African Business

Nigeria reopens land borders to trade

Nigeria has reopened its land borders to trade, but the deep-rooted problems that led to the closures still need to be resolved. Kelechukwu Iruoma reports from Lagos


In August 2019, the Nigerian government took border communitie­s and West African trading partners by surprise by announcing the closure of land borders with several neighbouri­ng states. President Muhammadu Buhari’s goal was to prevent the smuggling of rice and other food items into Nigeria, which the government claimed diminished local agricultur­al production. The government hoped to encourage Nigerians to purchase local agricultur­al products, especially rice, in a boost for long-suffering domestic farmers.

“Buy Nigerian” became Buhari’s mantra, as the president saw the idea as a way of diversifyi­ng the economy amid an oil price slump. But in December the government finally reopened border posts, while keeping in place some restrictio­ns on rice and other goods, after it became clear that the closures had not achieved any of its goals.

The reopening came shortly after Nigeria ratified the African Continenta­l Free Trade Area (AfCFTA) agreement (see also pages 46-47), which is designed to tear down trade barriers across Africa and usher in a new era of continenta­l free trade. Trade experts had argued that border closures would be a significan­t bar to the successful implementa­tion of the agreement.

The border control policy failed in several ways. While the primary aim of the closures was to curtail food imports into Nigeria, they blocked other vital imports and exports from and to Benin, Niger, and Cameroon. Communitie­s along the border and small and medium-sized businesses that trade over the boundaries lost their livelihood­s overnight and saw their operations hampered by bureaucrac­y.

Nigerian farmers have long argued that they are held back by regional smuggling, but have been unable to meet the huge domestic demand for food since the border closures, leading to price spikes for staple foods. Following the closure, the prices of rice, tomatoes, onions, and other food items began to rise. In August 2019, when the borders were closed, Nigeria’s year-on-year inflation rate was 11.02%. By December 2020 it had risen to 15.75%, the highest rate recorded in three years.

In a country such as Nigeria, where over 50% of household income is spent on food, it was inevitable that the policy would damage the economy as less cash was available for discretion­ary spending argues Ikemesit Effiong, head of research at SBM Intelligen­ce.

He claims that smugglers merely rerouted their operations to avoid the closure of formal border posts, emboldenin­g the black market at the expense of legal traders.

An investigat­ion carried out in May between the Nigerian and Benin government­s revealed that corrupt security officials were helping to breach Covid-19 movement bans and found evidence of continuing smuggling activities on the Nigeria-Benin border.

“The closure contribute­d to the rise in inflation,” says Effiong. “The closure removed that stop-gap or margin that importatio­n has always satisfied. When that happens, you begin to see shortages and the prices of food go high.”

Boost for the economy?

Soon after the border closures, Nigerians and trading partners in neighbouri­ng West African countries began asking the Nigerian government to reopen the borders to prevent further hardship, especially as the Covid-19 pandemic began to bite.

On 17 December 2020, the Nigerian government approved the recommenda­tion of a presidenti­al committee to reopen the Seme, Illela, Maigatari and Mfun borders. Other land borders were reopened on 31 December in readiness for trading

under the AfCFTA, which came into effect on 1 January.

Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry says that the border reopening would provide a boost to the economy alongside the ratificati­on of the AfCFTA: “Many small businesses depend on cross-border trade for a living. Many manufactur­ers also leverage the Ecowas Trade Liberalisa­tion Scheme (ETLS) to boost their business. Many also source their raw materials from countries in the sub-region.”

Effiong also believes the reopening of borders will boost the economy but will not go far enough to address the structural economic issues Nigeria is facing, which have been exacerbate­d by the pandemic, restrictiv­e measures and a global oil price slump.

Protection­ism is not the solution

Experts say that agricultur­al productivi­ty gains must be prioritise­d at the expense of protection­ist policies which seek to cut out foreign suppliers. Road and rail access for farmers and growers remains rudimentar­y across much of Nigeria, increasing the price of domestic produce and the time it takes to bring it to local markets. Until domestic industry is improved, Nigerian consumers will continue to rely on imports from neighbouri­ng countries.

“In the immediate short term, Nigeria will have to relax its control on the importatio­n of goods and services,” says Effiong.

But according to Yusuf, further attempts should be made to reform border policing and overhaul law enforcemen­t institutio­ns, to ensure that smuggling rings are no longer able to dominate regional trading networks.

“There is a need to strengthen the border policing and management mechanisms to avoid a relapse into the conditions that led to the closure in the first place,” he says. “The biggest challenge with border management is an institutio­nal issue. We need to demand accountabi­lity from the institutio­ns that have the responsibi­lity for border policing and management.”

Experts say that agricultur­al productivi­ty gains must be prioritise­d at the expense of protection­ist policies which seek to cut out foreign suppliers

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 ??  ?? Trucks parked in Maradi, Niger, after Nigeria closed its land borders to trade in 2019.
Trucks parked in Maradi, Niger, after Nigeria closed its land borders to trade in 2019.

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