• Wednesday, June 12, 2024
businessday logo

BusinessDay

Nigerian borders remain closed 1 year after, 4 months to AfCFTA

Nigeria needs to reopen its land borders

It is looking like the closure of Nigeria-Benin Republic border is now forever, as the Federal Government remains adamant after shutting out Nigerian businesses from regional trade for one full year.

It is even more ironic that Nigeria-Benin border is still shut four months to the commencement of the African Continental Free Trade Area (AfCFTA) agreement, which Nigeria is a signatory to, and promises to serve as bulwark for Nigerian firms hit by poor local economic fundamentals.

As a result of the decision to shut Nigeria-Benin border in August 20, 2019, many manufacturers cannot import inputs from West and Central Africa.

Many exporters have shut down Africa-focused operations, hurting foreign exchange earnings badly needed by Africa’s biggest economy. 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.

Apart from eroding this in the coming quarters, the closure promises to erode trade, which is already taking a hit from poor economy and government FX restrictions.

In the first quarter of 2020, trade’s contribution to the gross domestic product (GDP) was 16.08 percent, lower than 16.86 percent reported in the previous year. Quarter-on-quarter growth of the trade sector stood at –13.79 percent, lower than the quarter-on-quarter growth recorded in the fourth quarter of 2019 at 10.90 percent.

“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 at the weekend.

Unemployment numbers released by the National Bureau of Statistics (NBS) on Friday showed the job rate has risen to 27.1 percent in the second quarter of 2020, from 23.1 percent in the third quarter of 2018. Jobs are created by firms such as manufacturers, exporters and traders, but their margins are now badly hit by border closure, COVID-19 and inflation rate, which was 12.56 percent in June 2020.

Though the shut-down enriches farmers and a few agro-based firms, it disfavours consumers and many manufacturers. The price of different 50kg of rice was N18,000 before the border closure but is now N26,000 at Mile 12 Market and N25,000 at Daleko Market, both in Lagos – 39 to 44 percent increase. Eight-seven million Nigerians are extremely poor, according to the World Poverty Clock.

Okhai Ehimigbai, export manager at Aarti Steel, which exports steel products and zinc ash, said on Friday that his company had stopped export to ECOWAS due to the closure of the land border. Export to Ghana by sea takes one month now as against two weeks or less through the land borders, he said.

Toki Mabogunje, president, Lagos Chamber of Commerce and Industry (LCCI), said at a dialogue session with Vice President Yemi Osinbajo 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 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.

The AfCFTA has been postponed to January 2021 from July 2020 on coronavirus concerns. Bismark Rewane, CEO of Financial Derivatives Company, said on Channels TV in 2019 that the AfCFTA would favour Nigeria, Kenya, Egypt and Ghana, among others, but warned that any government that was not effective would fail within the AfCFTA environment.

Analysts say export-oriented companies such as Dangote Cement, British American Tobacco Nigeria, FrieslandCampina WAMCO, De-United Foods Industries, Guinness Nigeria plc, Dangote Agrosacks, Beta Glass, among others, will benefit from the treaty.

“Mostly multinationals and large enterprises are in a better position to gain from AfCFTA because their economies of scale will improve. They have the big market and the capacity,” Muda Yusuf, director-general, LCCI, said in a telephone interview recently.

However, it is looking like Nigeria is not preparing for the trade treaty as it continues to shut land borders through which goods and services will come in and leave during the AfCFTA. Apart from the shutdown of the border, the Central Bank of Nigeria is increasing the list of items not eligible for FX access, which has a negative implication for trade.

After adding milk to the long list, the number of items not eligible for FX is now 44. The Nigerian business environment is still tough, with gridlock to Apapa and Tin Can seaports in Lagos delaying goods for weeks. Taxes are still multiple in many states while infrastructure remains a big challenge.

“We are excited about the signing of the AfCFTA. But we need to get ourselves ready for the pressure of competition inherent in the continental economic integration agenda. A number of commitments were made about the creation of an environment that would enable the private sector to be competition ready. But not much has happened in this regard so far,” Mabogunje of the LCCI, quoted earlier, further said.

Meanwhile, Ghana officially commissioned an AfCFTA secretariat on Monday, while Nigeria dithers. However, just like border closure, Ghana’s poor treatment of Nigerian traders calls to question the preparedness of both countries to the AfCFTA.