How legitimate businesses paid huge cost for reduced cross-border smuggling
The Manufacturers Association of Nigeria (MAN) in its factsheet on AfCFTA in the third quarter of this year, described the challenges before the country in terms of competitiveness among its neighbouring West African countries once the AfCFTA kicks off.
In terms of ease of doing business and ability to compete with other African neighbours in filling the supply chain, the report stated that Nigeria is likely to face severe competition in countries like Angola, Senegal, Morocco, Mozambique, Egypt and Guinea in products like toilet or facial tissues, parts suitable for use solely or principally with spark-ignition internal combustion piston, sanitary towels, plates sheets, film, foil and surface-active preparation among others.
In some countries in the West African coast where Nigeria has advantages in terms of the supply chain, inefficient port systems have made many exporters rely on most on-road haulage to access such markets.
As safeguard measures, MAN recommended that “high information barriers and uncertainty in achieving market access can be mitigated with appropriate export promotion strategies, including tax exemptions, provision of market information, etc. The government should overhaul, enhance and strengthen already established programmes in these areas to fit the cost of liberalisation”.
With the closure of the land borders since August, however, neighbouring countries are beginning to seek alternative suppliers for products hitherto provided by Nigerian businesses.
According to some operators, Nigeria holds the title of the biggest supplier of traded goods along the Abidjan-Lagos corridor. The closure of the Seme-Krake border has cut off the origin and supply of many semi-processed and manufactured products to cross-border markets in Benin, Togo, Ghana and Cote d’Ivoire.
The United Nations Economic Commission for Africa (ECA), African Export-Import Bank (AFREXIMBANK) and Eastern Africa Grain Council (EAGC) are currently carrying out a pilot informal cross border trade data collection exercise along the corridor.
Border communities and customs officials engaged in the process speak to the significant impact the Seme-Krake border closure is having on volumes and prices of goods traded both informally and formally along the corridor. Some referred to this as a “chain effect” resulting from the interconnectedness of ECOWAS economies.
“If Nigeria’s land borders are not re-opened soon, its neighbouring countries may look to alternative suppliers to fill the current gaps created by the closure. If this happens, even when the border re-opens, it may be too late for Nigerian suppliers to regain their market share. This would certainly be a big shot in the foot”, Coordinator of the African Trade Policy Centre at the United Nations Economic Commission for Africa, David Luke and the Executive Director of the Eastern Africa Grain Council, Gerald Masila posit.
The Federal Government explained that its border closure has led to a reduction in the demand for fuel at its depots, even as prices for rice and turkey continue to rise due to restricted supply.
Indeed, the Nigerian National Petroleum Corporation (NNPC) stated that it witnessed a significant drop in PMS evacuation from fuel depots since August 22nd.
There had been concerns about the nation’s daily fuel demand, especially when the amount used to offset subsidy payments rose as against projected income.
Its Group Managing Director, Mele Kyari, in a tweet, stated that the drop in demand may be connected to border closure and other interventions of the security agencies aimed at curbing smuggling, adding that the corporation will contain smuggling of PMS.
Hitherto, smugglers of Premium Motor Spirit, popularly called petrol, according to the NNPC, are believed to be stealing about 10 million litres of the commodity daily and selling it to neighbouring countries.
With petrol subsidised in Nigeria, as against the deregulated prices in neighbouring countries, it also provides an incentive for smugglers.
But the Chairman, MAN Export Promotion Group (MANEG), Ede Dafinone, said due to the current border situation, many companies are in dire problems, adding that significant losses have been recorded while many businesses are about to collapse.
He stressed that there are companies who rely on the West African market for additional sales to make profits, while those who manufacture locally in Nigeria for export have had their warehouses filled with unsold inventory.
Dafinone said: “There are companies in all sort of dire problems. Some companies that manufacture here have 100 per cent of their products meant for exports. How are they going to survive these months of border closure? They will make significant losses and the business would collapse. They will still pay interest on loans, pay their staff for this period when they are not selling anything. Many are already losing their supply chains.
“The best alternative means is the sea link that has been mentioned over the years, but that ship going across the coast is yet to be launched and we are waiting for that as an alternative, but even at that it is still expensive, but going forward, it is the only alternative”.
Similarly, the Lagos Chamber of Commerce and Industry (LCCI) faulted the closure extension, describing the sacrifice imposed on businesses and the citizens as disproportionate and becoming unbearable.
According to the chamber, “while the concern of government regarding security and economic sabotage which informed the closure in the first place is appreciated, the effect of the exercise is perhaps more pronounced in the South West – being the financial and commercial hub – of the country and the sub-region.”
The LCCI noted that maritime sector investors have equally been denied opportunities offered by transit cargo destined for landlocked countries, which normally comes through the Nigerian ports.
The chamber’s Director-General, Muda Yusuf, said that rather than shut the borders, some fundamental governance shortcomings should be addressed as part of a sustainable solution.
He insisted that the nation needed to fix its institutions for effective border management and policing.