Daily Champion (Lagos)

Nigeria's Late Passage of 2010 Budget Stirs Hardship in Benin Republic

analysis

For anyone coming in from Nigeria, the 60- kilometer journey from Krake, through Seme town, to Cotonou is actually a pleasurable ride. The six-lane highway that boasts of no noticeable crack, let alone a pothole, is a window to a highly organised society.

Given the glitter of the road, one would be inclined to think that it was paved with gold. Nothing has changed about the splendour of the journey and the orderliness in the city compared to two years ago when this reporter also visited, although everywhere appeared scanty, more so as it was few days away to the Easter celebration. One would have expected to see the detachment of Nigerian traders from Seme hurrying into Cotonou. But, this was not to be as the global recession appear to have caused a deep slump in the country's economy. Even the once boisterous Dantokpa market, and Missebo, the section of the market in which used clothing is sold were sparse. In any case, you are welcome to the Republic of Benin.

Prior to the global crisis, cotton was Benin Republic's highest foreign exchange earner before the seaport became the premier commercial centre. Bereft of mineral deposits like crude oil, steel, gold or bauxite, Benin had for decades to totter along on miserable state budgets that kept some of its most deserving civil servants in queue for a motorcycle loan. But this scenario changed, and pretty well too, when Benin woke up and realised it can re-engineer its economy. It did not only look inward, it looked across the border at its giant neighbour, Nigeria with huge resources but catalogue of woes and decided to take advantage of it. Drawing from the experience of others which shows that the best way to do business with Nigerians is sell to them what they already have; the French-speaking country had no problem in seizing the opportunity.

Cotonou's port, and its bustling market, makes it the commercial capital of Benin. The country's seaport, Port Autonome de Cotonou is its highest revenue earner. Repositioned to ambush an estimated CFA 204 billion (51 billion) per annum from the Nigerian economy, the port is to the tiny West African country what oil is to Nigeria.

Benin has been described as an entrepot economy, and the Cotonou market is a hub for trans-border trade between Benin and Nigeria. In many ways, the market is the nerve of the city where you find mainly Nigerians as traders and buyers. The reason is not far-fetched. Some goods are expressly prohibited in Nigeria, and so their importation through the nation's waterways is almost impossible. Examples of goods in this category are used cars that are older than eight years and finished textile products and second-hand clothing. These goods are imported into Benin and traded in the Cotonou market, freely.

To this effect, horde of traders beleaguer the Cotonou via Seme Border to re-export commodities including wheat flour, second-hand clothing, textiles, second-hand cars and tyres, sugar, spirits, tomatoes (tinned and paste) second-hand fridges and air conditioning units, sorghum, vegetable oil and frozen chicken. Others are foot wears, cosmetics, medical equipment, computer and telecommunication products.

Different categories of goods are imported to Benin to be re-exported into Nigeria. Most of the goods that leave Benin for Nigeria leave informally; in other words, this kind of trade is what the state - in this particular case the Nigerian state - would categorise as illegal. These include those goods that have relatively high import duties in Nigeria. A good example of this is rice. According to a report in 2007, the import duty on rice in Nigeria was 100 per cent, while the import duty on rice in Benin was 38 per cent. During the same year, the association of rice traders in Nigeria estimated that about 2,000 tonnes of rice was re-exported to Nigeria from Benin daily. It was further reported that rice merchants ship 10 per cent of their cargo into Nigerian ports, while the remaining 90 per cent is shipped into Benin, to be re-exported into Nigeria.

The truth is that re-export, around which Benin Republic has hugely structured its economy, is actually a partially fraudulent activity. It is based on skirting the Nigerian protectionist policy and indeed target goods prohibited in Nigeria or those that are very highly taxed. Such goods are imported from Europe and Asia by import-export companies (most of them Nigerian) based in Cotonou. The companies are registered with the Benin Chamber of Commerce and Industry.

Though Nigeria slammed a ban on the overland import of a wide variety of goods from Benin, yet several items are imported and trucked to the Nigerian border, just 50 kilometer to the east. It is said that Cotonou handles some 350,000 second-hand vehicles imported from Europe into Nigeria every year. It was further learnt that re-export trade is different from transit trade. The latter makes sense and is for landlocked countries like Niger, Burkina Faso and Mali. With re-export, Nigeria, which has eight ports back home, is simply renting the services of the Cotonou Port.

Information made available to Sunday Champion revealed that re-export generated for the Benin economy 20 to 30 billion CFA Francs in customs revenue between 1995 and 1997, representing 14 per cent of total budget revenue. Customs revenue shot up from CFA 16.7 billion in 1994 to CFA 31.7 billion in 1997.

Tracing the origin of re-export, Sunday Champion gathered that the practice dates back to the end of the 1960's during the Nigerian Civil War. Through this channel, considerable goods were said to have been smuggled to the Biafran side.

In recent times, the dynamism of this trade was greatly modified. The import-export companies conduct their exchange operations and obtain letter of credit from Cotonou banks.

The Nigerian importer does not only pay the Beninois customs duties, he rents stores, warehouses on Benin border towns, buys from parallel exchange markets and, of course, engages the services of transshipment agents who are actually glorified smugglers.

In what would amount to a double tragedy, goods imported by Beninois and sold in their markets are snapped up by Nigerian wholesalers and retailers. This category also smuggle their wares through every possible mode and sell them in Nigerian markets. Our findings showed that security agents including the police, customs, immigration are deeply involved in the smuggling or re-export business. And while these class of officers grow in their fat accounts, the Nigeria state is the ultimate loser. Indeed, the relationship amongst them is an integration of bribery, corruption, extortion, multiple levies and harassment by a plethora of security agents. Today, more Nigerian importers find justification to join the exodus to Cotonou where the Beninois are only happy to receive them. There, port clearance is a matter of few days with identiable chain of authority.

It was also gathered that importers are not the only ones avoiding Nigerian Ports. High shipping and clearing costs and the general poor infrastructure have made some ship owners to give preference in carrying Nigeria-bound cargo to the more efficient port of Cotonou from where they are transshipped in leaky vessels to Nigeria.

Bureaucratic bottleneck has not only caused expensive delays for ships, a lack of adequate facilities in the ports has forced shipping companies to acquire their own landing and loading gear, thus increasing shipping cost. Our findings, showed that the last time a ship made a berth at Port Harcourt Port was two years ago due to poor facilities.

Indeed, the footprints of Nigerian importers in Cotonou are not only evident in the swashbuckling at the Cotonou Port but by the VIP treatment accorded them by the country's bank chiefs and hoteliers. An enquiry by Sunday Champion revealed that as new banks spring up to accommodate Benin's fast growing economy, banks like ECO Bank, Societe Generale des Banques du Benin and Banque Africaine pour le Development et le commerce and Carrefour des trios Banques, Banque International Du Benin, have designed special packages to woo Nigerian businessmen. Similarly, hotels like Hotel le 15 Janvier, Le Littorial Motel, Hotel Miva, Hotel du Port and Hotel de Nations all reek of Nigerians and Lebanese.

The main market in Cotonou is called the Dantokpa market, and the section of the market in which used clothing is found is Missebo. Most of the used clothing importers in Benin are mostly Nigerians of Igbo extraction and their customers are largely Nigerian traders who visit to buy the goods. Many Beninois refer to Missebo as that part of the market that belongs to the Igbo. Benin Republic's, Missebo market, is one of the busiest commercial centres.

For the ordinary traveler, it would be difficult to believe that re-export trade is a major pillar of Benin's massive development projects. Sunday Champion gathered that the gains from the port are ploughed into other sectors to boost employment and private sector participation. Indeed, the multiplier effect is evident. In place of motorbikes purchased on government loans, the roads are crawling with sleek automobiles including the most fashionable 4-wheel runner. Investigations showed that small and medium enterprise are on the flourish as civil servants resign to find more rewarding engagements in other areas including smuggling and transshipment services. Yes, motorbikes are still there but mainly in commercial services to augment public transportation overstretched by the army of Nigerian traders and businessmen that used to invade Cotonou on a daily basis.

However, since the emergence of the global meltdown many Nigerian traders have been forced out of business in Cotonou or changed the line of business and taken up teaching opportunities, while others have gone into catering service.

Consequently, the success story of Benin that turned Nigeria's woes to its gains and which once enriched the purse of a pocket of Nigerian traders has been punctured. During a three-day investigation in Cotonou, this reporter learnt that it is no longer business as usual for Nigerian traders who complained that the booty derived from re-export of commodities has been eroded by high exchange. Earlier before the wake of global crisis, N140 was exchanged for 1000 CFA. But the Naira exchange for 1000 CFA jumped to N350 due to the crisis, Mrs. Sunday Okomonu, a textiles dealer said. Consequently, this has reduced the number of Nigerians who visit Cotonuo daily to buy these goods. This problem is worsened by the duplication and bureaucratic security checkpoints on the Seme highway which bar traders from moving contraband goods into the country, Okomonu lamented. She added that many Nigerian traders have been forced out of business in Cotonou or changed the line of business. For instance, some have taken up teaching opportunities, while others have gone into food catering business.

It was learnt that things are not looking up for Nigerian traders with many relocating to neigbouring African countries seeking for greener pasture. The gloomy tale actually begins from the black market at Krake (Benin's side of Seme border) where at any given minute, a platoon of Nigerian traders and businessmen, on their way to Cotonou, are often seen chasing available CFA currency with their loads of naira notes. The place is no longer as rowdy as before. This is due to the global economic recession.

According to Chief Christian Ojinkeya Alex Nwafor, chairman, Nigerian traders' welfare union, Cotonou, business was booming beginning from1983 until around 2005 but since the exchange rate from Naira to CFA shot above N300, it dropped. He said, "the problem we have is our currency, our currency is not steady. Sometimes, the naira would go up and other times it would go down. Even when the Naira drops to 300, business does not pick up. Prior to this time, more than three thousand Nigerians troop to Cotonou and buy goods and re-export back home, but when the exchange rate drops, the whole business stops. At a time, the naira jumped to 360 per 1000 CFA, sometimes it fluctuates between N370 and N380. If the currency of Nigeria can be steady at least between N250 to N360, then I think Nigerian traders in Cotonou will not bother much but it hasn't been unsteady."

The chairman observed that sales usually drop during festive period. He said, "During the Christmas season, second hand clothes don't move much in Cotonou. Those who have import license can import as many things as possible from Dubai. Besides, clothes from Dubai are cheaper than second hand clothing. You know, in this place, you have free importation. This is also the case during yuletide and Easter season. Many parents prefer to buy new things for their children. During this time, business activities are usually slow for those of us in the fairly-used clothing, shoes and handbags due to influx of textiles and new clothes from Dubai. This was not so in the 80s and 90s because business activities by West Africans who visit China and Dubai have not started flourishing."

According to him, festive periods used to be a time of bumper sales five years ago before traders began to flood the market with commodities from China, Dubai and other Asian countries. Nwafor said, "Normally Easter, Christmas and yuletide used to be harvest time for business in Cotonou until commercial activities in Dubai, China and other Asian countries began to boost. Since five years ago, when traders started flooding the markets with clothes, handbags etc from China and Dubai; business usually drop during festive period."

He blamed the predicament of Nigerian traders in Cotonou on delay in the passage of this year's budget by the Nigerian government. According to him, "the issue of business hardship in Cotonou is further made complex by the slow presentation of budget in Nigeria. The slow presentation of budget in Nigeria also affects Benin Republic. Whatever is happening here in the economy of Benin is a fall-out what happens in the economy of Nigeria. Hundred per cent of buyers in Benin Republic are Nigerians. Now, you see when Nigerian traders are complaining that there is no budget, that also means that there is no money in Benin. In the past when Nigeria used to pass her budget on time, things were better. But this year, things are worse off because of late passage of the Nigerian budget. We have seen the repercussion of the late announcement of the budget.

He further berated the government for not caring about her citizens in Cotonou. His words, "I don't think that the government of Nigeria cares for Nigerians outside the country but I know that Nigerian Community in Benin Republic cares for us. If Nigerian government cares, they will know that people are suffering, we are suffering here but there is nothing we can do but to find means of survival. Since the global economic crisis set in, many traders have lost their shops, business connections, while some have relocated from Benin to seek greener pastures else where.

There are so many Nigerians who were in second-hand business but today they are now into "pure water" business. Some have also re-adjusted and have gone into plastic products. They buy plastics from Nigeria and bring them to Cotonou for sale. Some have even gone into restaurant business to make ends meet.

Similarly, Fatai Abimbola Oladimeji, Vice-chairman of the Nigerian Traders' Welfare Union in the Republic of Benin lamented that traders in Cotonou are facing hardship due to economic crisis. The Osun state-born trader who has spent 15 years in Cotonou and is a dealer on second-hand clothing said that business has dropped sustantially because of the economic meltdown. Oladimeji said, "This thing affects everybody and our turn-over, profit has dropped. Things have changed. This change is due to economic global problem because anything that affects the Europe affects us the black people. This has led to increase in import duty on every product. Formerly, we paid three or five million CFA, an equivalent of N2 million but now we pay eight million CFA depending on the kind of goods you import.

He continued, "If you were paying five million CFA to clear your goods before and now you pay eight million CFA that is about N2.5million; the additional three million CFA affect buyers as the difference will be built into price. The price difference will discourage buyers and reduce sales and ultimately profit."

According to him, traders are not finding this situation easy; formerly we were buying bail of second-hand clothes 35,000 CFA, now it is 65,000 CFA. You can see that this is additional 30,000 thousand CFA and this will ultimately affect the price which will be shifted to the consumers, Oladimeji maintained.

He further observed that situation has caused rents to increase and called on the Nigerian government to intervene in their matter. "The situation has affected rent, for instance I used to pay a rent of 6,000 CFA per month, now it has been increased to 15,000 CFA. I beg our government at home to intervene. If Nigerians stop coming here, Cotonou is no more. If Nigerians are not coming to this country, then Cotonou is no more because Cotonou people depend on the Nigerian people as their buyers. Before over 3, 0000 Nigerians used to visit Cotonou but now the number has dropped, Oladimeji said.

Corroborating Osasu Aigbede, representative of Edo/Delta Traders' Welfare Association in Missebo mourned the plight of Nigerian traders who have been forced out of business. I am from Edo state. As the supervisor, taskforce and public relation officer, I like to point out that Nigerian traders in Benin Republic are passing through terrible times, it's only God that can explain. This is because I neither know how to explain what we are passing through nor imagine that we will go back to Nigeria to start life afresh. How can any of us think of going back to Nigeria to start business from the scratch? God forbid."

Aigbede blamed the plight of Nigerian traders on the tight security by law enforcement agencies on Seme-Benin Republic highway. Five years ago, traders used to troop into Cotonou from Nigeria to buy and sell, but many have withdrawn due to the way the law enforcement agencies by Seme-Benin Republic highway harass them, he said.

"Sometimes, the Police will just stop the motor conveying Nigerian traders and arrest them based on flimsy reasons. Sometimes, they will claim that many of the traders don't have approved traveling papers. Many of the traders are scared to visit Cotonou. You will hear them say, "Ah, if we go there, how do we go and look for papers, how would they get the papers and so on.

"So many of them run back to Nigeria, many of them decide to buy in Nigeria but those that are brave continue to come but the truth is that, it is a setback for us in the business. Something that we supposed to sell N500, we are forced to reduce price and sell N400, meanwhile you bought it N350, you discover that instead of your price to go up, It will go down and instead of making gain you run at loss," he lamented.

The economy of Benin Republic depends on importation for survival; they take advantage of this and increase the price of imported goods. My advice to our Nigerian government is that they should make our seaports open for importation. When this happens, I believe every one of us will run home and leave this place because Nigerians mainly depend on business. Hundred per cent of Nigerians are in business today. If those of us in Benin Republic leave here, this country will be left with nothing, but if we go home now, where are we going to start from, he queried, adding, "Nigeria is going down every day with crisis."

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