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Strangulating legitimate trade through unending border closure

This week makes it one year and two months since Nigerian government shut its border posts in the four geo-political zones of the country on August 21st, 2019.

The action has reverberated throughout the country, rippling through other neighbouring countries, especially Benin Republic, Ghana and Togo.

The closure has had and still having maximum impacts from whatever perspective one may look at it.

Government claimed that the action, which purportedly was to stop smuggling of rice, ammunition and other contrabands across the borders to the country, has begun to yield results.

Hameed Ali, the Customs Comptroller-General claimed that the border closure has increased cargo throughput at the ports as most of the goods that would have otherwise been smuggled are now being diverted to the ports.

This has increased Customs revenue to an unprecedented N5 billion daily, so he had then claimed.

We however don’t know whether the position has changed.

Ali said since the border closure, Nigeria had made over  N3.5 trillion from the seized rice and other contraband.

On the flip side of these outlandish claims by Ali is the untold hardship the closure has foisted on average Nigerians.

Prices of staple foods have skyrocketed, thus compounding the misery of poor Nigerians.

The closure has therefore generated mixed reactions among Nigerians.

While some aligned with government position, others have seen it differently.

For us at nigeriamaritime360.com, the border closure was a prescription to treat the symptoms of a chronic ailment but which cannot lead to its cure.

No doubt, smuggling is a cancerous ailment that has a corrosive effect on the economy.

But we dare say that border closure will only bring temporary relief to the scourge in as much as we do not deal with the root cause of smuggling, especially of rice.

At the risk of sounding monotonous and boring, we want to reiterate our oft-repeated position that what breeds rice smuggling in Nigeria is its high demand compared with its local short supply.

Anybody with the basic knowledge of economic theory of demand and supply will know that Nigeria, with its high population, has a humongous taste for rice consumption which the local capacity can’t meet.

To bridge this gap, people have to resort to foreign supply.

Even when government banned importation of rice through the land borders and slammed higher duties and tariffs on those allowed to come through the ports, without building and enhancing local capacity to meet local consumption, the only attractive alternative is smuggling.

So, with the closure of the borders, government can only temporarily stem the tide of smuggling as long as our local production capacity cannot still meet the rapacious taste of Nigerians for the product.

The scourge can only resurgent with fury after the siege on the borders is over.

So, let government close the border for as long as it desires, smuggling of rice will still continue as far as Nigerians don’t see affordable local alternatives.

Unfortunately, we are yet to see any serious efforts from government to grow indigenous capacity for rice production, notwithstanding the CBN Anchor Borrowers Programme.

Some apologists may want to make reference to scores of locally produced rice that are not only scarce but with prohibitive costs.

We acknowledge the fact that the closure has forced Nigerians with taste for foreign rice to embrace the locally produced rice, which we dare say are more nutritious and getting better in grade and quality.
However, we cannot fathom the equally high prices of this locally produced rice.
The costs are prohibitive which are marginally lower than the prices of foreign rice.
The little difference between the two species suggests that the continued border closure has not really boosted high production of the local rice that was envisaged and meant to made the foreign ones less popular.
The implication of this anomalous situation is that smuggling will still thrive despite the continued border closure.
As long as we do not despise the little beginning, the present local capacity is still like a drop in the ocean.

Our argument is that government needs not resort to a prolonged border closure to discourage rice smuggling, which is still going on anyway, though at a reduced rate.

What is needed to be done is to aggressively pursue the empowerment of indigenous rice millers to meet local production that will ultimately crash the prices.

Then make the locally produced rice available and easily accessible with reduced prices while the existing policy on rice importation is maintained and strictly enforced.

Gradually, foreign rice will lose its attraction to Nigerians while those who still prefer it will be made to pay heavily for it as it will then become a luxury item.

Until this is done, the unending border closure will be like water poured on the back of a duck in terms of fighting smuggling of rice.

Having closed the borders, our main concern is that the exercise is stretched too far which may result to unintended consequences  that will continue to reverberate long after the action is wound up.

The closure is gradually but steadily incapacitating legitimate trans-border businesses.

The proponents of the policy not only meant to stop smuggling of contraband items into the country, but in the process, wanted to cripple the businesses of Nigerians in the former and  informal sectors of the economy who engage in trans-border trade.

Why is border closed against this set of people? Are they part of smugglers of rice and other illicit items which government intends to stop?

Why would the owners of legitimate businesses in the country bear the wrath of government on smugglers?

Ironically, through this policy, government is inadvertently killing the very sector it ought to grow and protect.

Operators in this sector have cried out that their businesses are suffering and most of them may go under due to the unintended consequences of the closure.

The National Union of Chemical Footwear Rubber Leather and Non-Metallic Products Employees (NUCFRLANMPE) said the border closure was threatening over 200,000 jobs in the sector, as many companies are threatening to downsize.

The Nigeria Employers’ Consultative Association (NECA) , the Lagos Chamber of Commerce and Industry (LCCI) and Manufacturers Association of Nigeria(MAN) have all expressed reservations over the crushing effects of the policy on legitimate businesses.

Most of these traders have heavily invested in the production of goods that they intend to export under the ECOWAS Trade Liberalisation Scheme (ETLS) but are now stranded due to the border closure.

Unfortunately, most of the owners of these small businesses lack the capacity to export through the ports.

Those who export through the ports are being hampered by the malignant gridlock on the access roads which mostly trap their export goods, especially the perishable ones, on the roads until they are rendered not fit for exportation.

The Northern Textile Traders have also claimed that the textile industry which government is willing to revive to create more jobs, is coming down under the harsh consequences of border closure.

Alhaji Gambo Danpass, one of the textile manufacturers, said the sector may lose an estimated sum of N3 trillion if the closure persists.

“The textile companies like the United Nigeria Textile Ltd (UNTL), Kaduna Textile Mills, Arewa Textile, Gaskiya Textile, Asaba Textile and Lagos Textiles, with several others, are no longer operating and their equipment have gone bad. Where do we get the materials to sell?”.

The legitimate traders have unanimously condemned the unending border closure which they said has greatly hurt their businesses.
Apart from few successes the closure has recorded in terms of boost in the agricultural sector where local production of rice and poultry products have regurgitated, arms and ammunition, despite the official claims, still find their way into the country, especially from the Northern zone of the country.
Or how else could one explain the rising cases of insurgency and banditry activities in that part of the country.
“There is no gain, all that is about the closure of the border is loss, a lot of people have been thrown to the labour market since the closure of the land border.
“The government has not achieved anything since the closure.
“With the closure of the border, don’t we still have armed banditry in the North?
“The border has been closed for one year, so how did the weapons get there” a concerned stakeholder agonised.
A former Director of Research and Advocacy for the Lagos Chambers and commerce and Industry (LCCI) Dr. Vincent Nwani, gives further insight into the furtility of the continued border closure by Nigerian Government.
He revealed that Nigeria may have lost over N1 trillion naira as compared to the N11 billion naira  which the Customs claimed it has so far realised  from the closure.
Nwani informed that within the last one year since the border was closed, petroleum products worth over N450billion were smuggled outside Nigeria to neigbouring countries, adding that about 360 bags of rice are being smuggled into the country every hour.

“The question is the gains Nigeria has made from closing the border over the last one year higher than the loss?” he asked sarcastically.

“We have to congratulate them for seizing contraband goods worth N11 billion, but during the same period, are you aware that petroleum products worth over N450 billion naira was smuggled out of Nigeria to neighboring countries through the border?”
“During the same period, uncountable amount of rice was flowing into the country through bush paths by bikes.
“According to investigation, about 360 bags of 50kg foreign rice are flown into the country every hour during this period.
“I just gave you two example of rice and petrol, now imagine other things”, like arms and ammunition.
“So with these you found out that Nigeria may have even lost N1 trillion on aggregate compared to the N11 billion we gained”
“One of the other reasons why we closed the border is because of the peculiar security situation of the country, such as Boko Haram, kidnappers and herdsmen and other illegal arms struggles, so we need to ask is Nigeria safer now than one year ago,  the answer is no”
“Although official border posts are shutdown, nothing seems to have stopped as movement of goods and services through illegal routes created by smugglers in collaboration with some security operatives have continued to thrive”
This shocking revelation by one of the operators in the sector sums up the damage which the border closure has ironically wrought on the industry which government wishes to use to jump start job creation in the country.

We can only wish government will see reason to either review the scope of the policy by loosening the knots that are now strangulating legitimate businesses or end the siege on our borders.

It is unfortunate that President Muhammadu Buhari and his National Security Adviser have conceded the  initiatives on this policy to Hameed Ali, the CGC, who now dictates the terms and conditions on the reopening of the borders.

We dare say that the CGC is having a tunnel view of the whole issues of border closure which he has reduced to rice smuggling alone.

He is unaware or rather immuned to the pains of legitimate business owners whose factories are on the verge of being shut.

He is not mindful of the thousands of jobs that will be lost as a result of this policy.

He probably doesn’t care about the millions of Naira worth of legitimate goods that are trapped either in the warehouses or borders that are now rotting away.

Probably the CGC is not aware that a lot of Nigerians with legitimate businesses who engage in trans-border trade are going bankrupt as a result of this obnoxious policy.

We only hope government will realise that it is not advisable to throw away baby with the birth water.

Intractable border closure has become old fashioned, anti-trade and anachronistic approach to solving trade related challenges in today’s modern world where efforts are being intensified to dismantle all barriers in trans-border trade.

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