Nigeria has a reputation for blatant violation of international rule of law, for acting with impunity in breach of its international legal commitments. For instance, although a long-standing contracting party to the World Trade Organisation, WTO, and the Economic Community of West African States, ECOWAS, Nigeria is widely seen in these institutions of international economic governance as an unreliable adherent to the treaty rules.
Recently, Nigeria reluctantly signed the agreement creating the African Continental Free Trade Area, AfCFTA, but other African countries are beginning to worry that it has no credible commitment to faithfully adhere to its rules. Indeed, the Central Bank governor, Godwin Emefiele, a man determined to turn Nigeria into a communist economy, recently vowed that “AfCFTA won’t stop us from adding more items to the forex restriction list”, and the finance minister, Zainab Ahmed, warned that “the AfCFTA could create a nightmare situation for Nigeria”. The recent closure of Nigeria’s land borders was a policy response to such “nightmare situation”.
Indeed, although the border closure was presented as a move to stop the smuggling, it was a continuation of policies designed to protect local industries. For instance, since 2015, the Central Bank has maintained a list of items, originally 41, now 43, which those importing them are denied access to foreign exchange through the official window. Recently, President Buhari ordered the CBN to extend the forex ban to all food imports. The government also stopped the issuance of Form M to importers bringing in goods through the seaports. So, it’s not just goods coming in through land that the government wants to stop, but also goods imported through the seaports.
Sadly, there is no consideration of the economic and social impacts of such a drastic measure. Unsurprisingly, those import-competing producers, particularly farmers, who would benefit from the border closure are supportive of it
Of course, this is all in pursuance of President Buhari’s import-substitution and self-sufficiency agenda, and his government is determined to do anything, including closing every trade route, to achieve the objectives. Thus, the Central Bank governor, who is gung-ho on the self-sufficiency agenda, recently said: “We must sustain the border closure because it’s critical to boosting local production.”
Sadly, there is no consideration of the economic and social impacts of such a drastic measure. Unsurprisingly, those import-competing producers, particularly farmers, who would benefit from the border closure are supportive of it. For instance, the president of the Rice Farmers Association of Nigeria (RIFAN), Aminu Goronyo, was quoted as saying that the border closure “is to encourage patriotism”, adding that, “It’s time for our country to be independent on food rather than enriching people from other countries”.
But what the border closure will do is to enrich farmers, while making ordinary Nigerians poorer as the prices of locally produced food items skyrocket. All indications are that, since the border closure, the prices of common food items have risen sharply, some by 65 percent. According to one rice dealer, the price of a bag of rice before the border closure was about N16,000, “but it has shot up between N24,000 and N30,000 since the closure”. So, while farmers become richer, ordinary Nigerians become poorer!
What’s more, perversely for a government that talks a lot about increasing non-oil exports, the border closure will also hurt exports. According to one analysis, over 90% of Nigeria’s trade with the West African subregion is by road, with Nigeria exporting several finished products to the subregion. Surely, closing the land borders will hurt the export trade, not to mention the possibility that other West African countries may retaliate against Nigeria, as the angry reactions in some of those countries against the border closure have indicated.
So, while the border closure will enrich local producers, without increasing their productivity and competitiveness, it would also harm the interests of Nigerian exporters and consumers. Elsewhere, such a drastic measure would not be introduced with an impact assessment. Interestingly, it’s not clear what members of President Buhari’s Economic Advisory Council, who were tasked with devising “homegrown solutions” to Nigeria’s economic problems think about the border closure. Surely, cost-benefit analysis would show that the economic and social costs of the decision are higher than benefits to protected local industries.
But apart from the negative economic, social and diplomatic consequences of the border closure, there is also the international rule of law dimension. This is because the border closure is a blatant violation of Nigeria’s commitments under the WTO and ECOWAS treaties. As the WTO Agreement is the benchmark against which other trade agreements should be measured, let’s briefly consider Nigeria’s obligations under WTO law.
Article XI of the General Agreement on Trade and Tariffs (GATT) 1947, incorporated into the WTO Agreement, prohibits any restriction on imports other than through tariffs and other charges. Article XXII then goes on to forbid any member from “nullifying” or “impairing” the benefits accruing to other members under the agreement, either by failing to carry out its obligations or by introducing “any measure” that might harm other members’ interests.
Surely, by closing its land borders to stop cross-border movement of goods, Nigeria is, firstly, prohibiting or restricting imports other than through duties, taxes or other charges, and, secondly, nullifying and impairing the benefits accruing to other WTO members, especially those in West Africa, whose legitimate exports to Nigeria are being restricted, in violation of WTO law. But the border closure and import bans are not the only ways Nigeria is illegally restricting trade in breach of its WTO commitments.
Recently, the national president of the Association of Nigerian Licensed Customs Agent (ANLCA), Tony Nwabunike, complained that because the government has given the Nigerian Customs Service a revenue target, customs officials are manipulating the customs valuation system to extract illegal duties from importers. The Automobile Association said the same thing in a recent advertorial, accusing the customs service of imposing “arbitrary customs duties” by maintaining a “contrived” duties system. According to the advertorial, signed by the association’s secretary, Ademola Moshood, the freight-on-board (FOB) system being used by customs officials to calculate duties “is outrageously high, more than 100 percent higher than normal FOB”. So, the government is using the valuation system to collect illegal duties to meet its revenue target, in violation of the WTO Customs Valuation Agreement.
Of course, at the heart of all this is Nigeria’s determination to pursue its own development agenda without international constraints. But the truth is that it could do this without breaching international rules by legally using any of the several safeguard and escape provisions in WTO law. For instance, Nigeria could invoke Article VXIII that allows “governmental assistance to economic development”, including supporting infant industries, or the emergency safeguards provisions under Article XIX if it felt too much imports were damaging its domestic industries. Nigeria could invoke these provisions provided it negotiates with other WTO members with a substantial trade interest and offers acceptable concessions to them.
What’s more, Nigeria could justify the closure of its borders on the ground of curbing smuggling or customs enforcement under Article XX or on the ground of national security under Article XXI, provided the border closure does not constitute “a disguised restriction on international trade”. But everyone knows that the underlying reason for the border closure was not smuggling or national security concerns, but the protection of local industries, and, thus, it’s a disguised restriction on international trade!
Truth is, Nigeria’s deep-seated protectionism is not compatible with its international legal commitments. It would have to decide whether to comply with its international obligations, legally invoke the escape provisions in international trade agreements or withdraw from them altogether. It cannot continue to trample on international rule of law. The border closure, apart from its economic and social costs, has done further damage to Nigeria’s already battered reputation for utter disregard for international rule of law.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
