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Nigeria must design, effect border policy to stem economic losses, says Akinwunmi

By Chijioke Nelson
16 November 2019   |   3:47 am
Mr. Ayodele Akinwunmi, an economist in the Corporate Banking Department of FSDH Merchant Bank Limited, spoke to CHIJIOKE NELSON on the current closure of Nigeria’s land border, which he said though temporary, but must be reviewed urgently to stem the growing tide of economic losses and insecurity in the country


Mr. Ayodele Akinwunmi, an economist in the Corporate Banking Department of FSDH Merchant Bank Limited, spoke to CHIJIOKE NELSON on the current closure of Nigeria’s land border, which he said though temporary, but must be reviewed urgently to stem the growing tide of economic losses and insecurity in the country.

Did the border closure come to you as a surprise?
No! I was not surprised; it is something that has to happen or has to be regulated, so that some sanity could come into the free movement of goods and persons, because of the adverse economic and security implications on the Nigerian economy.

Besides, there is a subsisting policy concerning the importation of items that could be produced locally, majority of which are smuggled in through the border.

Nigeria ratified some ECOWAS (Economic Community of West African States) protocols related to flow of goods and services, including the onboarding AfCFTA. Is this move not a breach of economic cooperation?
I do not think this move is in violation of those agreements. Remember, I said earlier that no sovereign state would allow free movement of goods and persons that can cause havoc to its economy.

Those agreements were signed 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 also create diplomatic friction and distortion of economic cooperation.

Is that a strategic move in your calculations?
I think it is a strategic move by the Federal Government of Nigeria. No country would allow a porous border that would be injurious to its domestic economy and its security.

Although I believe the timing was not appropriate, because of the attendant and avoidable adverse economic outcomes, which have reflected in the form of escalating food prices, Nigeria has recorded some gains in the process.

It is now time for the country to accelerate plans to build local competitiveness in order to increase local production in areas that Nigeria has a comparative advantage. Government should develop a mechanism for harmonious relationship between the regulators in the manufactory sector and operators.

This would increase the quality and products and raise the standards of made-in-Nigerian goods in order to compete in the international market.

Border closure is a short-term measure to address a few unwarranted economic and securities security issues; it is not a long-term permanent measure to stop smuggling and solve acts of terrorism in the country.

Government should provide more incentives for export-orientated sectors of the economy in order to drive non-oil foreign exchange generation. There is a need for more reforms in the ports to ease the export of goods from Nigeria.

Nigeria must trade with neighbouring countries to grow its economy and also create the job. There are empirical evidences to show that international (legal) trade accelerates economic growth and development.

Is it really without repercussions to the economy, even in the short-term?
We have experienced increased food prices because of the shortage of rice supply in Nigeria. The prices of both the imported rice and local rice, for example, have increased substantially.

Available data in the market shows that the price of local rice has increased from N14, 000 per 50kg bag to N21, 000 (50 per cent increase). The price of foreign rice has increased from N17, 000 to N26, 000 (52.94 per cent).

You may say that is good money for the farmers, but when you realise that a fraction of the Nigerian population is involved in farming and the salaries of workers have not increased by that proportion, it then means that the impact on the entire economy is negative. The increase in the food prices led to an increase in the inflation rate in September after three consecutive months of decline.

Given the indefinite nature of this policy, what would you expect of the inflation numbers, going forward?
In the short-term, I expect the inflation rate to increase further. It may increase consistently from October through December this year but below 12 per cent. We have seen the first increase in September after three months of decline.

With appropriate policies that encourage local production of food, supply should increase, thereby forcing prices down after the initial increase.

Could there have been alternatives and what would you prescribe as palliatives now?
The alternative for Nigeria is to build structures within the Nigeria economy that would stimulate local production and manufacturing of goods at competitive costs. We need to get our power sector right. We need to have functional and supportive transport systems that can aid the movement of goods and keep the prices of goods competitive rate.

There is an urgent need to develop strategies to create rural economies across the food-producing regions in the country and integrate such clusters into the industrial sector. This would create job opportunities, boost the economy at the grassroots level and reduce rural-urban migrations.

Given the current rural-urban migration rate in the country, it is estimated that about 72 per cent of the country’s population would be living in an urban area in 2050. This may increase the unemployment rate in the country and threaten food security.

There is a need for adequate security of lives and property. Regulations and the judicial process must be investment-friendly. Just as I mentioned earlier, closure of the border is a temporary measure, the federal government needs to also engage the neighbouring countries to ensure that they develop a joint agreement that restricts illegal movements of people who are engaged in terrorism.

Of course, neighbouring countries would not make themselves available as a lunch-pad for smuggling and sabotaging of Nigeria’s economy.

Ideally, what should government’s border policy with regards to economic activities be like?
There should be restrictions on the free movement of goods and services that are produced outside the economic regions that have signed the agreement for the free trade. Government must also strengthen the Customs and Immigration personnel to ensure that there is no illegal movement of goods and persons into the country.

Government should continue to implement policies and strategies that would maintain the security of lives and properties in the country.

But I also think that some bold measures are ongoing. For example, since the coming of Central Bank of Nigeria (CBN’s) development financing initiative, Nigeria has seen significant growth in the number of farmers going into rice farming and available records show that paddy production has gone up also.

According to the CBN Governor, Mr. Godwin Emefiele, between 2015 and now, the country has also seen a significant rise in the number of companies, corporate and individuals setting up rice mills, integrated mills and even small mills in the various areas.

The CBN and the Federal Ministry of Agriculture and Rural Development have been at the centre of not just encouraging the production of rice in Nigeria, but also funding these farmers by giving them loans at concessionary terms to buy seedlings, fertilizers or some of the herbicides they need for their rice production.

To what extent has the porous land border regime affected the economy before the closure?
It has increased insecurity in the country, as some of the cases of kidnapping and acts of terrorism in Nigeria were carried out by non-Nigerians.

Nigeria was also almost turning into a dumping ground for expired food items and other consumer products, with adverse environmental and health implications for the country and its people.

On this premise, I support that the CBN should continue to restrict access to foreign exchange for the importation of items that Nigeria could produce locally and should work at unifying the multiple exchange rate regime in the country, with financial backing to guarantee its effectiveness.

Do you not see smuggling as a sign of supply shortage?
It could be a sign of supply shortage in the local market on one hand, on the other hand, some foreign countries sometimes adopt a strategy to sell goods cheaper in foreign countries to enable them to penetrate the markets or earn additional revenue to defray the fixed income in their local economy or make a marginal profit.

Nigeria must do what is within its power to make smuggling unattractive to the players in the overall interest of the economy. Fortunately, the CBN is proactive in the efforts to rev up local production and supply, as well as working with the Presidency to ensure that the country’s land borders would be opened once the neighbours agree to implement the proposed mutual anti-smuggling policies.

It is currently leading the charge against smugglers and has threatened to close their accounts in the banking industry.

Do you see a challenge in local supply of the smuggled items, particularly food products?
Yes! Years of consistent neglect of local production, weak business enablers in the country in the face of the growing demand for these food items, because of our large and growing population, have all led to local shortage in supply. The smugglers, leveraging on our porous land borders, have been having a free ride on us at the expense of the Nigerian economy.

I think it is high time the security agencies fully take charge of their respective duty posts with all sense of patriotism. I think we have evidence of lapses in the border control. That is why I said earlier that Nigeria needs to strengthen the security apparatus to ensure that we close the observed lapses.

The officials at the borders would need more equipment, incentives and commitments to police the land borders.