Robbing Peter to pay Paul: Winners, losers of Nigeria’s border closure

The year 2019 was Nigeria’s most successful in terms of exports to other West African countries. Analysis of official trade data shows this much, but it was also the year Nigeria suddenly shut its land borders, effectively closing trade with neighbours for several months to follow.

A country in dire need of foreign exchange suddenly shut off a viable source of staying afloat. An irony. But the story was even more interesting.

In July 2019, Nigeria had finally signed the Africa Continental Free Trade Area (AfCFTA) agreement. But before the rest of Africa could recover from the euphoria of the continent’s largest economy signing up to the trade deal (after some reluctance), it suddenly shut its land borders in August, just a month later.

Following the announcement of the border closure, what could have been likened to a shooting star in Nigeria’s trade history was aborted

The Nigerian government had at the time said the decision to close the borders was to curtail smuggling of food products, especially rice, movement of arms it believed fuelled insecurity, and petrol, which is subsidized in Nigeria then smuggled to neighbouring countries where it is more expensive.

“When the border was shut because of rice smuggling, we were looking at what was coming into the country, not what was going out,” John Isemede, a consultant on Export Value Chain to the United Nations Industrial Development Organization (UNIDO) , told BusinessDay.

Analysis of different data sets show that Nigeria not only lost out in making money from trade within the region, but insecurity also worsened. In trade, data from the National Bureau of Statistics (NBS) shows that Nigeria’s exports to the Economic Community of West African States (ECOWAS) region declined from N2.24 trillion in 2019 to N841 billion in 2020 and N1.24 trillion in 2021.

To better understand the decline in exports beyond COVID in 2020, stopping trade with the neighbouring countries made it easier for the pandemic to hurt the Nigerian economy more, and the livelihoods that perished along with it.

Data shows that in 2016, Nigeria exported N576.59 billion worth of goods to the ECOWAS region, increasing to N782.65 billion in 2017, and then N1.04 trillion in 2018.

The growth continued, and in fact, reached its peak in 2019 when it became N2.24 trillion. By 2020, following the border closure and assumedly the impact of COVID-19, exports from Nigeria to the sub-region dropped to N841.33 billion and last year, 2021, was N1.24 trillion.

The foreign trade data also gave some peculiar insights. Exports to ECOWAS in the first three months of 2019 were N300 billion and declined to N217 billion in the second quarter. But coincidentally, trade was gearing up for a record-high by the third quarter when the border closure was announced.

By the end of that quarter, Nigeria’s exports to ECOWAS stood at N1.14 trillion, higher than even the full year outcome of any previous year in history. But following the announcement of the border closure, what could have been likened to a shooting star in Nigeria’s trade history was aborted. By the following quarter, Q4 2019, exports dropped to N582.28 billion and as at the third quarter of 2022 when NBS last released data (before this article), Nigeria’s exports to other ECOWAS countries have not returned to the peaks of 2019.

In all these years, Nigeria’s imports from ECOWAS were barely up to 10 percent the value of its exports.

“We had more losers than winners,” said Muda Yusuf, CEO, Centre for the Promotion of Private Enterprise (CPPE). “The few manufactured products that we export go to the West Africa sub region and there is a lot of agro export that also takes place particularly in the northern part of the country to Niger, Chad and other places.”

All of these came to a halt. Some Nigerian manufacturers, as Yusuf explained, said smuggling of some of their competing products to Nigeria was curtailed following the border closure and they were able to sell more locally. However, they were equally shut out from exporting to the West African market as well.

Counting gains

The Manufacturers Association of Nigeria (MAN) had an initial favourable disposition to the border closure. Finally, smuggled products that undercut Nigerian businesses would no longer find their way into the country, the body said.

However, BusinessDay got access to internal documents of the association, some of which it had shared with the top hierarchy of the Nigerian government. In these documents, MAN provided assessments of the border closure’s impact, both the good, and invariably, the bad that it would usually not publicly speak about.

“The closure of the Land-Border, particularly between Nigeria and the Republic of Benin, has been more of a double-edged sword for the Private Sector, with evidential advantages and disadvantages as well as resultant shocks and dislocations,” read a portion of one of the documents.

At some point, one of the documents highlighted benefits of the border closure to include increase in investments, demand and consumption of locally produced rice and other commodities like fish, chicken and textiles, as well as domestic, industrial plastics and electrical cables.

It also said there had been an improvement in government revenue to the tune of over N5 Million daily arising from the fact that cargoes that hitherto would have disappeared in the ECOWAS corridor now go through the Lagos ports and attract appropriate duty.

However, the truth, MAN said, was that “manufacturers in Nigeria have lost and are still losing market share in the West African corridor daily due to the closure because export of manufactured products have now become overly less competitive.”

The documents, which were authored before some of the borders were later partially opened, further said that since the closure of land borders, manufacturers had been experimenting alternative modes of moving their products including Sea and Air, to sustain export.

“Unfortunately, feedback indicates that moving goods within the region through sea and air is extremely costly, particularly in terms of charges and time as some of the countries in the region cannot be linked directly from Nigeria except through Europe,” MAN said. But the land borders were shut, and the intended beneficiaries were struggling to cope.

The losers

MAN identified the Tomato paste and related products sub-sector, which ideally should have been major beneficiaries of the border closure. The manufacturers claimed that large volumes of tomato paste in different forms were daily brought in illegally.

Yet, the borders were supposed to be closed, or at least, they were shut to legitimate trade. Nigeria, which on the average imported about 300,000 metric tons of tomato paste annually was losing about $450million in revenue accruable due to non-payment of the levy of $1500 per ton and 50 percent duty on tomato paste.

In the Beverages sub-sector, one document noted the border closure affected major companies such as Dangote Group, Cadbury, and Unilever Nigeria Plc.

“Because of the closure, most companies especially those registered under the ETLS who normally import through the Land borders have had to move their goods through the seaports, which created perennial congestion at Apapa, and became a nightmare,” it said.

For instance, a beverage company that was not named in the document, had products worth N283 Million, that were stuck at the Seme border for about nine months (till the time the document was authored). This had led to huge revenue losses to the business, with most of these products nearing their expiry date.

“The companies are most certainly going to incur more financial losses, if the consignments are not quickly evacuated; as several of these trucks owned by the companies have been vandalized by thieves, despite the presence of security personnel,” MAN said. Another major constraint it identified was that it took an average of 35days from loading the containers in Accra till delivery in Ikeja, Lagos unlike the average of 7 – 10 days for road shipments.

Export and supply of Polypropylene (PP) Bags to Mali, Niger, Chad, Cameroon, Burkina Faso, Benin Republic came to a halt. Between August to December 2019, one of the companies was said to have lost a total of N1.413bn.

Export and supply of aqua and chicken feeds took a hit when one of the companies in the industry was to do business with customers in Benin Republic and Togo to supply aqua feeds. Total business lost between August–December 2019 was $90,000 for one of the companies. In another instance, an agreement to supply feeds to a customer worth $240,000.00 per year was lost, the MAN document said.

In the Tobacco industry, a company had 21 trucks with manufactured cigarettes on the export route to Niger Republic through Kamba border in Kebbi State and to Benin Republic through Seme border, an arrangement the border closure halted.

When one company tried using Air Freights, it was more expensive and Sea Shipment routes took more than 70 days to arrive at the destination. The document said it was costing about £50,000.00 (N22,750,000.00) for that company to export each 40fts container using Air Freights. This, MAN says, was eroding over 60 percent of the company’s profit as it exports an average of 25 to 30 containers every month to Niger, Burkina Faso, Mali and Benin.

In the Cement industry, with companies like Dangote Cement, Lafarge Cement and BUA Cement, and the Toiletry and Cosmetics industry, the tales of losses and operational hiccups due to the border closure echoed through.

The results are in

Boosting local food production and curbing an arms influx that threatened the country’s security were notable buzz words at the time of the border closure. However, Nigeria’s food inflation was at an all-time high of 23.72 percent as of October, and 120.5 million Nigerians are now food insecure according to the 2022 state of food security and nutrition in the world report.

Also, if curbing insecurity was an objective, available data suggests that failed, too. The Nigeria Security Tracker by the Council on Foreign Relations shows there were 8,075 deaths due to violence in 2019 (the year the borders were closed), but by 2020, the number of deaths increased to 9,663 and by 2021 the number of deaths was 10,343.

Read also: ECOWAS deepens investment to drive West Africa’s food security in 4yrs

Curiously, while some local farmers reported making more money during the border closure, for others, it was a nightmare. A BusinessDay investigation published in 2020 found that farmers became victims of the border closure that was meant to benefit them. Security agencies extorted hundreds of millions of naira from farmers before their goods could leave the rural communities and enter urban centres during the border closure. If they refused, the goods would be labelled contraband and confiscated.

In December 2020, one month to the ‘commencement’ of AfCFTA, Nigeria reopened four out of eight major land borders closed; Seme, Illela, Maigatari and Mfun. In April 2022, it re-opened the Idi iroko, Jibiya, Kamba, and Ikom land borders, after 32 months.

The Manufacturers Association of Nigeria, noted in the documents seen by BusinessDay, that “the closure of the official posts has shown that the intensity of smuggling activities through illegal routes may not be heavy as to significantly disrupt economic activities in the country.

“Experience has now shown that most damaging smuggling activities may have been coming from the official border posts,” one of the documents by MAN said.