What if I told you there was a sure-fire way to stop all crime? A virtually fool proof way to ensure that the crime rate dropped to zero. Would you be interested? Are you curious to hear what this genius idea is about? Well it is very simple. Just lock everyone up in solitary confinement indefinitely. If we do this, I can guarantee that the crime rate will drop to zero. There would be no killings, no robberies, no kidnappings, no scamming and so on. The “solitary” is very important though, since apparently people can scam others from prison.
If we want to stop crime, and we know that locking everyone up in solitary confinement will stop crime then why don’t we do it? We don’t do it because it makes no sense. For sure we don’t like crime and we would all like a zero-rate crime level, but we care about the costs of whatever strategy we choose to achieve it. Is fighting crime worth sacrificing all our freedoms for? Of course not. Regardless of the zero-crime benefits, the costs are so much more. In this extreme example of benefits versus costs analysis, we will always choose to take our chances and try some other crime-fighting strategy.
For over a week now most of the border posts on the western part of the country have been shut, and if government reports are to be taken seriously will stay shut for at least 28 days. Why have they been shut? Apparently, rice smuggling on the Benin border is alarming. “The country has saved huge sums of money which would otherwise have been expended on importing rice using our scarce foreign reserves. We cannot allow smuggling of the product at such alarming proportions to continue”. Officially the borders are not completely shut and people with valid travel documents can still pass through, but nothing besides human beings are officially allowed through.
You probably already know my views on importing food but before we get to that, let us talk about the costs of closing the border. The Seme and Idiroko borders are perhaps the most important land border crossings for all sorts of economic activities. I know, some of this is smuggling but much of these activities are legitimate.
Since the Lagos ports turned into the stuff of nightmares, the port at Cotonou has served as a viable alternative for people to import or export legally and easily. Let us also not forget that trade with Togo and Ghana and large swathes of West Africa also pass through those borders. What are the costs of effectively shutting down cross-border economic activity? Are those costs higher than the perceived benefits from trying to stop rice imports?
I say “trying” because the border between Niger and Benin Republic is over 700 kilometres, and hundreds of border posts along the way; some official and some unofficial. As long as the rest of the world is able to produce rice, ship it halfway around the world and have it arrive at the Benin borders at half the price the same rice sells in Nigeria, there will be smuggling.
Let us not forget that we have a significant fraction of people living in poverty and any opportunity to earn extra money will be seized, especially when there really is no moral justification for not doing it. The real problem is not that rice is being smuggled, but that the same rice has two different prices depending on which side of the border you are standing on. And the reason is the policy options we have chosen. Policy that has not focused on improving the productivity of our rice farmers but continuously tries to use the shortcut of banning competition and channelling profits to preferred players.
So, what will be the likely outcome of shutting the borders? The prices of rice and other tradeable goods will go up, leading to a bigger spread between prices in Nigeria and prices across the border. This will incentivise people to take even bigger risks and devise more ingenious ways to smuggle things across the border.
In the meantime, we can expect to take a GDP hit as the western part of the country, which is an important economic centre, will find life that more difficult. The costs from this border closure are likely to fair outweigh any perceived benefits. Will we learn anything from this exercise? Probably not. We still have not learned a basic lesson about human behaviour: if your policy requires human beings to behave irrationally to succeed then it has probably already failed.
NONSO OBIKILI
Dr Obikili is Chief Economist at BusinessDay
