Border Closure and its Benefit to the Nigerian Economy

Border Closure and its Benefit to The Nigerian Economy

Nigeria is the largest country in the African Continent in terms of economic volume, and it is the latest nation in Africa to close its borders to international trade after Kenya, Rwanda, and Sudan. This stands to reason as no country will ever leave its border at the mercy of other countries as several illegal practices like smuggling would be widespread.

In August last year, Nigeria banned the movement of goods from the countries with which it shares borders – Benin, Niger, Cameroon, and Chad.

There have been outcries ever since this move was made and several meetings and visits held but the Nigerian Government is digging in insisting certain protocols must be respected as a condition for the border re-opening.

 

Curtailing illegal exports of Petrol

Petrol was being sneaked out of the country despite subsidies being paid on them by the government which makes its price as cheaper as half as in neighboring countries.  Apparently, the Nigerian Treasury has been suffering these all along to the skewed benefit of other countries. According to a report by the Nigerian consultancy, Cardinal Stone, Nigeria has been subsidizing fuel supply to a few West African countries to its detriment for more than 12 years.

Curbing Smuggling of Rice

Rice was being illegally brought to the country as customers favored imported Asian brands over the ones grown by local competitors. These were brought into the country from Benin via its port in Cotonou. The government’s decision to shut the borders has received wide accolades by local growers. The investment in the agriculture sector was not becoming visible and impactful due to rice trafficking, according to a comment by a senior executive in charge of corporate relations with the food giant Olam. He said that the entire rice value chain had been positively impacted by the border closure as the locally made rice have started selling and farmers are improving on their yield quality. The huge pressure on foreign reserve has also come down.

Benefits to the Poultry Farmers

There is also now a high demand for local poultry and eggs as a result of reduced import activities from neighboring countries. Border closure helps boost local production as there has now been several start-ups in the poultry sector which the market demand is able to support

Benefits to the Banking System.

Agriculture entrepreneurs have increased their deposits into banks as a result of activity peak. Specialist banks are like Bank of Agriculture, Bank of Industry, Development Bank and cooperatives are now busy supporting local practitioners who can now make business projections and sustain them.


Criticisms

The closure has not come without criticisms.  Nigeria is seen as defying the provisions of AfCFTA (African Continental Free Trade Area Agreement which came into force earlier in 2019 for which it is a signatory). AfCFTA members are committed to disciplines on trading in goods and are to refrain from restrictions on volume of trade within mutual borders but Nigeria has maintained that its neighbours flagrantly flout this agreement hence its decision.

Apart from AfCFTA’s complaints, border closure is also seen to be inconsistent with Nigeria’s commitment of over four decades to the Economic Community of West African States (ECOWAS) ideals. In the protocol of ECOWAS, members are committed to the establishment of a common market and liberalization of trade by the abolition of customs duties on imports and exports, and also the abolition of non-tariff barriers to establishing a free trade area. Nigeria, being the big brother of ECOWAS is faced with a dilemma but the leaders consider their nation’s self interest as paramount. Talks are on on the next moves but Nigeria maintains the status quo is of benefit to her.

Although the situation seems to affect foreigners more, a couple of other sectors in Nigeria have also taken a hit by the action. The  closure has impacted the local exporters of goods adversely. Goods such as metal scraps, copper, cocoa, butter, rubber, etc. produced in Northern, Eastern, and Western Nigeria which were exported to other African countries regularly contributed a hugely to the nations GDP but that seems impossible at the moment. It is yet to be seen how this will be on but for now, the benefits far outweigh the temporary losses.

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