Manufacturers are reeling from loss of revenues and foreign exchange due to the Federal Government’s stubborn closure of the Nigeria-Benin Republic border.
They are wondering how the government plans to sustain the policy in the face of the imminent African Continental Free Trade Area (AfCFTA) starting in January 2021.
At the moment, Cadbury Nigeria cannot bring in Hot Chocolate drinks from Ghana and cannot export Tom Tom, Buttermint and cocoa intermediaries to West and Central Africa.
The confectioner reported a 14.42 percent decline in revenues from export sales to N3.3 billion in nine months to 2020 due to Covid-19 and closure of the land border, sources close to the company said.
Aarti Steel, an exporter of steel products, has stopped exporting to West and Central Africa because exporting by sea is expensive. The firm has also lost some of its export staff members due to the situation, according to Okhai Ehimigbai, export manager at Aarti Steel. On the other hand, PZ Cussons is now moving its goods via sea, which is an expensive and slow option.
BusinessDay was told that Nestle Nigeria spent weeks on sea recently while exporting its products to the rest of West Africa. This should have taken three days by land and should have been cheaper. Exporters now move their vessels to Europe and wait for weeks for vessels returning to Africa due to the controversial closure of the important borders.
Moreover, Guinness Nigeria is also unable to move its drinks to West and Central Africa. In Guinness Nigeria’s 2020 nine-month financial statement, year-on-year revenue fell by 78.6 percent majorly due to decline in export volumes.
The brewer earned $15.06 million from exporting Malta Guinness and Guinness FES to Ghana and Cameroon, including the United Kingdom, in 2017.
Much of that FX is lost already due to the controversial closure of a border linking Nigeria to West Africa.
British American Tobacco Nigeria Limited is also impacted by the border closure. It earned $145.48 million in 2017 from exporting tobacco products to Liberia, Guinea, Ghana, Cameroon, Cote d’ivoire and Niger Republic, according to the 2017 CBN Annual Report. Much of that has been lost.
Many manufacturers are suffering in silence because they are unable to get their raw materials or export their finished products to West and Central Africa by land due to the government’s continued closure of a border linking Nigeria to the African market.
“Does it make sense to keep shutting this border when you have ratified the AfCFTA and when the trade treaty is starting in January?” a senior executive of one of the manufacturers asked, on the condition of anonymity.
“Six of our export staff members have been asked to go, and our export revenue is down by 90 percent. So, tell me, are you helping or killing us? And why should the border be opened for two companies when hundreds of companies need to export and survive?” the angry executive, whose company exports mainly to Africa, further asked.
The Nigerian cash-strapped consumers are bearing the brunt.
Incomes have been dropping due to job losses and slowing economy attributed to Covid-19 and lagging growth, but consumers have been forced to pay higher for essential products.
Jimi Daniels, a Lagos-based artist, complained he paid N5,500 for a locally made pair of shoes in Lagos last month as against N3,500 when he wanted to buy it in June 2019. A 50kg bag of foreign rice, which was sold for an average of N14,000 before the border closure, now goes for N32,000 at Lagos markets. This shows a 129 percent increase in 14 months.
A big basket of tomatoes at Port Harcourt market now sells for N15,500 as against N7,500 sold last year, while a bag of pepper now sells for N15,000 as against N9,000 a year ago.
“Initially, the closure was supposed to last for one month, but till now it still remains closed. The resultant effect of this is the decline in export to these countries and significant losses for many exporters, as many have closed down some of their production lines since then,” Ede Dafinone, chairman, Manufacturers Association of Nigeria Export Group (MANEG), told BusinessDay.
The situation is impacting Nigeria’s trade with ECOWAS negatively. Nigeria earned $823.06 million (N296.3bn) from export to ECOWAS countries and $2.72 billion (N978.21bn) from shipping out products to Africa in the first quarter of 2020. In the second quarter of 2020, export to the whole of Africa was estimated at N401.4 billion, while goods worth N149.3billion were exported to ECOWAS member states, an 82 percent decline from export in the first quarter. Though this may be attributed to Covid-19, manufacturers said the border closure was a critical factor.
The Nigerian government has ratified the AfCFTA but leaves its border with Benin Republic and Niger Republic closed, with 44 items from milk to tomato on the list of products not eligible for foreign exchange access.
This raises questions as to Nigeria’s readiness for a trade treaty starting on the first day of January, and leaves many exporters unprepared for the imminent competition.
The border was, however, controversially open for Dangote and partially for BUA for export, drawing flaks from experts and bankers.
“Allowing legitimate exporters and importers to move their goods across the border should be a non-brainer,” Atedo Peterside, a leading banker, said last week.
One manufacturer said the one-sided and preferential treatment remains the major reason why some players are more prosperous than others in the same sector.
The AfCFTA, the largest trade agreement after the World Trade Organisation (WTO), is touted to open up a $3.4 trillion opportunity for a continent barely trading at 16 percent with each other.
For Nigeria, the continent’s most populous nation, it is an opportunity for firms to grow revenue, profits and a lagging gross domestic product, while creating jobs for a country with a 27 percent unemployment rate, 14.23 percent inflation and misery index of 43 points. Inflation jumped to 14.23 percent in October from 13.7 percent in September due to rising food prices caused by border closure.
Toki Mabogunje, president, Lagos Chamber of Commerce and Industry (LCCI), said recently that the closure of the land borders had 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 the 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.
Analysts say nothing can be achieved with the closure of the borders when reforms are yet to take place along the corridor. Others assume that the government could be putting measures in place before re-opening the border.
Tony Ejinkonye, executive director, business development (Africa), Eskilroad Network Limited, said, “I want to believe that with the ratification of AfCFTA, the government will want to put some physical and fiscal structures in place for effective take-off and reopening of the borders. Goods entering or exiting our borders will need to comply with the rules of the agreement.”
