Nigeria: Border Closure and War Against Smuggling

Seme Border used to illustrate the story.
3 November 2019

Smuggling of goods, which was the major reasons for the recent closure of Nigeria's land borders, poses serious threat to the economy, discourages investments and destroys innovation.

The impact of the decision by the federal government to close all its land borders two months ago to tackle smuggling is one of the most-talked-about issues in the sub-region today. Reports show that those in the business of smuggling have continued to suffer huge losses.

Even though commentators have continued to weigh the merits and demerits of the government's action, both the fiscal and monetary policy authorities strongly believe that it would positively impact the Nigerian economy.

This is just as it has been disclosed that since the borders were closed, the government has seized over N2.3 trillion worth of contraband.

The exercise, code-named Exercise Swift Response, is being coordinated by the Office of the National Security Adviser, the Nigeria Customs Service, the Nigeria Immigration Service, the Nigeria Police Force and the Army.

Clearly, monetary policy transmission mechanism in Nigeria is inhibited due to numerous factors, especially the menace of smugglers. For instance, despite efforts by the Central Bank of Nigeria (CBN), through its development finance activities to raise domestic production, especially in rice production, the menace of smuggling has continued to affect local production.

On the other hand, the activities of smugglers have negative implication on Nigeria's quest to raise the badly-needed non-oil revenue to finance its budget.

According to a recent BBC report, the action of the federal government is affecting trade across the sub-region. The report further disclosed that that the bustling borders have come to a standstill, with goods rotting and queues of lorries waiting at checkpoints in the hope the crossings will reopen.

It pointed out that Nigeria's neighbours are angry, saying the smuggling of rice mainly prompted the federal government's action.

"It seems Nigeria was fed up about the flouting of its ban on the importation of rice over its land borders. Smugglers bringing in rice from Benin appeared to be making a killing. The biggest contraband route was between Cotonou, Benin's biggest city, and Nigeria's commercial hub Lagos, which is just a few hours' drive away," the BBC report added.

According to the World Bank, Benin's economy is heavily reliant on the informal re-export and transit trade with Nigeria, which accounts for about 20 per cent of its GDP, or national income.

And about 80 per cent of imports into Benin are destined for Nigeria, the bank had stated.

"Nigeria is only allowing in foreign rice through its ports - where since 2013 it has imposed a tax of 70 per cent. The move is intended not only to raise revenue, but also to encourage the local production of rice. But smugglers have been taking advantage of the fact that it is cheaper to import rice to Nigeria's neighbours.

"And Nigerians' appetite for rice is almost insatiable in a country where the grain is a staple. There was a time was when it was considered an elitist meal consumed only on Sundays. But now its affordability - plus the love for jollof rice - has made it a national dish," it added.

Furthermore, the BBC report pointed out that the Nigerian government's action was not just about rice, saying, "Benin is also a major corridor for second-hand cars to Nigeria, where there is a ban on importing cars that are more than 15 years old."

Official figures are difficult to come by, but Luxembourg-based shipping company BIM e-solutions says an average of 10,000 cars arrive at the Cotonou port from Europe monthly, it stated.

Ghana's Foreign Minister, Shirley Ayorkor Botchwey, said the country's traders had incurred huge losses because their goods had been detained for weeks at the Nigeria-Benin border.

Also, Benin's Agriculture Minister Gaston Dossouhoui, described the situation as "a distressing sight" when he visited markets in the town of Grand Popo.

"It's very difficult for our producers. It's a disaster," he was quoted by the AFP news agency as saying.

In an effort to mollify its powerful neighbour, Niger has since imposed its own ban on the exportation of rice to Nigeria.

The Comptroller General of the Nigeria Customs Service, Col. Hameed Ali (rtd.), recently said tax revenues had gone up as cargo destined for Benin was now arriving at Nigerian ports.

"One day in September, a record N9.2 billion was collected, which had "never happened before", he said.

"After the closure of the border and since then, we have maintained an average of about N4.7 billion to N5.8 billion on a daily basis, which is far more than we used to collect."

Boost for Domestic Product

To the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, the gains of the border closure include boosting domestic trade, job creation and enhancing Nigeria's economic policies.

Though he said he was not an advocate of permanent border closure, Emefiele added that before the borders would eventually be re-opened, affected countries must be effectively engaged with a view to agreeing on certain terms and conditions.

Answering questions from State House correspondents in Abuja after a meeting with President Muhammadu Buhari before the president's departure to Saudi Arabia recently, Emefiele illustrated how some businesses, which he said had almost collapsed before the border closure, suddenly became productive barely a week after the closure.

He narrated the experiences of rice millers and members of the Poultry Association of Nigeria whom he said had before the closure called him to lament about low sales, only to witness a sharp rise in demand shortly after the closure.

He described smuggling of foreign products into the country as a major impediment to the growth of local industries and businesses, adding that rice and poultry businesses had been booming optimally since the borders were closed.

According to Emefiele, the closure of the borders has not only boosted businesses in the urban areas, rural areas are also bubbling because businesses such as grain production are now productive as farmers have maximised profits since the closure.

He said: "Recently, and this is the absolute truth. About two weeks before the border closure, the chairman of the Rice Processors Association, incidentally, he owns Umza Rice in Kano, called me and said that all the rice millers and processors were carrying in their warehouses nothing less than 25,000 metric tonnes of milled rice in their warehouses; that this rice had been unsold because of smuggling and dumping of rice through the Republic of Benin and other border posts that we have in the country and that he would want us to do something about it.

"Secondly, we also have members of the Poultry Association of Nigeria, who also complained that they have thousands of crates of eggs that they could not sell together with even some of the processed chickens that they could not sell, also arising from the problem of smuggling and dumping of poultry products into Nigeria."

He said he was told that after some meetings that were held in addition to those engagements that the CBN also held with the president, the border was closed subsequently.

A week after the borders were closed, he narrated, the same Rice Millers' Association called to tell the bank that all the rice that they had in their warehouses had all been sold.

"Indeed, a lot of people have been depositing money in their accounts and they have even been telling them 'please hold on don't even pay money yet until we finish processing your rice," he said.

Emefiele said the poultry association had told him that they had sold all their eggs. "They have sold all their processed chickens and that demand is rising. So, when you asked: what is the benefit, the benefit of the border closure on the economy of Nigeria? (I just used two products - poultry and rice) that it has helped to create jobs for our people. It has helped to bring our integrated rice milling that we have in the country back to business again and they are making money," he said.

The CBN governor said the rural communities were bubbling because there were activities and rice farmers were able to sell their paddy, adding that the poultry business was also doing well even as maize farmers, who produced maize from which feeds were produced were also doing business.

"These are the benefits," he emphasised.

Emefiele urged the federal government to list out terms and conditions to be met by Nigerian neighbours before the borders are re-opened.

According to him, such terms and conditions must include the kinds of commodities that can be shipped to their countries, pointing out that such commodities must be meant only for their local consumption.

He added that situations where certain commodities, after being shipped to such countries, head for Nigeria would not be acceptable as they undermine the country's economic policies, threaten the productivity of domestic industries and the desire for job creation.

According to him: "We are not saying that the borders should be closed in perpetuity, but before the borders are re-opened, there must be concrete engagements with countries that are involved in using their ports and countries as landing ports for bringing in goods that are smuggled into Nigeria.

"That engagement must be held so that we agree on the basis under which: what are the kinds of products that they can land in their countries because if they land those products in their countries, and it is meant for their own local consumption, it is understandable.

"But the fact that those products are landed in their countries and then trans-shipment of smuggled items into Nigeria is something that I am sure you all agree as Nigerians we should not allow to happen because it undermines our economic policy. It undermines our own desire to make sure that industries are alive and jobs are created in Nigeria."

FG's Position

However, the Minister of Foreign Affairs, Mr. Geoffrey Onyeama, recently explained that the border was closed because of the frequency of rice smuggling into the country, pointing out that the president saw the unwholesome development as a threat to Nigeria's pursuit of food sufficiency.

According to the minister, the decision to close the borders was the fallout of a concrete search for a permanent solution to smuggling across the Nigerian borders.

Onyema added that the president believed that smuggling must be decisively dealt with particularly at this moment when Nigeria is no longer depleting its foreign reserves to secure foreign exchange for rice importation.

"The fact that our citizens can now work in rural areas, farming, it is a threat to our country to allow this smuggling to persist on that scale," he said, adding: "The president talked about the amount of money we now save by no longer having to spend our foreign reserves to buy foreign rice."

He explained that the measures were to allow the security forces to develop a strategy, to know exactly how the smugglers operate and where they operate from.

Also, the NCS said the joint security exercise at the borders would continue indefinitely until the security agencies develop the capacity to man the borders effectively.

The National Public Relations Officer of the NCS, Mr. Joseph Attah, while commenting on the matter, recently told THISDAY that, "I don't know why people think that we should be a country of all comers; anybody can just come into our country through anywhere both approved and unapproved. We are facing increased security challenges; shouldn't the security services come together and build their capacity to police these routs?"

He said the exercise would continue until the security services were satisfied they had fully developed the capacity to effectively man the borders.

On what informed the exercise, he said, "In the face of increase in security challenges in the country such as terrorism, arms smuggling, dangerous drugs and proliferation of light weapons, the Office of the National Security Adviser (NSA) put all the security agencies together to conduct an intensive patrol along our borders. The necessity for this is to ensure that our national economy and security interest are not compromised."

National Assembly's Backing

Also, the Deputy Senate President, Senator Ovie Omo-Agege, said the action of the federal government had the backing of the National Assembly.

Omo-Agege, said the initiative was in national interest and enjoys the backing of federal lawmakers.

He emphasised that there was no rationale for breaching ECOWAS' protocol, attacking Nigerians or allowing unjustified risks against Nigeria's security and economic well-being.

He stressed the need for government to be pro-active to ensure citizens' safety, adding that it focused on integration of the 15-member states' citizens through measures that include policy harmonisation, peace and security, infrastructure development, and good governance in member states.

He added: "There are however areas the parliament needs to take a closer and firmer look at; paramount is the issue of intra-regional, as well as intra-national security of member states.

"For example, there needs to a harmony between the central economic integration tenet of free movement of persons as guaranteed by Protocol A/P.1/5/79, and the rights of individual member nations to protect their interests where internal security is threatened as guaranteed in Article 10 of the ECOWAS Protocol on movement of persons which frowns at the presence of persons from another/other member country(ies) prejudicing the rules and regulations of host countries. Together with other relevant Articles of the Protocol, it guarantees the right of such host countries to take measures to redress such anomalies.

"A good example is the current conversation on Nigeria's action, consistent with the provisions of Article 10 and its sovereign right, of temporarily closing her land borders in response to serious irregularities attending the movement of goods and persons across our borders.

"We can recall that the ECOWAS Parliament in a recent resolution called on Nigeria to reopen these borders.

"Whilst we prefer to build bridges of regional integration, we agree with the government of His Excellency, President Muhammadu Buhari, that all member states have a bounden duty to comply fully with the letters and spirit of the Revised Protocol.

"That way, national and regional economies and the high aim of regional integration would be safe rather than unduly threatened by the action of Member States who breach the Protocol," Ovie Omo-Agege added

His views on the need to curb threats posed by influx of small arms, illegal activities of veterans of various armed conflicts and flagrant breach of ECOWAS Protocols prohibiting the trans-shipment of imported goods through other ECOWAS countries' borders was supported by Chairman, Senate Committee on Diaspora, NGO and Civil Societies, Senator Ajibola Bashiru.

Discordant Tunes

But, the Director-General, Lagos Chamber of Commerce, (LCCI), Muda Yusuf, has called on the government to address the root cause of rice smuggling, rather than the border closure policy of the government. He argued that the action of the government would not be a sustainable solution.

"A lot of imports that come to the sub region come first to Nigeria and from here the imports are distributed to other countries and all that have stopped. We have people trading their products on the ETLS (products registered to be traded in the sub region), the closure of the border has stopped trading activities in the ETLS. Of course there are some benefits, but we need to count the costs.

"The gap analysis between domestic production and domestic consumption for rice is between 2.5 to three million metric tonnes annually, so how do you feed those persons? The price of local rice is expensive and the quality is not good and we have not sufficiently supported those capacities," he argued.

Also, in his reaction, the National President of the National Council of Managing Director of Licensed Customs Agents (NCMDLCA), Mr. Lucky Amiwero, had argued that borders should not be closed, saying Nigeria was not at war.

He said: "We signed an ECOWAS protocol for free movement of people. Has Nigeria complied with the procedures of ECOWAS protocol? You don't just close borders like that because the borders are actually entry point. It is just like you are closing your airports or closing your seaports.

"Nigeria has three entry points, which are airport, seaport and border stations and all these are legal stations in line with the provisions of the law and we have ECOWAS protocol and the protocol is talking about free movement of persons and goods and you have signed this protocol. If you want to do any closure, it must be a country-to-country negotiations and the issue should be done according to information, which is contained in World Trade Organisation (WTO) agreements."

But the International Monetary Fund (IMF), which noted that action has been having adverse effects on the economies of some countries in the sub-region, called for a timely resolution of the matter.

Director, African Department, IMF, Mr. Abebe Selassie, explained, "So we're very hopeful that discussions will resolve the challenges that this illegal trade is fostering. To be sure, if the border closure was to be sustained for a long time, it's going to definitely have an impact on Benin and Niger, which, of course, rely quite extensively on their big brother next door. So, we hope that there will be a resolution to that closure issue."

Indeed, the problem of smuggling and its impacts are far reaching, affecting national revenue, businesses and households.

The menace has assumed an alarming proportion and turned out to be a parallel economy, which is depriving the country of its rightful levies including excise and customs duty worth hundreds of billions of naira.

As a result of smugglers' activities, thousands of industrial units have been rendered sick as smuggled goods flood open markets. Nigeria is facing the challenge of enormous revenue leakages and black money -- its size estimated to be three time the regular economy.

The way out is for the federal government to engage the countries affected and set the rules as well as penalty for offenders, before re-opening the borders.

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