Business

Border closure now useless, hurting economy –Experts

…as Nigeria loses over N1trn export revenue

 

On August 20, it will be one year since the Federal Government ‘partially’ closed the nation’s land borders. Manufacturers, importers and freight forwarders are calling for its reopening, saying the seeming indefinite border closure is now hurting more than it has healed the economy. PAUL OGBUOKIRI reports

 

Dynamics of border closure

 

In August last year when the Federal Government took the drastic step to close the land borders with its neighbours, not only were the Boko Haram insurgents wrecking havoc in the North East and alleged Fulani herdsmen killings being reported across the country, another dimension of criminality, banditry and upsurge in kidnapping was sweeping across the North West through the North Central towards the Southern Nigeria. All those were blamed on the nation’s porous borders.

 

And to nib those in the bud the Federal Government on August 20, 2019, introduced a joint military operation code named ‘Ex-Swift Response.’

 

Also, despite government’s ban on rice imports from the land borders and the Central Bank of Nigeria’s listing of rice as one of the items it will no longer allocate foreign exchange for its import; imported rice smuggled into the country through the land borders continued to flood the country, rubbishing the government’s backward integration programme on rice.

 

An attempt to assess the performance of the border closure which was a technical ban on imports and exports across the land borders, shows that positive result has been achieved on rice smuggling into the country with the recent report of a drastic fall in the quantity of rice the Asian countries were able to export to Benin Republic, Niger, and Cameroon in the last quarter of 2019 and first half of 2020.

 

Those three African countries are Nigeria’s next door neighbours that have over the years acted as transit points for smuggled foreign goods (including rice) into the continent’s largest economy.

 

However, not only has the impact of the border closure yet to been felt on the nation’s security challenges, manufactures, freight forwarders, imports and economists have called for the reopening of the borders, saying it is hurting the economy more than it has healed it.

 

Economic repercussions of border closure

 

The continued closure of Nigeria’s borders to neighboring countries will exacerbate the stagnation of the economy, Nigerian financial experts have warned.

 

Titus Okunrounmu, a former Director of the Central Bank of Nigeria (CBN), said that the closure would stifle economic growth of the country. Okunrounmu, who served as a Director in the department of budgetary of the apex bank, said shutting down of borders will further complicate economic challenges as the nation is still importing a lot of goods into the country. “Closing the nation’s borders is not the solution to our economic under-development,” he added.

 

 

The economy will continue to be stagnant because the smugglers would find alternative means of bringing their goods into the country and warned that the trend would negatively affect revenue generation, the former banker said.

 

He urged the government to take steps to develop the economy by looking inwards to proffer solutions to the immediate problems affecting the economy. Meanwhile, the Association of Nigeria Licensed Customs Agents said those 500 trucks loaded with perishable goods that were stranded at Seme following the partial closure of the border have wasted.

 

Bisiriyu Fanu, a senior member of the association, told reporters in Lagos that the stranded goods belonged to genuine importers who had paid government duties but got stuck by the partial border closure. According to him, the partial border closure is impacting negatively on the nation’s economy.

 

“The impact of the closure is enormous, if you go to some markets in Lagos like Balogun, Idumagbo, Idumota and Oyingbo, people from neighboring countries who always patronize them are no more coming,” he added.

 

Manufacturers count losses

 

According to the Acting Director General of the Manufacturers Association of Nigeria (MAN), Paul Oruche, his members have in the last one year lost over N1 trillion in export revenue to the African countries due to the closure of the land borders. He said the seeming indefinite border closure has disrupted trade between Nigeria and other Economic Community of West African States (ECOWAS) countries with severe economic impacts as volume of trade within ECOWAS has declined from 12 to seven per cent.

 

Oruche explained that the border closure is severely affecting shipment of Nigerian manufactured goods to the ECOWAS countries as Nigerian goods are still facing rejections in neighbouring countries due to acrimony over the Federal Government’s refusal to reopen the borders.

 

He said: “Closure of the land borders has enormous implications for cross border economic activities around the country. “The indications are now that the closure is indefinite.

 

While we share the concern of government on issues of security and smuggling, we believe that the indefinite closure of land borders is not the solution to the problem.”

 

Oruche insisted that it was unacceptable for the Federal Government to shutdown the all the borders in the name of smuggling of agric produce and ammunitions at the detriment of trade promotion and facilitation along the ECOWAS trade corridor for one year now without reviewing the adverse effects on businesses and the country’s economy in general.

 

He noted that there was no country in the world where smuggling of products does not take place but that it is the responsibility of government to control smuggling like other countries are doing without shutting down the borders in a bid to encourage trading among states. The border closure has sent danger signals to other ECOWAS countries in the region as it is taking more than expected.

 

Oruche said: “What we are saying is to find a way of encouraging trade among ourselves in sub- Sahara Africa. We are saying that trade among ECOWAS countries is very low, it’s just 11 per cent or 12 per cent in terms of volume in the region and the border closure has brought it to seven per cent.

 

He further said that the result of a survey of the impact of the border closure on Nigerian manufacturers indicate that “it has been a huge challenge to them and many of them are scaling down jobs, reducing costs because that the aspect of the export market is no longer feasible, attractive and profitable.”

 

The Chairman, MAN Export Promotion Group (MANEG), Ede Dafinone, said due to the current border situation, many companies are in dire problems, saying that significant losses and many businesses are about to collapse.

 

He stressed that there are companies who rely on the West African market for additional sales to make profits, while some manufacture locally in Nigeria for export, but have had their warehouse filled with unsold inventory.

 

“From the government side, there may have be an increase in revenue from payable duty but Customs should be trade facilitating agency rather than a revenue-generating agency.”

 

Economy of border communities crippled Meanwhile, the economy of the border communities may have been the most badly hit by the indefinite border closure as an estimated three million people formerly engaged in legitimate businesses have lost their jobs with about 90 per cent of Small and Medium Enterprises (SMEs) either grounded or relocated.

 

Since its launch, those living in the communities who had relied on border activities for their survival are now living in abject poverty leaving many with no option than to embrace illegal businesses (including smuggling) around the border corridors to put food on the table for families. Ironically, since the closure of the border posts most of border communities now rely on aiding smugglers who always invade Customs duty.

 

This is because villagers involved in haulage of goods from one location to another for traders and importers are now left with no legitimate means of livelihood than smuggling of petroleum products and other movable goods.

 

Investigations revealed that even bank branches operating around the border corridors have lost both their Nigerians and neigbouring countries’ customers as no clearing agents go into the banking halls to do transactions with no imported goods coming into the border for clearing.

 

Last line

 

There are concerns about the continued closure of the land borders and its possible impact on the implementation of the African Continental Free Trade Area (AfCFTA) expected to kick off next year, having being delayed for implementation in July. Also, unilateral border closures go against all commercial and freedom of movement treaties signed under ECOWAS.

 

Besides, data from the National Bureau of Statistics (NBS) showed that the nation’s inflation rate has maintained a steady rise from 11.98 per cent recorded in December 2019 to 12.56 per cent in June 2020. Food inflation equally rose to 15.18 per cent.

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