Implementing the ECOWAS Common External Tariff: Challenges and Opportunities for Nigeria

Type Working Paper
Title Implementing the ECOWAS Common External Tariff: Challenges and Opportunities for Nigeria
Author(s)
Publication (Day/Month/Year) 2014
URL http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/06/27/000442464_20140627​090155/Rendered/PDF/888430REPLACEM0Box385245B00PUBLIC0.pdf
Abstract
This paper assesses the potential impact on Nigeria of implementing the new ECOWAS Common
External Tariff (CET). It uses the World Bank’s Tariff Reform Impact Simulation Tool (TRIST) to simulate
three scenarios: i) keeping in place current import bans and levies which are charged in addition to
tariffs, while implementing the CET tariff rate on non-banned products ii) removing the import bans and
implementing the CET rate on all products, but keeping the additional import levies in place and iii) fully
implementing the CET on all products and completely removing import bans and levies. The paper
suggests that implementing the CET would have significant and largely positive effects on Nigerian
consumers and producers, but only under the third scenario which includes the removal of import bans
and special import levies. In this case, imports could be expected to increase between 3 and 5 percent.
Tariff revenue would increase if import bans are replaced with ad valorem tariffs, but once import levies
are also removed the net effect is likely to be negative, though a precise assessment is difficult given
data limitations. A significant share of this loss could be offset by expected revenue gained from
increased formalization of imports as the CET reduces the incentives for informal trade. Overall, tariff
and other trade taxes account for just 3.7 percent of total government revenue, so the overall fiscal
effect would be small.
The full CET scenario, including the removal of import bans and levies, would significantly benefit
Nigerian consumers, who could expect to see the price of their consumption bundle decline by around
2.4 percent. The main channel of impact would be the removal of the levy on rice. On the contrary, if
the bans and levies are kept in place under scenario i), implementing the CET on non-banned products
would lead to an increase in the price of the average consumption basket that would adversely and
disproportionately affect the poor.

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