Pros and cons of border closure

The closure of the Nigeria-Benin border continues to generate reactions from all. At newspaper stands, filling stations, churches and public places, Nigerians argue for or against the justification behind the closure of the country’s busiest border.

Supporters of the closure believe the federal government has taken the right measures to stimulate growth of local manufacturers. There is, however, a consensus that the Nigerian manufacturing sector is grossly challenged.
While the manufacturing sector has contributed between 8 to 9 percent to GDP it is still underperforms the double-digit expectation of the 2014 National Industrial Revolution Plan. Many companies have shut down in the past six years.

Protectionists i.e. those for protecting local manufacturers argue that shutting the borders restricts imports and gives local manufacturers the space to scale, sell and make a profit. It reduces the level of unfair competition they face and increases their competitiveness. Many exemplify this position by citing the cement industry in Nigeria as a success story of protectionism. They argue further that the closure enables firms to achieve economies of scale and protect infant industries, especially in Nigeria, where unverified data show that one out of every three firms dies within three years after set-up.

The closure of the border is not entirely a witless exercise. It curbs smuggling, especially of arms and ammunition, at a time when Nigeria is tackling with insecurity, supporters say.

Smuggling has been a thorn in the flesh of the Nigerian economy. Several industries have been hurt by this negative practice – in 2015 textiles worth $2.2 billion smuggled from Benin Republic swamped the $40 million produced locally every year, according to the World Bank.

Experts argue that no amount of money can revive the textile industry if the borders are open to all kinds of textiles and fabrics. Despite several interventions, including the N100 billion Cotton Textile and Garment Fund of the central bank, the country cannot boast of any viable full-fledged textile company.

These arguments are at cross purposes with the skyrocketing rise in the price of food. Based on the recent inflation data for October, the effects of shutting the border on the price of food is even more apparent. It’s “the worst October since at least 2009” says Nonso Obikili, chief economist of BusinessDay. Food prices in August and September are the worst in 10 years too. While it is tempting to blame it on the rain (the rainy season was late this year) or on monetary policy (it hasn’t changed since January), the only cause of the sharp rise in food prices is the closure of borders. Obikili forecasts that food prices for November and December maybe the worst as well in a while.

The price of rice has come down and there are reports of increased production and milling, however pinned on the current harvest season. The sustainability, however, is questionable.

Fundamental bottlenecks haven’t been addressed. Despite various schemes to help rice farmers by the CBN, production cost is still high amid infrastructural deficiencies. Moreover, Nigeria mills 4.7 million metric tonnes of rice, but demand is 7 million, according to the Ministry of Agriculture. Keeping the border closed means about 98 million extremely poor Nigerians will pay higher prices for food.

Also, production of farm products, including rice, is inelastic. This means that even if you close borders and increase lending to rice farms by N100 billion, supply won’t increase automatically. The rice must be planted, manured, harvested and milled. This is a process can take five to seven months, according to farmers.

Also, border closure impacts trade negatively at a time when the African Continental Free Trade Area (AfCFTA), the agreement to promote trade across the continent, which President Buhari signed few months ago with pomp and ceremony.

In all, the negative impacts of border closure outweigh its positives.