[Column] Frida Frans: The impact of Coup d’état on trade agreements and economic stability in West Africa

The recent series of coup d'état incidents in West Africa has resulted in significant political upheaval across the region. These prominent coups occurrences in Mali, Guinea, Burkina Faso, Niger are characterized by sudden and often forceful changes in leadership. At times they have highlighted the intricate challenges faced by various West African countries, involving adept power transitions and upholding democratic values.

This situation has created a scenario where nations implement security-driven measures such as border closures and trade limitations. These actions disrupt the movement of goods and people across borders, impacting supply networks and essential commodities. As a result, these occurrences carry significant ramifications for trade, regional integration initiatives, and the broader economic advancement.

These implications extend beyond the limits of the Economic Community of West African States (ECOWAS) to encompass Africa's positioning on the global stage. In light of these circumstances, it is crucial to delve into the intricate interplay between coup d'état events and their multifaceted impacts.

By dissecting these dynamics, we can better comprehend the complex challenges faced by the region and the potential avenues for fostering resilience, stability, and sustainable development or in generating African solutions to African problems.

 Disruption of Trade Agreements and Treaties

The effects of coups can go as far as disrupting the existing trade agreements and treaties between countries. This can result in the suspension or renegotiation of trade deals, creating barriers to the free movement of goods, services, and capital. Amid the ongoing developments in Niger, this is visible from various official media reports that the Economic Community of West African States (ECOWAS) demonstrated its response to the situation by announcing a no-fly zone, the sealing of borders with Niger, and the suspension of all commercial and financial transactions with Niger on the 30th of July, 2023.

Additionally, Mali’s Committee for the Salvation of the People (CNSP) has been issued a directive by ECOWAS to release and reinstate President Bazoum within a stipulated one-week timeframe. Failure to meet ECOWAS' stipulated demands will prompt the organization to deliberate on a range of potential measures, including the consideration of military intervention.

The implementation of travel limitations by the regional body is a direct consequence of the country's imposed closure of both land and air borders in the aftermath of the coup. Simultaneously, a nationwide curfew has been enacted during specified hours. Regrettably, under such circumstances, trade operations obviously have come to a standstill.

Considering the region's aspiration for integration, Article three (3) of the Revised Treaty of ECOWAS outlines the imperative of dismantling trade barriers and aligning trade policies to establish a Free Trade Area, Customs Union, Common Market, and eventual Monetary and Economic Union in West Africa. However, recent coups have the potential to disrupt significant regional agreements as analyzed below.

Regional integration often involves the development of infrastructure projects such as roads, railways, and energy networks. The ECOWAS Trade Liberalization Scheme (ETLS) serves as the central framework for market integration and trade within this region.

It encompasses protocols pertaining to the unhindered movement of goods, individuals, and transportation. A notable example is the Abidjan-Lagos Trade and Transport Facilitation Programme, supported by the World Bank, which has proven beneficial to countries like Benin and Nigeria.

Notably, Burkina Faso and Togo are also in the process of implementing this initiative. Nevertheless, the obstacles stemming from the insufficient execution of these ETLS within national boundaries, can partly be attributed to factors like coup events that impede its effectiveness due to shifting of priorities and uncertainty about the future direction of the country. Addressing these challenges is imperative to foster a more profound integration of trade and markets within the ECOWAS framework.

Furthermore, impacted by these developments are critical sectors related to the region's investments, particularly the key areas aimed at augmenting investment and competition policies. These encompass the establishment of the ECOWAS Common Investment Market, the active promotion of conducive investment climates, and the integration of financial markets. Illustratively, initiatives like the ECOWAS Investment Forum, alongside the provision of an online platform for monitoring the investment climate, are indicative of efforts being made in this direction.

What is more, the suspension of multiple West African countries from ECOWAS not only presents a significant hurdle to the ongoing negotiations of the African Continental Free Trade Area (AfCFTA) but also introduces a substantial setback to the broader regional integration efforts. This suspension casts a shadow over the cooperative spirit necessary for realizing the potential benefits of the AfCFTA, which aims to foster greater intra-African trade, boost economic growth, and enhance the collective bargaining power of African nations on the global stage.

Besides, the exclusion of these countries from such a prominent regional economic community, disrupts the harmonization of trade policies and regulations across the region. This, in turn, undermines the seamless movement of goods, services, and investments that the AfCFTA seeks to achieve.

The collaborative mechanisms and mutual trust necessary to ensure the success of the AfCFTA may be compromised as a result of these suspensions, potentially hampering the progress of this transformative initiative.

 Regional Economic stability

ECOWAS has a history of military interventions, and the ongoing events in the region cannot be easily disregarded as isolated happenings linked solely to undercover foreign-sponsored extremist groups. On the contrary, these occurrences now stand as distinct and intensifying threats to regional stability, reminiscent of the tumultuous eras experienced in the 1990s and 2000s.

During those tumultuous years, countries such as Liberia, Sierra Leone, Guinea-Bissau, and Côte d'Ivoire were engulfed in civil conflicts, profoundly affecting their socio-political landscapes. Concurrently, Mali, Niger, and Nigeria grappled with insurgent movements that not only undermined their economic advancement but also hindered overall societal progress.

The historical echoes of these earlier crises are poignant reminders of the fragility of regional stability in West Africa. The current incidents share unsettling similarities with those turbulent times, suggesting a pattern that demands attention and concerted action. If not addressed comprehensively, these escalating threats could lead to a resurgence of political upheaval and security challenges akin to those previously experienced.

Against this backdrop, the demographic composition of West Africa is a critical factor that exacerbates the risks associated with such instability.

The region boasts a burgeoning youthful population, comprising approximately 429 million individuals, expanding at a notable annual rate of 2.5 percent, according to data from the U.N. population division. While youth can bring vitality and innovation to a society, when coupled with pervasive insecurity and limited opportunities, it also harbors the potential to become a source of vulnerability. The risk is that this youthful demographic, under the shadow of protracted instability, might experience hindered human development and limited prospects, perpetuating a cycle of underdevelopment and insecurity.

Moreover, the prevailing instability in the region gives rise to a distinct political risk, which in turn acts as a deterrent for potential investors. This phenomenon, substantiated by data from the World Bank, underscores that while West Africa's GDP exhibited a compounded annual growth rate of 4 percent from 1990 to 2021, after accounting for inflation, the per-capita growth stood at a mere 1.3 percent due to rapid population expansion.

Throughout this period, the inflow of foreign direct investment (FDI) has been relatively modest. Surprisingly, even when commodity prices showed an uptick in 2020, there was an apparent lack of a corresponding surge in investment. Moreover, the trajectory of trade has remained stagnant, and the flow of net official development assistance (ODA) has been steadily declining.

In addition to these economic ramifications, the broader repercussions of insecurity in the region encompass aspects such as weakened governance, elevated military expenditures, and forgone investment opportunities. These interrelated factors have collectively contributed to a noticeable impact on West Africa's average human development index (HDI).

As of 2021, this index had barely surpassed the threshold of 0.5, substantially lagging behind comparable developing regions. On that background, it is evident that the intricate nexus between instability, economic underperformance, and human development indicators underscores the multidimensional challenges faced by West Africa.

By charting a path towards enhanced political stability, effective governance, and targeted development initiatives, the region can aspire to transform its current trajectory and unlock its latent potential for sustained prosperity.

  Favorable Augmentations

On the other hand, it remains of utmost importance that the occurrence of coups does not exert a detrimental impact on currency fluctuations within ECOWAS. This consideration becomes predominantly pertinent given the context that the eight West African Francophone Member States comprising the West African Economic and Monetary Union (WAEMU) have firmly established themselves to the extent of benefitting from shared macroeconomic fundamentals, most notably the utilization of a unified currency (the CFA franc).

The stability of currency exchange rates within this subset of nations has been underpinned by their adherence to a common currency, reflecting a coordinated approach to monetary policy. This unified currency framework fosters consistency in trade and investment activities, contributing to economic cohesion among the WAEMU member states.

In this light, the occurrence of coups and the subsequent political upheaval have the potential to unsettle the delicate equilibrium that has been cultivated. It is thus essential that measures are taken to ensure that the impact of coups on currency dynamics is minimized. Such measures could encompass bolstering political stability through diplomatic interventions of course, reinforcing governance structures, and engendering a culture of respect for democratic norms.

By preserving the stability of the common currency, the WAEMU member states can sustain the gains achieved through their economic integration efforts and bolster their resilience in the face of internal challenges.

In summary, contemporary coups in West Africa have far-reaching effects on both the economic and political landscapes of the region, disrupting efforts towards intra-Africa trade and regional integration. These events emphasize the critical importance of stable governance, political cooperation, and the upholding of democratic principles to foster sustainable economic growth and deeper regional integration.

Drawing from historical lessons and acknowledging demographic factors, West African nations must adopt proactive strategies that prioritize stability, security, and comprehensive human development. These strategies are vital to prevent the recurrence of past crises and ensure a more prosperous and secure future for their citizens.

Most importantly, the interconnectedness of regional organizations like ECOWAS and the broader aspirations of the AfCFTA highlight the interdependence of African nations in their pursuit of sustainable economic development. While the suspension of countries from ECOWAS poses challenges, it also underscores the need for diplomatic and cooperative solutions that can align the goals of both regional integration initiatives.

A collective commitment to resolving political differences, fostering stability, and upholding the principles of intra-African trade is essential to secure the potential gains offered by the AfCFTA and advance the economic well-being of the continent as a whole.

Frida Frans is a Namibian researcher, she holds a Master’s degree in Governance and Regional Integration from the Pan African University in Cameroon. Opinions expressed here are her own.