Assessing the impact of border closure on Nigeria’s economy

Assessing the impact of border closure on Nigeria’s economy

 

On August 21 2019, the Nigerian government announced the partial closure of the country’s land borders with Benin Republic and other neighbouring countries in an effort to curb the rising incident of smuggling of rice, firearms and other prohibited goods into the country.

Two months after, precisely on October 14, the government ordered the complete closure of the borders restricting the trade of all goods for the same reason.

A joint task force codenamed ‘Ex -Swift Response’, comprising the Nigeria Immigration Service, Nigeria Customs Service, Nigeria Police Force and the Armed Forces, was subsequently set up with the responsibility of enforcing the border closure under the coordination of the Office of the National Security Adviser (ONSA).

The President Muhammadu Buhari administration said the failure of neighbouring countries to respect the agreement and ECOWAS protocols entered into between Nigeria and the rest of the countries on transit goods necessitated the closure of its borders just as it maintained that it would not reopen the borders until it receives a firm commitment from neighbouring countries that they would adhere to the ECOWAS trade protocol.

According to a World Bank report, an estimated 80 percent of imports into neighbouring Benin Republic are not for their consumption, but onward movement to Nigeria, with the majority finding their way into the country illegally.

President Muhammadu Buhari

 

One year after, there is no doubt that the border closure has recorded some gains especially in curbing rice, fuel and vehicle smuggling.

Indeed the policy has dealt a severe blow to the thriving smuggling business across Nigeria-Benin border with the companies in Cotonou that specialise in importing vehicles, rice and smuggling them into Nigeria having to close shops while the steady flow of motorcycles, taxis, trucks and passengers which keeps the border areas buzzing has drastically reduced.

In pointing out the government strides in the border drill exercise, the Minister of Information and Culture, Lai Mohammed, said since the closure, Nigeria’s monthly import revenue has increased by 15 percent, instead of dropping as expected in many quarters, while the local consumption of fuel has dropped by 30 percent, apparently due to the reduced smuggling of the products to neighbouring countries.

“There has been an enhanced production and milling of Nigerian rice. Patronage of Nigerian rice has also increased and farmers are expanding their farms as well as engaging more hands.

“It is important to note that 95 percent of illicit drugs and weapons that are being used for acts of terrorism and kidnapping in Nigeria today come in through our porous borders. However, since this partial closure, these acts have been drastically reduced. Our conclusion is that the arms and ammunition these terrorists and criminal elements were using no longer gain access into the country. In addition, the importations of the drugs which affect the well-being of Nigerians have also been reduced,” he said.

Comptroller-General of Customs, Hameed Ali

 

Interestingly, the Nigeria Customs Service says its revenue has also increased since the borders were shut as cargoes destined for Benin now come in through the seaports. According to Nigeria Customs Service Comptroller-General, Hameed Ali, the agency has been making between N4.7 to 5.8 billion daily revenue, which is higher than what it used to generate before the border closure.

“What we have discovered is that most of those cargoes that used to go to Benin Republic and then discharged and smuggled into Nigeria are now forced to bring their goods to either Apapa or Tin Can Island and we have to collect duty on them. As a matter of fact, our revenue has not reduced; it is increasing as a result of closing the border,” Ali said.

Despite the gains of the border closure, traders, manufacturers and business owners have been at the receiving end as they have continued to count their losses in the last one year.

Corporate firms, large number of informal sector players and individuals doing legitimate businesses across the border have become victims of the border closure. Jobs have been lost, prices of food skyrocketed while legitimate export within the West Africa sub-region has suffered.

Also, local manufacturers have suffered huge losses and incurred major lapses in financial transactions since the border closure, just as production lines have been shut down and workers are being laid off. Findings show that food and beverage manufacturers are the worst hit owing to their inability to import already purchased raw materials while their finished goods meant for the ECOWAS sub-region and Trans-Sarahan markets have been prevented from leaving the shores of Nigeria through the border.

Comptroller-General of Immigration, Muhammed Babandede

 

In the wake of the border closure, manufacturers whose raw materials were stuck at the border reportedly lost an average of N5billion daily, as they are unable to bring in raw materials or export their finished products.

Some in the agriculture sector, who produce mainly for export, are also losing out as 80 percent of their revenue is from export. Perishable goods stocked in some warehouses have spoilt, expired or damaged or damaged, while some companies are now unable to bring in raw materials already paid for, which were purchased from neighbouring countries for local production.

Retailers and wholesalers are not left out in this harsh situation. According to the Director General, Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, with the borders’ closure, the country’s production capacity utilisation could fall to an all-time low, with mass closure of industries, down-sizing of workers and high inventory of unsold goods.

Ajayi-Kadir noted that Nigeria’s manufacturing sector’s core business is all about import and export of goods and raw materials, adding that these are the areas that sustain the country’s local manufacturers that are into production of goods and services.

He said the fate of many manufacturers was gloomy, stating that SMEs were worst hit by the border closure. Kadir said that while it takes eight days to transport manufactured goods to Mali through the land border, it now takes eight weeks to move goods through the waterways.

Director General, Manufacturers Association of Nigeria, Segun Ajayi-Kadir

 

Although some stakeholders had expressed support for the border closure at the initial stage, no one expected such prolonged closure.

Vice President, Association of Nigerian Licensed Customs Agents (ANLCA), Kayode Farinto, is of the view that more than 1,000 licensed customs agents have been cut out of business with over 200,000 employees suffering job losses. Farinto argues that the continuous closure of the land borders would also affect the nation when the African Continental Free Trade Agreement (AFCFTA) takes off, urging the government to consider reopening the borders for essential goods.

He said, “In the spirit of ECOWAS, this border closure is not good for Nigeria. Now, we are trying to practice the AfCFTA but the closure also negates the agreement that Nigeria has signed.

“What the government should have done after closing the borders is to deploy security devices. It is high time we opened our borders and don’t forget that freight forwarders and international business people that move these cargoes are now unemployed with many sick and not able to afford a living.”

There are also allegations that personnel of the joint task force deployed to enforce the border closure have been compromised thus negating the objectives of the action. While it appears compliance and enforcement reigned at the main border, smuggling still thrives in some of the nation’s borders as reflected in recent seizures recorded by the customs anti smuggling units in Lagos and Owerri, which ostensibly escaped the eyes of the joint operatives at the border.

In 2019, a member of House of Representatives representing Daura/Mai’adua/Sandamu Federal Constituency of Katsina State, Fatuhu Muhammed, alleged on the floor of the House that smuggling activities were going on in the northern borders unhindered, aided and abetted by security agents.

Although the government might have the good intention of curbing smuggling to encourage local production and secure the nation, it is evident that the border closure is not sustainable, as it has done more harm than good to the nation’s economy.

Government’s action has affected Nigerian entrepreneurs operating genuine trans-border businesses, hence the need to take a second look at the policy.

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