Business Feature

Boarders reopening will crash food prices, halt rising inflation –Experts

As the news of the Federal Government’s order reopening the land borders spread, a video emerged online showing residents of Benin Republic in wide jubilation over the development, an indication that their economic lifeline has been restored. PAUL OGBUOKIRI reports that while the reopening of the borders has a lot of positives, there are also negative implications

 

On Wednesday, the Federal Government ordered the reopening of four major land borders in Nigeria. They included Seme in the South-Western part of the country, Ilela in the North-West region of the country, Maitagari in the North-West part of the country and Mfun in the South-South part of the country.

 

The Finance Minister, Zainab Ahmed, while disclosing that at the Federal Executive Council meeting said while the four borders are to be immediately reopened, “the ban on importation of rice, poultry and other banned products still subsists and will be implemented by the border patrol team.”

 

The development had elicited mixed reactions with many Nigerians expressing hopes that the measure would help reduce the surging cost of food items and other necessities. In separate interviews with Sunday Telegraph, experts say the reopening of the borders has its human, economic and social impacts.

 

Foreign goods will compete with Nigerian goods

 

Speaking Professor Ben Eze of the Department of Economics, University of Nigeria, Nsukka said the problem with the reopening of the border is that there is a high probability that a lot of goods would come in and compete with Nigerian-made goods.

 

He also stated that products like petroleum would be smuggled across the borders as it was before the closure. He said business will resume. Those who have endured this over one year of the border closure will return fully into business.

 

“Customs must do their work and not accept bribes. Otherwise, there will be importation of contraband goods. Also, a lot of goods will come in but come and compete with Nigerian goods though this will bring down the cost of goods in Nigeria.

 

“Another thing is, a lot of goods will leave Nigeria, like petroleum products they smuggle the products across and that may continue again because sometimes they smuggle it to Benin and Togo to sell.” Ekpo, however, said the reopening of the border also has positive sides. According to him, the closure of the border that was meant to increase the consumption of made-in-Nigeria goods instead caused inflation and saw the increase in prices of goods.

 

He also stated that there was a lot of smuggling activities at the borders due to their porous nature, adding that “we also Ali violated the ECOWAS agreement not to close the border. “The reopening will allow for a free flow of goods, merchants will move their goods out, and other goods can come in.”

 

The economist argued that the border closure was a failure as Nigerians didn’t gain much from the process and the positive implication of border reopening is that food items will become cheaper after a while. “A lot of goods were coming in from these countries when they closed the borders, people were smuggling, and that moved up the prices, the closure, the pandemic and the protest all led to increasing prices.”

 

How it will affect food prices

 

For DR Uchenna Uwaleke of the Department of Finance, Nasarawa State University said the reopening of the borders is not a lasting solution to Nigeria’s economic problems because the likelihood that food prices will crash and the inflation pressure will reduce is only a temporary debate.

 

He said that the lasting solution is for Nigeria to solve its problems by creating opportunities to develop SMEs, agro-allied businesses, network businesses, the Central Bank’s programme for agriculture, among others.

 

He said: “If we are ready to develop all these, we will be able to boost local production and rely less on imported food items, either those that were imported legally or those that are smuggled into the country.

 

The long-lasting solution is to take our destiny in our own hands.” He stated that Nigeria had had cooperation and interactions with neighbouring countries for long and across the borders. He said: “There have been lots of movements of goods and services whether authorised or unauthorised.

 

That relationship has been on hold for so long. The closure and inability to get those things across have triggered cries about the implications on the common man on the streets.

 

These people had enjoyed some cheap foodstuff courtesy of the movement across borders. In other words, we had to rely on ourselves to a considerable extent, and allow for minimal subsistence operation of some of these basic needs; things didn’t work out correctly.

 

“Things don’t work out perfectly immediately, and that is what we have seen in the rise in inflation pressure, generally on food items, that is over 18 per cent now.

 

The joy is that with the reopening of the borders, things will be coming to Nigeria; either those who will do it legally or unfortunately those who will do it illegally.”

 

Impact on local industries

 

Also speaking, a Professor of Financial Economics of the University of Uyo, Leo Ukpong disclosed that that the border closure was needed to help local industries get on their feet. He added that the reopening could do more harm to the local businesses. He, however, stated that the blame should be  on government policies that do not allow such industries to thrive.

 

“Bringing in goods is not what will kill our local business, but the internal policies are suppressing the growth of those industries,” Ukpong said.

 

 

 

On the other hand, Ukpong said that a country like Nigeria with a huge population is usually unable to produce all that is needed. “There’s always a need to import,” he said. The professor added that a closed border is not very good for a massive economy with over 200 million people. He stressed that opening it up would allow some of the critical goods and parts needed to come into the country to keep prices down a little bit.

 

“Right now, cement has gone up to N4, 000 per bag, and that is bad for the country. We don’t know why the cement went up but as a short term measure for the consumers, builders in construction and even the government who need cement for road construction, can open up the border. The cement come in, and while they are doing that, they build capacity to manufacture or build cement in good quantity here because that is a major thing for the economy,” he said.

 

He said that though the border was closed to curtail smuggling and to help local businesses, it is tough for the average consumers to identify what they benefitted from the decision.

 

“The price of rice is almost N40, 000 as at today so what that means is, we cannot produce enough rice consumed in Nigeria, closing the border ended up hurting us,” he said. Justifying the reopening of the border, the professor said to reduce rice importation, enough rice should be produced to meet with local consumption.

 

“If it is short term, if the government is focused and they produce enough, it is a big basket for average consumers, opening the border is the right thing to do. However, it is the government responsibility to support those who want to go into manufacturing; that’s a long term policy.

 

“I’m not saying the government should produce (goods) but it should support those who are already into the production. The government should give them the needed support like rice farmers; increase their productivity, subsidised fertiliser, loans, packaging and all.

 

Let’s look at how we can support locally produced goods and services,” he added

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