“If you don’t enforce tariffs and borders, you’re penalising local manufacturers and industry,” Coumantaros said. The border closure is “just asking the neighbours to play by the rules they agreed to. That issue will become even greater,” when the free trade area comes into effect, he said.
Nigeria’s closed its borders with Benin in August in a bid to stop the smuggling of food and other goods. The country’s customs service has said that the closure will last until at least the end of January.
The closure is seen as an obstacle to the implementation of Africa’s free trade agreement, which comes into effect on July 1.
Benin risks being “a dumping ground, a VAT-free zone,” leading to “a completely uneven playing field,” Coumantaros said. “We support the government’s initiative.”
“Of course foreign producers would all love to have access to the Nigerian market and not pay VAT and customs duties,” he said. “We’re the dummies with the worst roads” that are the result of poor tax collection. Flour Mills of Nigeria’s (FMN) own food production in the late-2019 down season period was higher as a result of the border closure and the lack of smuggled produce, he added.
The poor condition of the roads around Nigeria’s ports is an obstacle for FMN, which has used its own money to fund repairs. The company in 2017 spent about $3m to help repair the Apapa Wharf road with Dangote.
Many more road repairs are still needed, as well as investment in rail, Coumantaros said.
Better infrastructure is urgently needed for the “critical” task of bringing Nigeria’s agricultural and industrial sectors together, he said. “A farm without a factory is a weed,” he said. “A factory without a farm is scrap metal.”
“There’s nothing that brings economic development faster than roads.”
The company’s food business is “doing well” and FMN is “right where we should be” in terms of meeting its financial targets, he said. “Our shareholders will be very happy.”
FMN has five main business lines: grains, sweeteners, starches, proteins and oils and fats.
The company’s sugar plantations are currently yielding about 65 tons per hectare of sugar, versus an international norm of about 110 tons, he said. Improved water management and flood protection in Nigeria will help to close the gap. He expects an increase of between 10 and 15 tons per year for the next two years.
Coumantaros is optimistic for the company’s long-term prospects. “We know that the Nigerian market will continue to grow.”
FMN, he said, is willing to consider possible acquisitions in a “cautious and opportunistic” way if they can consolidate the development of the consumer food business, he said. “If they hit the right metrics, we’ll look at them.”
Bottom Line: Optimism that Nigeria will implement Africa’s free-trade agreement looks misplaced until the government is sure that smuggling has been brought under control and tax collection improved.
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