In September, Nigeria’s borders were closed. In a meeting with stakeholders, the Comptroller-General of Nigeria Customs Service (NCS), Hameed Ali, stated that the closure was undertaken to strengthen the nation’s security, protect its economic interests– by preventing smuggling. He further stated that a lot of things had gone wrong with transit of goods; that the border closure was to ensure that things were streamlined for all stakeholders.
The general idea of a border closure is to ensure that the protocol involved in transit of goods and trade facilitation is adhered to, such that there is better trade complement between countries. The closure as ordered by the Federal Government (FG) is thus to prevent importers in Ghana, Benin Republic, and Niger Republic from routing imports from Europe, illegally through local borders to Nigeria, thereby disrupting the local market. The protectionist policy of border closure, although valid only in the Nigerian infant agricultural context, is like placing the cart before the horse. The struggling local rice producers are not disadvantaged because of smuggling. Nigeria’s economic viability will not be advanced by border closure. Nations utilize closure as a last protective measure to momentarily guard a robust infant industry.
The FG’s complaints about smuggling are self-defeating. There would not be any smuggling if the custom officials maintained local trade and immigration laws. In 2017, The Nationwide Survey on Corruption in Nigeria by the United Nations Office on Drugs and Crime (UNODC) and the National Bureau of Statistics (NBS) reported that Custom officials solicited the most bribes, ahead of Immigration officials and elected State and Local representatives. Recently, an undercover investigation brought light to a massive corruption ring in the Nigeria Customs Service. The reports brought to fore the ineptitude and corruption in the Nigeria Customs Service. The border closure merely papers over the smuggling problem; it does not address a root cause: corrupt Custom officials. The FG has extended the closure to January 2020, although they have reported that about three trillion naira smuggled goods have been seized since closure, it pans to reason that, without a thorough re-organization and re-orientation of Nigeria’s Customs and Immigration officials, the border will be reopened in January 2020 back to the same corrupt officials who facilitated goods smuggling. Then another round of complaints about illegal disruption of local market, then repetitive closing and reopening of borders while a root cause is left unattended.
The border closure was fuelled by rice smuggling. Nigeria’s population of 200 million people (with almost 100 million people living on less than a $1 (N360) a day) is fed by a retinue of subsistence rural farmers, who account for 80% of locally produced rice, the remainder 20% being cultivated by commercial farmers. Local rice production stands at about 4.7 million tonnes; local consumption stood at 6.4 million tonnes in 2017. The shortfall was usually balanced by imports (in 2016, 2.6 million tonnes were imported), which, per economic competition drives down prices.
Given the CBN’s Foreign Exchange restriction on rice, the border closure combines to substantially limit rice importation, resultantly creating a scarcity-sized hole. Since local supply cannot meet local consumption, the rice prices have soared– consumer-inflation rose to 11.51% in September, up by 0.08% from 11.17% recorded in August. Ninety million Nigerians live below the poverty line, and where about 60% of income is spent on food, rising inflation will leave Nigerians with less disposable income, placing more and more of the people below the poverty line.
Any policy, notwithstanding sincerity of intent, which tends to leave the masses with deflating disposable income, is not well-thought. It is an economic hara-kiri that should be advocated against. Besides the fact that local consumption outstrips local supply, the business environment is not supportive to local producers. The FG cannot will the economy to food sufficiency in a dilapidated system.
Access to farm mechanization remains low due to bad roads. Some rice farmers trek as far as 30 kilometers to the nearest rice mill. After milling, channels to transport their produce to local markets are also abysmally poor. Corruption also trails mechanized farming: to ease access to rice mills and boost local production, in 2017, the government reported procurement of 100 rice milling machines in different states, but the exact locations of the machines have remained a mystery.
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Rice farmers are also disincentivized due to lack of access to credit facilities. Before the commencement, in 2018, of the Central Bank’s initiative to increase credit access in agriculture, commercial banks advanced facilities to farmers at 18% to 30% interest rates. The Central Bank’s initiative to finance agriculture at 9% interest rate is commendable, although, it should be noted that it is lower than the 5% rate farmers had called for due to self-provision of power and transportation.
Power as a stated cost is also a major concern to farmers. For a bustling population of 200 million, Nigeria needs 180,000MW of power, but generates less than 5000MW. South Africa, with 58 million people, generates 48,000MW and is working towards increasing generation to 79,000MW. Eighty percent (80%) of rice cultivation is done by local farmers. Rural Nigeria has electricity penetration of 36%, South Africa has 80% in comparison. Such limited access to power substantially restricts farmers’ and millers’ efficiency across value chains in rice production.
Border closure will not address the problem of corruption in Nigeria Customs Service, neither will it improve accessibility to credit facility, nor increase local production to attain a semblance of sufficiency. The FG should leave the border and attend to more pressing industrial challenges: address forthwith the corruption in the Customs that facilitated smuggling (and will still facilitate smuggling) after reopening of border; address the power crisis; better roads, rails, to channel produce to local markets; increase accessibility to low-interest loans and machinery, et c.
Protectionist policies are not on the whole, bad. However, there has to be a robust industry to be protected. Where the preliminaries are prominently positioned, there will be an inflow of investments to agriculture, towards increased local production to balance consumption. Where borders are closed in this instance, it will be to protect the local industry from high-tech foreign competition, albeit momentarily, until they become competitive. The FG should not prance over preliminaries– laying the cart before the horse– driving up inflation that will hurt legitimate cross-border businesses, local producers and the populace.
THE GUARDIAN