Nigeria drags on border re-opening 22 days to African free trade take-off

Twenty-two days to the start of the African Continental Free Trade Area (AfCFTA), the Federal Government of Nigeria is still foot-dragging on the re-opening of its border with its neighbours.

Though President Muhammadu Buhari said on Tuesday that his government would reopen the borders “as soon as possible” to allow the return of economic activities, stakeholders say they couldn’t bank on those words. Officials of the Buhari government, including the finance minister, had also recently been speaking of possible border reopening, but the stakeholders say they are doubtful this would materialise soon.

The continued border closure is creating uncertainty in the Nigerian trade circles, showing the country as unprepared for the opportunities and challenges ahead of the AfCFTA, manufacturers say.

“Export is suffering. The manufacturing and trade sectors are in recession, and it looks like Nigeria’s policy uncertainty is being transmitted across the border and to the AfCFTA,” said the chief executive officer of a manufacturing firm based in Agbara, Ogun State.

The Nigeria-Benin border was shut 15 months ago to curb smuggling of petrol and rice, especially from Benin Republic into Nigeria. The situation has favoured agro-based manufacturers such as producers of rice, palm oil, vegetable oil, among others. But it has stalled export of Nigerian products to West and Central Africa, hurting Nigeria’s capacity to earn the badly-needed foreign exchange amid dollar crisis.

Nigeria earned $823.06 million (N296.3 billion) from export to ECOWAS countries and $2.72 billion (N978.21 billion) 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 N149.3 billion were exported to ECOWAS, representing 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 Manufacturers Association of Nigeria (MAN) said the country is losing its foothold on the West African market due to the closure of Nigeria-Benin border since August 2019.

Read also: Border re-opening, AfCFTA to provide relief for manufacturers in 2021—LCCI

MAN, in a statement signed by Mansur Ahmed, its president, said some manufacturers exporting to neighbouring African countries had to close down their export segments due to the border closure which has discouraged long-term investments and affected the economy.

“For instance, major players in the beverages, polypropylene, bags, tobacco, cement, toiletries and cosmetics industries are losing markets they had worked very hard to secure in the West and Central African region. This is a position that Nigeria has hoped to leverage to secure a strong position in the African Continental Free Trade Area (AfCFTA) which kicks off in January 2021,” Ahmed said.

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 year-on-year 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, Okhai Ehimigbai, export manager at Aarti Steel, said.

On the other hand, PZ Cussons is now moving its goods via sea, which is an expensive and slow option.

Nestle Nigeria spent over eight weeks on sea recently while exporting its products to Niger Republic. 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 border.

Guinness Nigeria is also unable to move its drinks to West and Central Africa. In Guinness Nigeria’s nine-month financial statement to 2020, 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 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, Cameroun, Cote d’Ivoire and Niger, according to the 2017 CBN Annual Report. Much of that would have 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 continued closure by the government of a border linking Nigeria to the African market.

Apart from border closure, Nigeria has restricted 44 items from accessing the FX in the local market and looks happy to add more to the list. The protectionist decisions have had untold effect on inflation and poverty. A 50Kg bag of foreign rice, which was sold for an average of N14,000 before the border closure, now goes for over N30,000 at Lagos markets.

A big basket of tomatoes at the 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 sold a year ago. Food inflation jumped to 17.38 percent in October 2020 as nearly 50 percent of the population wallows in poverty, according to global estimates.

“Open markets drive innovation, productivity and prosperity,” said Olu Fasan, member of the International Trade Policy Unit (ITPU) of the London School of Economics and Political Science.

“When domestic firms are exposed to world economy through imports, exports and FDI, they can learn from others,” he said.

The AfCFTA is starting on January 1, 2021, after a postponement due to COVID-19 concerns. Nigeria, being the biggest market in Africa, is expected to gain, but market watchers say the border closure is becoming unhealthy as the trade deal nears.

But the President, speaking on the border closure at the security meeting with the 36 Governors at the Presidential Villa, Abuja, explained that the closure of the nation’s land borders was also partly an attempt to control the smuggling in of weapons and drugs.