Nigerian border closures cut smuggling but drive up prices

The closure of the Nigerian borders may have achieved its set goals, but some things not bargained for have also surfaced, the combination, pushing up prices of goods and affecting some other businesses as well.
Analysts believe that, government should look at the spiral effect and possibly balance the consequences. For instance, the closure, analysts believe, affects both legitimate and illegitimate trade.
Hundreds of trucks baked in the sun at the frontier between Nigeria and Benin last week as the controversial closure of west Africa’s busiest commercial crossing stretched into its third month.
According to the Nigerian government President Muhammadu Buhari’s drastic action, which expanded recently into a suspension of imports and exports across all of Nigeria’s land borders, has achieved its primary goals: rampant smuggling from Benin has dropped and customs revenues through Nigeria’s ports have risen.
But the negative consequences have been stark. Prices of food staples have risen steeply and legitimate businesses have been caught in the crossfire, from traders whose trucks are stuck at border crossings to telecoms operators struggling to refuel their petrol-powered masts.
“It’s affecting everyone,” Mikewonder Micah, who runs a shop at the now sleepy Seme border post, previously the scene of endless traffic jams and bustling street-side commerce on the road between Nigeria’s commercial hub, Lagos, and Benin’s capital, Porto-Novo, told the Financial Times. His sales have fallen by 70 per cent since the closure. “When they closed the border it wasn’t so bad, but it gets harder and harder every day.”
The borders’ closure, planned to last until at least January 31, is the most aggressive in a series of policies Mr Buhari has introduced to curb smuggling, boost local production and achieve food security.
Nigeria’s foreign minister Geoffrey Onyeama has said the borders will only reopen if the country’s neighbours properly enforce existing rules of origin within the regional trading bloc, the Economic Community of West African States (Ecowas), which are designed to prevent the dumping of cheap western and Chinese goods.
For many observers this is an admission that Nigeria’s corrupt, underfunded customs service is unable to successfully control the country’s notoriously porous frontiers. That is a worrying signal for the prospects of a much-heralded continental free trade deal that is meant to provide a desperately needed boost to intra-African trade, said W Gyude Moore, senior policy fellow at the Washington-based Center for Global Development.
“[Closing borders] is such a blunt instrument and as long as it remains in the repertoire of states trying to form a continental agreement you can see the challenge it poses,” said Mr Moore, a former public works minister of Liberia.
Still, Mr Moore said he sympathised with Nigeria given how much of Benin’s economy is generated from its function as an informal trading route for its neighbour.
Imports per capita into Benin of everything from cars to textiles, rice and poultry “are far too large” for Benin’s 11m people, according to research by the Washington-based Brookings Institution. Most goods end up being smuggled into Nigeria.
“I struggle myself to see how else Nigeria could have imposed significant costs on Benin for this behaviour,” Mr Moore said. “But by doing this it makes it an acceptable thing, [for example] for Ghana to do to Togo tomorrow.”
Andrew Nevin, chief economist for PwC in Nigeria, agreed. “It’s obvious that 90 per cent of the traffic that goes through [Benin’s main port] Cotonou is destined for Nigeria . . . so on a basic level we’re supportive of the government dealing with this,” Mr Nevin said. “The problem with the current tactics is that it captures both legitimate and illegitimate trade.”
The shutdown has had wide-ranging repercussions in Nigeria and across west Africa, where Nigeria accounts for about 70 per cent of the region’s gross domestic product.
“When Nigeria sneezes, west Africa catches a cold,” said one Nigerian official at the Seme border post.
The greatest impact has been on Nigeria’s vast informal sector, which at 65 per cent of GDP is the largest in sub-Saharan Africa, and on ordinary Nigerians, more than half of whom live in poverty. Inflation rose in October to 11.6 per cent year on year, driven by food prices, which jumped 14.1 per cent in the same period to an 18-month high. Food costs account for roughly 60 per cent of the average Nigerian’s spending and the price of the most important staple, rice, has roughly doubled since the border closed.
The government says the border closures will help boost local food production. But rice takes time to grow, harvest, process and sell, and the country’s struggling farming industry cannot keep up with the huge increase in demand.
“We are not yet ripe to close the border because . . . we need years [of] investing in farmers so they can harvest enough for Nigeria,” said Ekpo Ain, a rice trader at the Sura market in Lagos.
He used to sell dozens of bags of rice a day when the market was bursting with low-cost Thai imports. He said he was now lucky if he shifted a few. “We are in a mess now — we are in trouble.”

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