Weighting reasons, gains of border closure

No nation across the world has left its borders open for inflow of goods and services. Even in the so-called free economy, mostly practiced in theories and textbooks, there is always a record of inflow and outflow. This means that the goods and services must follow the proper channel within the bounds of a sovereignty.

Financial experts have also agreed that properly checked borders have not ensured whatever enters the territory are taxed, thereby boosting the income of the country, but mostly essential in ensuring the safety of lives and property. It is worth noting that safety of lives and investments are prerequisites to investment decisions.

In recent years, Nigeria has recorded a cocktail of such crisis, which has been blamed on cross-border activities. But it is also understandable that lapses, which still remain, has been tolerated due to low productive capacity to firmly effect import substitution policy.

An economist and financial market analyst with FSDH Merchant Bank Limited, Ayodele Akinwunmi, agreed that the border has to be regulated so that some sanity can come into the free movement of goods and persons because of the adverse economic and security implications on the economy.

“Besides, there is a subsisting policy concerning the importation of items that can be produced locally, which majority of them are smuggled through the border. No sovereign state will allow free movement of goods and persons that can cause havoc to its economy.

“Whatever diplomatic agreements were signed, they are within a set of guidelines that should be mutually beneficial to all the states within the economic regions. Any deviation would not only be tantamount to breach, but would create diplomatic friction and distortion of economic cooperation,” he said.

While issues of timing and short term effects have been raised by some, Emma Wagbo, an economist pointed out that country specifics are acceptable in policy decisions, especially when time lags create an opportunity to evade well thought-out plans.

“Irrespective of the immediate pains as reflected in the form of escalating food prices, Nigeria has recorded some gains in the process. Nigeria should have built structures within the economy that will stimulate local production and manufacturing of goods at competitive costs, but until we get there, let us start with what is on ground now. I think it is the only way to deal with policy riggers here,” he said.

The closure of Nigeria’s land borders, which came without warning ‪on August 21‬, has opened up neighboring countries exploitation of liberalism to the detriment of the economy. Now they are angry with Nigeria, yet there own borders remain tight.

According to a BBC report, the action of the government is affecting trade across the sub-region. The report further disclosed that that the bustling borders have come to a standstill, with goods rotting and queues of lorries waiting at checkpoints in the hope the crossings will reopen, adding that Nigeria’s neighbours are angry, saying the smuggling of rice mainly prompted the action .

Smuggling in numbers
Nigeria, with a population estimated at about 196 million, has a huge demand for rices. So, it’s mainly rice, among other commodities, that are more smuggled. The notorious route for such illegality is Cotonou, Benin’s commercial hub, targeting Nigeria’s economic capital, Lagos.

The World Bank report showed that Benin’s economy is heavily reliant on the informal transit trade with Nigeria, which accounts for about 20% of its GDP and national income. About 80 per cent of Benin’s imports are not for their consumptions, but onward movement to Nigeria, with the majority finding their way in the country illegally. While bans have stopped the illegal trade over the years, it was time to experiment with total closure of the land borders.

This same border is also a major corridor for second-hand cars to Nigeria, where there is a ban on importing cars that are more than 15 years old. A report claimed that Luxembourg-based shipping company, BIM e-solutions, Sid that an average of 10,000 cars arrive at the Cotonou port from Europe monthly.

But sources from the Nigeria Customs Service, agreed that many of these cars are smuggled across the border to Nigeria. This year, former Managing Director of the Nigerian National Petroleum Corporation, Maikanti Baru, said petrol smugglers were taking about 10 million litres out of the country each day. It’s indeed, high time drastic measures were introduced.

CBN interventions
The Central Bank of Nigeria (CBN) since 2015, has raised its bar in the pursuit of import substitution policy, particularly targeting food production and other commodities that can be produced locally. While the country, since 2013, has been allowing rice importation through the ports, it is with a 70 per cent tax. The huge tax was to discourage its import and attract investment in its production locally, as well as protect the fledgling local farmers.

Clearly, the monetary policy transmission mechanism in Nigeria is inhibited due to numerous factors, especially the menace of smugglers. For example, despite efforts by the apex bank through its development finance activities to raise domestic production, especially in rice production, the menace of smuggling has continued to affect local production.

A Nigerian maritime site- Ships and Ports, noted that in 2014, Benin lowered its tariffs on rice imports from 35 per cent to seven per cent, while Cameroon erased it completely. These were to counter Nigeria’s 70 per cent tax and flood the market with rice at cheaper rate.

But CBN Governor, Godwin Emefiele, stated that since the border closure, Nigerian rice, as well as poultry farmers have been benefitting, as they have been able to market their accumulated produce, which sales were hampered by illegal importation and smuggling.

The CBN Governor said the development had negatively affected Nigeria’s economy, adding that the government was  determined to keep the borders closed until all engagements in connection with the issues were concluded with the neighbouring countries to have them halt the use of their ports as lunch-pads for smuggling items into Nigeria.

“Between 2015 and now, we have seen an astronomical rise in the number of companies, corporates and individuals that are setting up mills, integrated mills and even small mills in the various areas.

“The Central Bank and agriculture ministry have been at the centre of not just encouraging the production of rice in Nigeria, but also funding these farmers to buy seedlings, fertilizers or some of the herbicides that they need for their rice production.

“We have embarked on programmes, warning those who involved in the business of smuggling or dumping of rice in the country to desist or we will close their account in the banking industry. And that is coming very effectively.

“The Chairman of the Rice Processors Association and owner of Umza Rice in Kano State, called me and said that all the rice millers and processors are carrying in their warehouses nothing less than 25,000 metric tons of milled rice.

“Secondly, we also have members of the Poultry Association of Nigeria who also complained that they have thousands of crates of eggs that they could not sell, even some processed chickens that they could not sell, due to smuggling and dumping of poultry products into Nigeria.

“A week after the borders were closed, the same rice millers association called to tell us that all the rice that they had in their warehouses have all been sold. Indeed, a lot of people have been depositing money in their accounts and they have even been telling them to ‘please hold on don’t even pay money yet until we finish processing your rice.’

“The Poultry Associations have also come to say that they have sold all their eggs, they have sold all their processed chickens and that demand is rising.

“So, when you ask, what is the benefit of the border closure on the economy of Nigeria, the outcome on the two products- poultry and rice, is the answer. The benefit is that it has helped to create jobs for our people, it has helped to bring our integrated rice milling that we have in the country back into business again and they are making money.

“Our rural communities are bubbling because there are activities, as rice farmers are able to sell their paddy. The poultry business is also doing well, and also maize farmers who produce maize from which feeds are produced are also doing business. These are the benefits,” he said.

The Director of Corporate Communications Department, CBN, Isaac Okorafor, reiterating the importance of producing goods locally, said that jobs will be created and the value of the Naira will appreciate, while the domestic economy will become vibrant.

He said explained that these importers should come and establish in the country, as the nation cannot continue to consume other countries’ goods, noting that no country has ever developed that way.

“We have to emulate the Chinese economy. When China began manufacturing, people referred to their products as inferior. Today, China is leading in the manufacturing of most products in the world.

Nigeria can become another China. What our people are doing in Aba, in Abia State is an encouraging example. CBN has directed commercial banks to give loans to medium and small scale industries to encourage local production,” he said.

Already, the Comptroller-General of the Nigeria Customs Service, Col. Hameed Ali (rtd.), has said that tax revenue profile had gone up, as cargoes destined for Benin now arrive at the Nigerian ports.

Ali was quoted as saying that “one day in September, a record N9.2 billion was collected, which had never happened before. After the closure of the border and since then, we have maintained an average of about N4.7 billion to N5.8 billion on a daily basis, which is far more than we used to collect.”

Border closures in retrospect
United States President, Donald Trump, during his campaign, said he was going to pay attention to the country’s borders and inflow of goods and services. He favored investments and productions in the country, otherwise everything would be subject to negotiations. Today, he has built walls against Mexico to check movement in persons. He is also going tough with China and its products.

Reports also show that the former Gold Coast, currently Ghana, once placed embargo on Nigerian immigrants and sent some that are already in the country away. Years later, the administration of Alhaji Shehu Shagari; of blessed memory, Nigeria retaliated, which saw the forming of the popular cliche “Ghana-Must-Go.”

President Olusegun Obasanjo, also ordered the closure of this same Benin land borders, as the country’s citizen, Ahmadu Tidjani, carried out a criminal exploit in Nigeria. It was only when the country’s authorities arrested and handed him over to the Nigeria that the border was reopened.

Why has the country failed to stop its territory from being a lunch-pad for smugglers against Nigeria?

Already, the Federal Government has said that the nation’s land borders would remain shut until the country’s neighbours agree to implement mutual anti-smuggling policies. By January 2020, it would be seen whether the countries have agreed to the terms of the border reopening.