James Ojo Adakole
In August, 2019, the Federal Government announced the closure of Nigeria’s land borders in an ostensible attempt to promote locally made products in the country.
The initiative christened Operation, Exercise Swift Response, has since divided the country alongside two extreme camps. For many, the move was a right step in the right direction, especially to prevent Nigeria from becoming a dumping ground for other countries.
Border closure, others observe, however contradicts the idea of the recently signed African Continental Free Trade Agreement (ACFTA). So far, it appears unlikely the Federal Government would announce the re-opening of the borders anytime soon.
While addressing journalists in Abuja on December 23, 2019, the Minister of State for Industry, Trade and Investment, Mariam Katagum, stated that the country’s borders would remain closed until Nigeria reaches a consensus with Benin and Niger republics on how borders should be reopened.
“We had the strategic meeting of the three countries and what we agreed with our neighbours was to activate a joint border patrol, comprising the Customs, all the security agencies and to try to follow the actual protocol laid down by ECOWAS.
“The committee met on November 25 and it is only when that committee is certain that all the countries are respecting the ECOWAS Protocol that they will recommend a day for the reopening of the borders,” the minister said.
However, many analysts believe the lingering border closure portends more harm than good for the Nigerian economy, especially this year.
Commenting on this, respected development analyst/development columnist, Stears Business, Akinkunmi Akingbade, observed that the closure of land borders has had both negative and positive effects on the Nigerian economy.
He said: “The Nigerian land border closure has had a double-edged effect on the economy, with some sectors gaining while other sectors have been hurt. Inflationary pressures have greatly been affected, as Nigeria’s inflation rose year-on-year to 11.85 per cent in November 2019, the highest rate since April 2018. The food sector had a great effect on the index with an inflation rate of 14.48 per cent.
“Nevertheless, one would observe that some sectors have largely benefitted from the border closure. Local rice producers have enjoyed increased patronage from Nigerians, as the price of imported rice tremendously increased. The poultry industry has also been estimated to have saved N50 billion since the commencement of the land border closure. Other items such as illegal drugs, cars and petrol smuggling have tremendously reduced since the closure of the borders.”
Akingbade, however, stated that the Nigerian government must ensure the needed structures are provided to sustain the opportunities recorded by closure of land borders when they are eventually reopened.
He further stated that should border closure linger this year, the country’s economy would face tough times, especially high inflation. Highlighting the economic implications of land borders still being shut in 2020, the development analyst said: “Inflationary pressures will continue to rise, Nigeria’s local production capacity is unable to meet the local demand for rice, chicken, cars, amongst others. Hence, where we are unable to effectively substitute these imports with locally made products, the effect of the border closures would continue to be a strain on the economy. As a development analyst, it is important to note that the border closure has helped to boost local production, thereby increasing job opportunities in the country. Therefore, such opportunities are expected to be sustained even with the closure of Nigeria’s land borders.
“However, for sustainable development to truly occur, the competitive nature of these industries has to be improved upon and maintained, to reduce the effect of the reopening of Nigeria’s land borders
“From a development perspective, the essential effect of the border closure is to help boost local production, while reducing smuggling into the Nigerian borders. The Nigerian government has imposed tariffs on certain imports to improve competitiveness in these sectors. Earlier in the year, the Central Bank of Nigeria (CBN) also restricted forex sales to food import. However, these measures have only imposed temporary treatment towards boosting the sales of local food produce, due to poor competitive nature of some of these locally produced items.
“Hence, the question to be asked is, will a locally produced item sell over an imported item when the borders are reopened? The main reason local rice production has been successful during this border closure is because the Nigerian government has successfully supported the growth of the industry through the Anchor Borrowers Programme, which has been in operation since 2015. Thus, there has been a great boost in local rice yield for Nigerian farmers. Also, there have been several investments, by Dangote, Coscharis, Olam, and other players, in building integrated rice mills. These mills have helped farmers to convert their harvested rice, thereby making their rice produce fully ready for consumption, improving rice production.
“Thus, the Federal government should aim at improving value chains, before imposing tariffs on the imported items. With such strategy, any tariff introduced by the government would have a reduced effect on Nigerians. Inflation mainly occurs when the local producers cannot satisfy the consumption requirements of Nigerians. Hence, more Nigerians are looking towards buying limited products in the market.
“Another sector to observe this year is the automotive sector. The Nigerian government has declared that in 2020, they will introduce a new automotive policy bill, which would aid the production of locally assembled cars in Nigeria. Nigeria currently has an annual production capacity of about 300,000 vehicles. However, utilization rate as at 2017 stood at 45,000, which is just 15 per cent of the total production capacity. If the bill turns out to be effective this time, it would also help boost Nigeria’s GDP.
“More importantly, the Nigerian government and its neighbouring country partners, should evaluate how they can boost production in their value adding industries, and also adopt sustainable measures towards preventing land border smuggling into and outside Nigeria.”
Also speaking, a development economist and senior lecturer of Economics at the University of Nigeria, Nsukka (UNN) in Enugu State, Emmanuel Nwosu, expressed reservations with the position of the CBN that border closure has improved the country’s exchange rate.
He said: “Some pertinent questions include: has the Naira appreciated since then? Has the National Bureau Statistics (NBS) reviewed its methodology for data collection for calculating inflation rates and who and who do they capture during data collection?
“Econometrics and statistics are not supposed to underlie data generating process for policy-making, rather they should be used to test already generated data for policy purposes.
“Also, we need to know the exchange rate demand for importation of official cars for all levels of government including the CBN itself. The price of one Hilux van is about N24 million, and you can guess the price of other exotic vehicles that cost between N35 million to N100 million depending on the features.
“These vehicles are imported in thousands every year and after each round of election government institutions will replace these cars.
“Have we for one day checked that the price of each of these cars can buy more than a ship load of rice? Nobody talks about the pressure they put on exchange rate of the Naira. Since the Central Bank barred 41 items or more from assessing exchange rate what has been the gain in the value of our currency?
“The Central Bank has continued to allow multiple exchange rate regime thereby creating arbitrage opportunities that support round tripping and high exposure of the Naira to speculative attack. I’ll be surprised if it can be proven that we spend more than our oil revenue earnings to import goods from other countries when Naira is not appreciating. But this is not the case because by 2014 the dollar equivalent of a senior lecturer’s income was about $19,000, but today it’s a little over $8,000. So, our capacity to buy foreign goods has declined drastically.
“Another issue to find out why school fees are not included among those items barred from accessing foreign exchange. Is education not produced in Nigeria? Our CBN governor got his degrees in Nigeria and he has been appointed for the second term. The former governor of CBN Soludo also got all his degrees from a Nigerian university.
“In those days people were not able to do complex research because education was largely analogue. Today, our students do better in international examinations and other universities when they travel abroad showing our standard of education is higher. They are computer literate and ICT compliant. Only, students who could not pass UTME in Nigeria fail to perform in foreign universities although they avoid good schools because of entrance exams.
“Those who schooled many years ago find it difficult to pass courses taught in the universities nowadays when they come for Master’s degree or higher. This is what shows the standard is higher than the simple linear models etc, they were only exposed to. If we must be honest, school fees should be delisted from foreign exchange list.
“As a way forward we should also know why Bureau De change is a peculiar feature of our exchange rate management. Surprisingly, they are larger in number than Deposit Money Banks. They make their living by buying and selling foreign currency. Which country does that and still maintain stable exchange rate? Discretionary monetary policy does not mean dishing foreign reserves to Bureau De change operators in the name of maintaining different exchange rates.”
On his part, Mr Ambrose Igboke, a public affairs analyst, pointed out that the country’s economy faces tough times in 2020, especially with major chunk of the budget going into recurrent expenditure.
He said: “The budget is the bedrock of the micro-economic structure of a country. It is about a forecast of what the economic will look like for a country. Now, looking at the budget, nothing has changed. It is said that you don’t keep repeating the way you do things and expect a different result. What has happened is that our recurrent expenditure has swallowed the entire budget and capital expenditure has a minute part of a budget that has N37 billion for repair works and maintenance of the National Assembly complex and approved by the president is something that we all have to be very worried about.
“In this year, Nigerians should not be expecting too much change, we are spending almost half of our budget on paying salaries, and servicing debts; the little infrastructure we need, we don’t have money to do it, we are borrowing so much money.
“The Nigerian future looks very bleak, and the rate people move out of the country in droves is worrisome. In my street alone in the last three months, four young families have migrated from this country to different parts of Europe between August and now; so the future is bleak, people are running away from the country, the youths, labour and professional manpower that are expected to re-engineer the process are already running away in droves; so it is mere wishful thinking to say we will do better this year.
“If that will happen, that is not when we celebrate little, little things. We celebrate minutest achievement as if they are major feats because we have not achieved anything and when you have not achieved anything, you keep on celebrating little things that other countries have taken for granted. Imagine that we are still anticipating 24-hours power supply in the 21st Century. This is something many countries have taken for granted in the past 40 years and we are in the same global competition, we have not started.”