Few weeks ago, at the Nigerian Economic Summit, Doyin Salami, who happens to be the head of President Buhari’s Economic Advisory Council said, in the presence of the President, that closing the border was a bad idea. That advice, very sound from my point of view, has been ignored, and the borders will remain shut at least until the end of January, covering the entire end-of-year shopping period. I think the shutdown will be extended, but that is another matter entirely.
One thing this border closure shows is the inability of our government to deal effectively with a complex problem.
What is causing the inefficiency of the customs and smuggling at our borders?
Is it not more sustainable to address the inefficiencies than shutting our border posts?
Did we attempt to calculate the collateral damage that the border closure would cause to be sure that we have taken the most valuable approach?
Consider the customs stopping people for “smuggled” cars. You have a rather ridiculous 70 percent tariff on brand new cars in the name of “incentivising local manufacturing”. It has been on for five years, with no discernible impact on the local manufacturing of cars. When you consider a host of negative economic factors (including low wages, the utter absence of a developed production line for basic manufacturing raw materials, power, and the lack of a discernible middle class with the sort of disposable income that would make local manufacturing make sense), it is orders of magnitude not economically viable to manufacture cars in Nigeria. Almost every locally made vehicle is more expensive to purchase than a comparable vehicle made abroad even without the import tariffs.
Under the circumstances, the only thing the tariffs do is encourage smuggling, and not discourage it.
During the 1920s, the United States government decided alcohol was an evil and placed a total ban on hooch.
Mobsters got very wealthy smuggling alcohol to people who wanted to drink, and the government missed out on millions of dollars in tax revenue. Nigeria ought to learn from that harsh lesson. Instead of a pointless tariff to support a local manufacturing sector that is simply not viable at this point in time (how many Nigerians can afford ₦15 million for a locally made Honda Accord anyway?) the government ought to focus on expanding production base. India did not jump into pushing locally made vehicles until its steel sector was firmly entrenched, and now we buy tricycles by the boatload from them.
Regarding rice, it is an unassailable fact that Nigeria’s rice production simply cannot meet our demand, and is not on track to do so. Multiple studies show that Nigeria’s soil isn’t even that productive for rice, whereas we are leaders in the production of several other crops. Our grain storage capacity is also laughably inadequate as we currently have the ability to store less than 5 percent of all the grain we produce (including rice) and post-harvest losses can reach as high as 50 percent of any given crop yield.
What have we done to incentivise production, storage, and getting the rice to the market on time?
Why are we not focused on the crops in which we have a strategic and comparative advantage to other countries?
For example, 70 percent of all yam eaten in the world is grown in Nigeria. What are we doing to improve production quality, storage capacity, and promote exports of Nigerian yams? Two years ago, and with a lot of fanfare, we exported 72 tonnes of yams to the United States. They were rejected and returned because of poor quality. Have we learned any lessons from that about storage and packaging?
What is this obsession with rice, and how does the border closure improve local production of rice or any other crop? The border closure has not improved production or yields of rice, but has instead driven prices sky high, and contributed to a spike in inflation figures, news that should alarm any sensible government. Despite all this, the government seems determined to see this policy through to its inevitably bitter end.
The saddest part of this entire episode is not Buhari or his destructive ideas, it is how Nigeria, as a society, shows no resistance to the dictates of authority figures.
Whoever gets to the top can do anything and all our systems will just accommodate the person, even if doing that is to all our detriments. In South Africa, when Jacob Zuma began to derail, the country’s institutions and business community stood up to defend their interests. In Nigeria, what we are watching is everyone bending their interests to accommodate the whims of President Buhari.
This has to do with the nature of the Nigerian system.
Power is so heavily concentrated in the office of the commander-in-chief, that having independent institutions is nigh impossible. This is a relic of our decades of military dictatorship during which the Head of State could do whatever he wished, and there was no independence in public institutions. That attitude has carried over into a supposedly democratic system of government that ought to involve checks and balances, as the executive has steadily undermined and eroded the independence of the other branches of government.
As such, it is near impossible to envision a scenario such as the one in the United States where the Federal Reserve essentially ignores the haranguing of President Trump and continues to carry out its policy objectives. Here, the Central Bank of Nigeria has proven to be more than willing to go along with whatever President Buhari directs, irrespective of the CBN’s own policy thrust and the interests of the economy at large. This is why the CBN is apparently undermining its own “Cashless Policy” with directives that have the unintended effect of discouraging the use of electronic payment options.
Even in the US with its long and proud history of strong and independent institutions, it is being clearly shown that what probably matters most is not the strength of the institutions or even their independence, but the attitude of the President and the people he puts in place to operate and oversee these institutions. A President who disdains checks on his power will act to grow that power at exponential rates and gladly step on anyone and anything that gets in his way, and there are no sacred cows. Thus, even as the institutions have tried to contain President Trump’s worst impulses, he still manages to get his way a lot of the time, and he will happily terminate the appointment of anyone who does not follow his orders.
Sad consolation is that perhaps the US will one day get to where Nigeria is. But it will have to hurry. We’ve had an almost 60-year head start.
CHETA NWANZE
Cheta Nwanze is head of research at SBM Intelligence
