Economic Effects of the Border Closure

Economic Effects of the Border Closure

Border closure
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The Federal Government of Nigeria closed its land borders on the 20th of August 2019 with Benin, Togo, Niger, Cameroon, and Chad. This was designed to curb the incessant smuggling of goods into the country, majorly staple foods like rice, cooking (vegetable) oil, poultry, tomato, flour, and pasta. The border closure was put in place to ensure adherence to trade rules, and revivify trade conduct that was already dwindling. In view of this, Col. Hameed Ali, Nigeria’s Customs Service boss, cleared that the land border will remain closed until Benin and other neighboring countries cease viewing Nigeria as a smuggling destination. He added that the closure would continue till neighboring countries keep to the ECOWAS protocols on the transit of goods. Subsequent event that has trailed the border closure has however shown its impact on the Nigerian economy.

Read Also: ‘Nigeria’s Economy is Directionless’–Nigerian Economic Summit

Manufacturers in the country have expressed grief over the losses that have been recorded daily as a result of the indefinite border closure. Ede Dafinone, Chairman of MAN Export Promotion Group (MANEG), disclosed that the border closure has put companies in grave problems. Companies that depend solely on the West African market for extra sales, and also manufacturers who export their products, have been immensely affected as their warehouses still have a lot of unsold products that might end up as waste.

Experts also lamented the rising inflation caused by Nigeria’s border closure. They disclosed that the percentage increase in the prices of goods especially staple food was alarming. This is coupled with the fact that many states are yet to implement the minimum wage for workers, which is a major bane affecting the citizenry as an increase in products largely impacts the standard of living. Local farmers too were not prepared for the sudden increase in demand that followed the land closure. They were caught unawares and as such had no ample time to strategize on how to make the most of the land closure.

Another constraint recorded is the negative impact on informal trade. It is hard to quantify the value, as well as the volume of informal trade that occurs across the land border due to lack of available data. However, the significance of informal trade cannot be undermined as it provides a major source of income for many. But with the border closure, source of livelihood for this category of people has been cut short, and the failure of the FG to complement the land closure with enough jobs obviously adds to the ever increasing unemployment rate in the country.

Notwithstanding, the border closure has recorded commendable results for the Nigerian economy. Capital market operators have praised the federal government on the border closure, stating that it has yielded positive economic results. This can be seen in the increase in government revenue collected via custom duties. Colonel Hameed Ali, the Comptroller General of the Nigerian Customs, announced at the National Assembly in October that billions of naira has entered the government purse following payment of duties:

“What we have discovered is that most of those cargoes that used to go to Benin Republic, shipped to Benin, and then discharged and smuggled into Nigeria, now that we have closed the border, they are forced to bring their goods to either Apapa or Tin Can Island and we have to collect duty on them… as a matter of fact, our revenue has not reduced, it is increasing as a result of closing the border.’

Nigerian Customs accumulates an average of over 4.7 billion and 5.8 billion in daily revenue commencing the border closure, which is much higher compared to what has been obtained prior to the closure.

Timipre Sylva, the Minister of State for Petroleum, further revealed that ‘there is a drop in fuel consumption by eight million liters a day.’ This is in view of the fact that prior to the closure, a voluminous part of petrol consumed in Nigeria is smuggled out to neighboring countries. According to research published by SBMIntel in August 2019, the price of petrol in Nigeria was $0.40 (N145/ liter), while the price in neighboring countries was surpassing the figure, more than double. In economic terms, goods will usually move to the location where valuation is at its peak, and considering the penetrable land borders, there is radically no restriction in any way for the movement of goods across the borders. The Nigerian Immigration Service disclosed that there are over 1, 400 illegal border routes all over the country. This reveals that there are several points where petrol can be smuggled out of the country. This gives room for petrol marketers to makes inundated profits by illegally moving goods across borders which flout the import/export rules of ECOWAS member states.

Another effectiveness of the border closure is the high increase in local production. That is, making local goods almost equal in price with imported goods. The land border closure minimized the number of goods entering the country, creating more room for local producers to sell their products to local consumers. For instance, the Christian and Muslim Poultry farmers experienced a high demand for local chickens.

The economic impact of the land border closure can thus be seen in its ups and downs. It is hard to determine which outweighs the other. However, the government needs to consider the citizens who are left hanging with no other means of making a living. While carrying out its responsibility of securing and safeguarding the land borders, the government should make efforts towards attaining a level-playing ground so that the lows do not override the advantages, thereby leaving ordinary citizens to bear the brunt.

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