Why smuggling remains a threat to the economy

By Foster Obi

Nigeria Customs Service (NCS), the agency saddled with policing the borders describes smuggling as “false declaration and concealment of goods, wilful under-payment of Customs duties, trafficking in prohibited or restricted goods, use of unapproved routes and ports, forging of Custom documents and touting in Customs good and documents.”

The Agency alerts thatsmuggling is a worldwide problem and that those who engage in it are considered economic saboteurs. It also thinks that smuggling is a destroyer of the economy.

“Smuggling robs the nation of her revenue hence affects provision of social services to entire community. Smuggling can destroy your health through importation of expired, fake, and other drugs. “Smuggling paralyses our local industries. Smuggling is a drain on the foreign earnings of the nation. Smuggling encourages acts of criminality that can lead to armed robbery and other heinous crimes. Smuggling is an unpatriotic act that can lead you into jail,” the NCS advised.

The United Nations report estimates that there are more than 350 million illegal light weapons smuggled into Nigeria. UN Regional Centre for Peace and Disarmament in Africa said this accounted for 70% of illicit small arms in West Africa. Some of the weapons are said to have originated in Mali and Libya, where there are on-going conflicts.  The report believes that the presence of so many illegal arms in Nigeria is a threat to peaceful co-existence.

Investigations show that smuggling has remained a continuous threat to the existence of any nation. For instance, the Nigerian Textile Manufacturers Association (NTMA) disclosed recently that Nigeria loses a whopping $325 million every year due to evasion of customs duty and value added tax by smugglers of textile materials.

Chairman NTMA, Mr.AbiodunOgunkoya said that smugglers deny government of huge revenue as well as pose a challenge to the industry. According to him, around 85 per cent of the $1.4 billion worth of textile materials that flood the nation annually are smuggled.

”About 85 per cent of the textiles being sold in the Nigeria markets, especially printed textiles are smuggled into the country including fake and counterfeited materials. Wax print fabrics produced in China bear counterfeit trademarks of Nigeria manufacturers and fake SON Logo printed on the labels,’’ he said.

He said in order to deal with the problem of smuggling of textiles in the country; the Federal government must design an effective system to protect the local industry.

A World Bank report recently disclosed that the level of illegal importation of goods into Nigeria from neighbouring Benin Republic and other West African countries should be a major concern to the Federal Government and the agencies responsible for management of the economy.

According to the report, a staggering N750 billion ($5 billion) worth of assorted goods are smuggled into Nigeria through Benin Republic alone every year and this amount represents about 15 per cent of total smuggled goods through that border.

The report also claims there is  enough proof that over $400 million (N6 billion) representing about 25 per cent of the total current annual revenue collected by the Customs  is lost through nefarious smuggling across the sub-regional borders.

The report said that smuggling into Nigeria will further hinder the effectiveness of the Customs Service and cause more revenue losses if urgent steps are not taken by government to tackle it. It advised a liberalisation of trade policies which encourage smuggling across the borders.

Rice stakeholders in the country recently declared that unless urgent steps are taken to reverse the negative trend of the ban on rice importation, Nigeria will continue to pine away under the massive loss of N110 billion every year as a result of rice smuggling.
They added that when other smuggled commodities, apart from rice, are computed, Nigeria’s losses will run into billions of dollars every year. The group, known as Nigeria Rice Development Association (NRDA), stressed that the country was losing a whopping N9.7 billion monthly from an estimated 80,000 metric tonnes of rice smuggled into the country from Benin Republic alone.

With this massive smuggling, it noted that huge amounts, that should accrue to government coffers from the high duty on rice is lost.

The group added that the potentials of the rice sector are being daily put at risk by the activities of these smugglers and their collaborators.

A rice miller in Kano State, Musa Abdullahi, said the call for the review became imperative because of imbalance of trade, smuggling and dumping of goods in the country.

He said while the government is trying to encourage local production of rice, thereby creating employment, income and value chain, some other people are rubbishing the noble effort by smuggling the product into the country.

Abdullahi said it was disheartening to note that investments and policies of government were being threatened on a daily basis by the incessant smuggling activities by a few. “Unscrupulous smugglers find it attractive to smuggle goods from neighbouring countries into Nigeria without paying necessary duties. This affects investment in the country.
“For instance, Benin Republic consumes only white rice but imports parboiled rice with destination for the Nigerian market. If the Federal Government reviews the trade liberalisation scheme and closes its borders to smuggled goods, neighbouring countries will take us serious.”

He added, “The quantum of rice being smuggled through our land borders from the Republic of Benin is increasing on a daily basis. Almost 45,000 MTS is entering the Northern part of the country from Niger and Cameroun.”

A local rice farmer in Kogi, BunmiOwolabi, said the major routes used for smuggling in the North is Maradi and Zinder as lot of warehouses in Katsina state are used for smuggling of rice.

Reports showed that a survey at the Seme and Idiroko border posts revealed that the big-time smugglers now have a long queue of specially-built trailers to carry 72 tonnes of goods – mostly rice – as against the 32-tonne trailer. Apart from the huge revenue loss and hazards such products pose to Nigerians, stakeholders observe that excessively loaded trailers damage the nation’s roads, further creating huge maintenance costs to the government.

The report observed that the small-time smugglers at the Seme and Idiroko border posts have become virtually lawless, as they resort to all manner of mischief to circumvent the law and smuggle products into the country.

Calling on the Nigeria Customs Service to quickly take action, Owolabi said “The present scheme, as it is being run, is to the detriment of the nation’s industrial sector and government needs to address this as soon as possible.

“Nigerian investors have made sacrifices by paying higher duties for the importation of rice through the official channels, while some of our members like Olam have begun the backward integration process for rice value-chain, cultivating over 10,000 hectares of rice plantation. We cannot allow smugglers to keep destroying these investments. There should be zero tolerance for smuggling,” he added.

The curb this problem, the Minister of State for Industry, Trade and Investment, HajiaAishatAbubakar said the Federal Government is developing a holistic strategy to tackle the menace of smuggling which is threatening the patronage of locally manufactured goods. The minister stated this during her visit and inspection of the production facilities of Lucky Fibres, manufacturers of Nobel Carpets in Lagos recently. She said the issue of smuggling is one challenge confronting the manufacturing sector in Nigeria and that the government is adopting a strategic approach to put an end to it.

She noted “You need to exercise more patience because we don’t want to address a part of the problem, but a holistic approach is being put in place. It is not just this sector, but for all sectors. You manufacturers should also be watchdogs for one another because Government might not see all the lapses. But when you identify any challenge that threatens your work, approach us and let us see what we can also do to help.”

The Minister however expressed satisfaction in the fact that the Nobel carpets and rugs are produced in Nigeria and exported to neighbouring countries like Ghana, Republic of Benin and Ethiopia, etc. Also speaking, Mrs.KemiAjibade, Senior Head of Human Resources, Lucky Fibres Limited, while conducting the Minister through the company’s production facilities lamented the impact of smugglers’ activities, who take advantage of Nigeria’s porous borders in importing substandard carpets and rugs into the country.

According to Ajibade, “an average Nigerian does not know the difference in substandard and quality carpets, but will rather buy what is affordable in the market even if it does not serve for a long time. We urge government to assist us in addressing the activities of smugglers. If you visit Alaba Market, you will see different kinds of substandard carpets and rugs being displayed for sale. We import some of our production materials like polypropylene (PP) because local manufacturers could not meet the quality that our machine can work with. The machine is the latest in the industry and only works with high quality fibres. “Local manufacturers of polypropylene in Nigeria usually complain that we are the only manufacturer in the sub sector of the Nigerian textile industry who demands for that quality because we want the best for our people. And since we cannot consume a large quantity of their quality polypropylene alone, they prefer to produce the substandard which is in popular demand.”

The Minister however assured the company of improvement in ensuring that all textile products are of good quality to meet international standards,

They also think that the current rate of smuggling through the West African sub-region is encouraged by tariff differentials. This has made it more economically viable for importers to patronise other ports in the sub-region rather than Nigerian ports, the say adding that Government should seriously look into the problem with a view to formulating better policies to redress the situation.

“Also, government should take a hard look at some of the treaties of the Economic Community of West African States (ECOWAS). Some of these treaties encourage free movement of people without addressing its harmful effects. Often, this freedom of movement undermines the economy of other countries through unbridled smuggling of goods.

They also believe that a visit to the border areas around the country like Seme and Badagry; parts of Cross River State; which demarcate Nigeria from Cameroon and the Northern border areas at night gives one an idea of the rate at which Nigeria is being plundered. They noted that a nation ‘whose economy has bled in this manner has only survived so far by miracle.’

Willy Egbudin, the Customs Area Controller of Apapa Area Command, believes that the NCS is combating smugglers adequately. According to him, “We have intelligence-led patrols, approved check points and proactive measures of mass enlightenment of stakeholders as a means of discouraging their involvement in smuggling as well as other unlawful activities.”

He added that the volume of rice being smuggled into the country through Seme border could be measured by the seizures made by them and this he added are widely reported in the media.

Val Usifo, a maritime expert, said of smuggling “My personal view is that smuggling is carried out by criminals. A serious business man has no reason to smuggle his goods into the country. You have an obligation when you are bringing in something; there are rules.

“Government cannot build a wall around our country; even if it does; it is individuals who want to cheat that get engaged in smuggling.  If government also changes a policy like the Common ECOWAS External Tariff, you have no incentive to try and cut corners.  I think the Customs with other security agencies are spending so much time and money trying to eliminate smuggling,” he declared.

In his verdict he said that smuggling means that government spends so much money and people risk their lives to make sure everybody is protected and that nobody should have sympathy for a criminal.