In August 2019, the Federal Government shut the Nigeria-Benin border in order to check smuggling of petrol and other commodities by local and foreign traders. The move angered several neighbouring countries as many of them saw the action as unilateral. Few months after, several African countries impacted by the closure pleaded with Nigeria’s President Muhammadu Buhari to re-open the borders to save their economies from slump.
Earlier in the year, Nana Akufo-Addo, president of Ghana, was reported to have begged Buhari to re-open the land borders to boost the Ghanaian economy. This, according to reports, happened on the sidelines of the UK-Africa Investment Summit 2020 in London.
A statement released by Nigeria’s presidency in January 2020 had said that the Ghanaian president showed understanding of the fact that Nigeria needed to protect its citizens, but pleaded for an expedited process as the Nigerian market was significant for certain categories of business people in the West African country.
In 2019, John Mahama, former president of Ghana, had appealed to Buhari to reconsider opening Nigeria’s land borders as the shut-down was hurting many small and medium businesses, especially in Togo, Ghana and Cote D’Ivoire, which rely on regional trade for survival.
This demonstrates that border closure is not a fix-it-all, especially when the fundamental issues of competitiveness have not been addressed.
The land borders have been on the shut-down for the past 12 months. Proponents and supporters of the closure of the land borders argue that local rice production has risen in the last one year. They see evidence in the 1.58 percent growth recorded by the agriculture sector in the second quarter of 2020. Another piece of evidence for the proponents is data from the United States Department of Agriculture (USDA) which put Nigeria’s milled rice production in 2018/2019 at 4.78 million metric tons (MMT), up over 2.5 percent from 2017/18 figure of 4.66 million MT. Data from the Thai Rice Exporters Association show that Nigeria imported a total of 2,796 metric tons in the half-year 2019 and 1,192 metric tons in the corresponding period of 2020, indicating a 57.36 percent decline over the period.
“Since the border closure, lots of farmers, who had abandoned growing rice, have returned. Other farmers are shifting to rice cultivation because the market is there now and it is profitable,” Muhammed Augie, former chairman, Rice Farmers Association, Kebbi State chapter, recently said.
“Nigerians are now changing their preference to local brands and consuming it more,” Augie further said.
Protectionists have always argued that border closure is the best measure to promote the local production or manufacturing. They argue that by shutting borders, imports are restricted and local manufacturers have the space to scale and make sales/profits. For them, border closure reduces the level of unfair competition local producers faces and increases their competitiveness. They further contend that border closure helps to protect infant industries, especially in Nigeria where firms’ survival rate is low.
Border closure, for the proponents, can also curb smuggling, especially of arms and ammunition, and is a vital policy for a country like Nigeria which is facing insecurity crisis.
However, as logical as the points are, opponents of border closure and proponents of open borders do not see many positives in protectionism.
They say that it creates monopolies and enriches a few at the expense of many others. This point is evident in the price of rice today. Before the border closure in August 2019, a 50kg of rice cost N16,000 to N18,000. One year after the closure, the price has risen to N24,000 to N6,000, thereby out-pricing the majority poor and enriching rice farmers who are also getting government incentives. In the agriculture sector, the noise about gains of border closure has often been heard on rice. Nobody is talking about cash crops which provide the much-needed foreign exchange when exported. Cash crops such as cocoa, palm oil and rubber, among many others, are sometimes exported through the Nigeria-Benin borders. The business has been crumbled and the FX, eroded. Several exporters have shut down operations along the corridor, with attendant job losses. Nigeria does not mostly base its policies on data and the recent NBS figures should tell anyone how much the country is losing from this singular policy.
Nigeria earned $823.06 million (N296.3 billion) from export to ECOWAS countries and $2.72 billion (N978.21 billion) from shipping out products to Africa in the first quarter of 2020. This is no longer possible, and it is bad news for an economy reeling under acute FX crisis.
Surprisingly, as was demonstrated, rice price has not decreased, which, for economists, means that the country is still not producing enough for the citizens. This reinforces many economists’ viewpoint that border closure forecloses competition which should be crucial for Nigerian farmers as the African Continental Free Trade (AfCFTA) nears.
This demonstrates that border closure is not a fix-it-all, especially when the fundamental issues of competitiveness have not been addressed. As of today, power supply issues have not been addressed in local production, and many farmers cannot access several markets due to poor road network. Flood is still a major issue for rice farmers, which naturally affects their output and cast doubt on their capacity to pay back government loans. More so, many farmers are still using crude tools because they are not farming commercially or cannot afford sophisticated machinery such as tractors. Also, quality of seeds is still a critical issue yet to be addressed, while input prices are sometimes very high.
These fundamental issues are still with Africa’s largest economy and cannot guarantee improved productivity even if the borders are shut for 10 years.
While the border closure favours some manufacturers, it disfavours many others who cannot import inputs or set up offices in other West African countries.
Toki Mabogunje, president, Lagos Chamber of Commerce and Industry (LCCI), said at a dialogue session with Vice President Yemi Osinbajo recently that the closure of the land borders has enormous implications for cross-border economic activities around the country.
“The indications are now that the closure is indefinite. While we share the concern of government on issues of security and smuggling, we believe that the indefinite closure of land borders is not the solution to the problem,” she said.
The biggest problem with border closure is that it could make or mar the AfCFTA starting in January 2021. Nigeria is a very significant country, being the continent’s largest economy and most populous. It needs to trade with the rest of Africa to boost its own growth. Critical issues are already fuelling under-performance in the economy. For example, inflation rate is 12.82 percent and poverty among the consumers reached 44 percent in 2018, according to World Poverty Clock. Unemployment rate has hit 27 percent in the second quarter of 2020, from 23 percent in the third quarter of 2018. The GDP contracted 6.1 percent in the second quarter of 2020, according to the NBS. The country is facing a worsening foreign exchange crisis, including low Foreign Direct Investment and Diaspora dollar inflows.
This is why trade is important to create opportunities for businesses, which, in turn, will create jobs and grow the economy.
Trade among West African countries is about 12 percent, which is relatively low when compared with other regions. On continental basis, trade among African countries is 16 percent, which is poor when compared with Europe’s 59 percent, Asia’s 51 percent, North America’s 37 percent, and Latin America’s 20 percent, data show.
At the moment, it is looking like Nigeria is not preparing for the trade treaty as it continues to shut land borders through which goods and services will come in and leave when the AfCFTA starts. Apart from the shutdown of the border, the FX restriction on several items is another anti-trade policy that will impact how things pan out when the AfCFTA begins in January 2021.
Nigeria must be ready to open borders as it is simply a one-sided policy that disfavours all the consumers and many sectors, while enriching a few people.
