For Nigeria, economic and national security rank higher than trade
In a measure reminiscent of his first stint in power, President Muhammadu Buhari has closed the country's land borders, part of increasingly drastic measures to protect the economy. Critics believe his actions are having the opposite effect.
Nigeria intends to keep its land borders closed as part of measures to force self-sufficiency in rice production and consumption within its territory.
Colonel (rtd) Hameed Ali, comptroller-general of the Nigerian Customs Service, announced on Monday that imports and exports across the land borders of Africa’s largest economy were stopped, with no timeline for re-opening them.
- The restrictions began with a shutdown of the border with Benin on 30 August.
Manning the border is a joint paramilitary effort by security agencies including the army, police, customs and immigration, in tandem with the Office of the National Security Adviser (ONSA).
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Benin has longstanding cultural and economic ties with its larger neighbour – its former president Thomas Boni Yayi once self-effacingly described his country as Nigeria’s 37th state. Benin has for decades been a hub to facilitate informal and formal trade, as well as the smuggling of all goods, especially rice and cars.
Port of the problem
Given the congestion, bureaucracy and corruption at Nigerian ports, the Cotonou port has long served as an auxiliary hub for importers. The porous borders have proved to be fertile ground for smugglers, who use the bush paths to bring in goods.
According to the World Bank, 20% of Benin’s GDP is from importing goods that are then reshipped to Nigeria.
The presidency believes this drives up prices in Nigeria’s domestic markets and affects the country’s ability to mass produce for its citizens.
- Consequently, in June 2015 the Central Bank of Nigeria (CBN) restricted the availability of forex to importers of 41 items including clothing and toothpicks as part of a raft of protectionist interventions that have happened since Muhammadu Buhari got into office. The list was later stretched to 43.
- In August 2019, central bank governor Godwin Emefiele doubled down on a Buhari comment about restricting forex to food importers in order to allocate more foreign reserves to diversifying the economy. “I will like to stress that we would ensure that more of these items will get on the list of items that are going to be restricted from accessing foreign exchange in the Nigerian banking industry, not just from the CBN source,” the governor said.
The border closures echo Buhari’s first stint in power between 1983-1985. Since then, the border has rarely been shut down.
- One notable exception was in August 2003, when then-president Olusegun Obasanjo closed the Seme border to Benin for two weeks after serial crimes committed by Amani Tidjani, a trans-border crime kingpin notorious for stealing and then selling stolen cars between both countries. Tidjani had been treated leniently by the courts in his home country of Benin and Obasanjo closed the borders until the Beninese president ensured his extradition to Nigeria, ending the diplomatic row. Tidjani died in a Lagos prison in 2014.
- In 2004, both countries signed a Memorandum of Understanding (MoU) with Benin agreeing to not import banned items – an agreement it has often reneged on, especially with the lax security around the borders.
The new episode comes just as Governor Emefiele has urged rice millers in Nigeria not to hoard rice or increase the price, describing these as “unpatriotic acts”.
- The renewed closure of the borders has drastically affected trade, especially on the Benin side, and analysts warn that it could drive inflation on the Nigeria.
- According to the financial blog Nairametrics, it has led to a 12.9% increase in the price of rice in Lagos markets, with some merchants re-packaging local rice in foreign bags as foreign rice is considered better quality.
- The September 2019 Consumer Price Index from the National Bureau of Statistics reported that food inflation had risen to 13.51% and the rates could rise even higher in the coming month due to both the border closure and the implementation of a new set of taxes.
The move also poses questions about decades-old ECOWAS trade agreements and the rights to free movement within the West African bloc, as well as for the African Continental Free Trade Agreement (AfCFTA) which Nigeria signed only a few months ago.
For Hameed Ali, national security ranks above the rule of law. “We want our nation, we want to make sure that our people are protected,” he told the press. “You must be alive and well for you to begin to ask for your rights. Your rights come when you are well and alive.”
- “Go and meet the people in Maiduguri when Boko Haram was harassing their lives, the only question was survival, there is no question of right[s]. This time Nigeria must survive first then before we begin to ask for our rights.”
Nonso Obikili, chief economist at Business Day newspaper, argues that the border closure might in fact be a boost for criminal gangs, rather than reducing contraband.
We successfully shut down the space for formal rice (and other food) importing and the industry unsurprisingly moved to the informal sector. If you shut down the space in the informal sector the industry won’t disappear. It will just move to the heavily armed informal sector.
— Nonso Obikili (@nonso2) October 14, 2019
Bottom line: With re-election no longer an issue, Buhari is free to pursue more economic nationalism, arguing for short-term pain for long-term gain. But will Nigeria ever see the payoff?