The federal government on Wednesday announced the reopening of four of its land borders. The announcement was made by the country’s Minister of Finance, Zainab Ahmed after this week’s Federal Executive Council meeting. This comes after over a year of shutting the flow of goods across its borders by the federal government.
There was speculation about the federal government reopening the borders after Bloomberg reported that Dangote Cement got a waiver to export cement to neighbours Niger Republic and Chad. The federal government received a backlash for its bias.
While the policy seemed good at face value. Protecting local businesses goes beyond the closure of borders. The inflow of goods into the country through its borders is part of how other countries do business with the rest of the world.
Nigerian businesses cannot compete globally because of the high cost of doing business locally, so local manfacturers undercut quality for affordability, while others mass produce in countries like China that have economies of scale.
The federal government cited smuggling of petrol, rice through its land borders, the proliferation of arms as grounds for its action.
Did the federal government achieve its purpose for shutting the country’s borders?
While rice farmers, poultry business owners have lauded the FG’s decision to shut the land border as a way of protecting the local manufacturing sector, the policy failed to accomplish real growth as the National Bureau of Statistics reported a 14.89 percent inflation in November 2020, compared to 11.02 percent inAugust 2019 when the borders were shut.
While the government takes credit for bringing cross border smuggling of petrol to zero for the entire period of the border lockdown. So many manufacturing businesses were hurt as some of their inputs come from neighboring countries, causing businesses to lose revenue.
The cost of rice before the border closure was ₦21,000, it current sells for ₦28,000
Renowned economist, Pat Utomi argued in favour of targeted industrial policies known as latent comparative advantage in modern structural economics. He stated that, “you look at your factor endowment, and you say, we can expect that in five years if we protected this particular industry, not a blanket kind of thing that we did under import substitution industrialization, that led us to having permanent infant industries.
If we look at our endowment in sesame seeds and we realize that if we did the needful, within five years we will be globally competitive in the production, processing and export of sesame seeds, that we can fit into global value chains and dominate those value chains, then we can use industrial policy to ensure that over that five year period we give enough protection to that industry.
Blanket closure of the border can only do more damage. So, those who say it did them good, are we really truly competitive in those areas?”.
After the Buhari-led administration signed the AfCFTA on July 7, 2020, the government knew it had limited time to reopen, otherwise, it would be contravening the articles of the agreement by prolonging its border closure when the agreement takes off on Janary 1, 2021.
A major trade that flows across the Seme border, Nigeria’s busiest land border is the used clothes and shoe business. The country’s textile industry did not make any noticeable progress during the period of the border closure.
The same goes for poultry businesses, the Poultry Association of Nigeria called out to the federal government to intervene as their sector is at the precipice of collapsing.
While there are personal gains from the border closure, on the aggregate there are no real gains as it appears to have been a futile policy from a national standpoint.
Now that the federal government is beginning to relax border restrictions, the focus should move to addressing the country’s infrastructure gap in areas such as electricity, roads, and ease of doing business to attract foreign investments. These are the key requirements to making Nigerian businesses more competitive.