transition period of 2006-2007. These tariffs stand as ECOWAS MFN rates to non-member countries and are part of the trade liberalization scheme (TLS) aimed at enhancing the sub-regional trade integration. ECOWAS’ CET establishes four tariff bands, namely 0% for social and necessities, 5% for raw materials, 10% for intermediate goods and 20% for finished goods that are not produced locally. Nigeria was granted the possibility of adding a fifth band of 35% for finished goods manufactured locally. The adoption of CET will have different effects on Nigeria’s households depending on whether the households are net consumer or ...

Suggested Citation

  • Kareem, Olayinka Idowu, 2015. "The Distributional Effects of ECOWAS Common External Tariffs in a Rich Country with Poor People," Conference papers 332648, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332648
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