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Nigeria’s border closure sparks mixed impact on economy5 minutes read

As for rice, the country’s agriculture lobby is loudly supporting the border closure

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Nigeria's border closure sparks mixed impact on economy
A picture taken in Maradi, near Niger's southern frontier on October 19, 2019 shows trucks parked after the Nigeria closed its border with Niger on August 20, 2019 to defend against smuggling. - The closure of the border by Nigeria has put trade at a stalemate since August 20, AFP reports. (Photo by BOUREIMA HAMA / AFP)

Two months ago, Nigeria slapped restrictions on cross-border trade with its neighbours, but there are mixed signals as to whether the controversial move is benefitting the country.

On August 19, President Muhammadu Buhari dramatically closed Nigeria’s land frontiers to goods traded with Benin, Cameroon, Chad and Niger, saying its economy needed to be protected from rampant smuggling.

The move has met with howls of pain in Benin especially, and cast a shadow over a newly-minted agreement to scrap restrictions on trade among African economies.

READ: Badagry-Seme border closure: A tale of hunger games?

But has it been beneficial for Nigeria, as the government has sought?

Evidence seen by correspondent suggests that any benefits are at the macro level — and the country’s many poor are likely to be among the losers.

The two main commodities being smuggled were petrol and rice.

Petrol was being sneaked out from Nigeria, where subsidies make the fuel half as cheap as in its neighbours, and resold.

Rice, on the other hand, was being brought into Nigeria, where consumers favour imported Asian-grown varieties over the locally-grown competitor, from Benin via its port in Cotonou.

The most visible winner from the closure is the Nigerian treasury, which has benefitted from the falling cost of petrol subsidies and from a rise in customs receipts.

READ: Nigeria’s border closure sparks tension after price hike of rice

“Nigeria, to her detriment, may have inadvertently subsidised (fuel) supply to a few West African countries for more than 12 years,” the Nigerian consultancy Cardinal Stone said in a report this month.

Sales of gasoline in Nigeria fell by 12.7 per cent after the border closure, which indicates that millions of subsidised litres (gallons) are being secretly taken abroad for resale, it said.

The reduction in consumption, if sustained, could lead to subsidy savings of around ₦13.5 billion monthly and ₦162.1 billion annually, it estimated.

In early October, Nigeria’s customs chief, Rt. Col. Hameed Ali, said customs receipts had reached a record level, of ₦5 billion daily, since the closure, with the bustling port of Lagos benefitting most as imports rise through official channels.

Gain and pain –

Nigeria's border closure sparks mixed impact on economy
A taxidriver fills his vehicle up with gas fraudulently brought from Nigeria in Maradi, near Niger’s southern frontier on October 19, 2019 after the Nigeria closed its border with Niger on August 20, 2019 to defend against smuggling. – The closure of the border by Nigeria has put trade at a stalemate since August 20, AFP reports. (Photo by BOUREIMA HAMA / AFP)

As for rice, the country’s agriculture lobby is loudly supporting the border closure.

Ade Adefeko, a senior executive in charge of corporate relations with the food giant Olam, said investment in Nigerian agriculture was being hamstrung by the rice trafficking, which is estimated to reach two million tonnes a year.

Olam has the biggest rice-growing business in Nigeria, owning 13,000 hectares (30,000 acres) of cultivable land of which only 4,500 ha. are being used because the sector is “not profitable” in the face of competition from Asian rice, he said.

But “since the border closure, locally-milled rice has started selling, and the entire rice value chain has been positively impacted by the closure,” Adefeko said. 

READ: Nigeria’s custom chief says Seme border closure has no ‘time limit’

He called for the border closure to be maintained “until the end of the year, and see how it goes on a longer-term.” 

The customs chief, Ali on Monday told reporters there was no “time limit… It will continue as long as we can get the desired results.”

But if the border closure is a boost for domestic growers, it has led to price increases for consumers.

Nigeria's border closure sparks mixed impact on economy

The price of a 50-kilo bag has more than doubled to ₦20,000, roughly the entire monthly income of a Nigerian living in extreme poverty — of whom there are an estimated 87 million in the country.

Traders in Lagos Island, a vast market of Made in China textiles and gadgets, say the closure of the borders had crimped supplies via Benin’s Cotonou.

“Lagos port is too slow and you have to pay too many bribes to get your goods out,” said a swimsuit hawker. “I have to cut down my margin by half.”

The annual inflation rate has edged up to 11.24 per cent in September, while food inflation ran at 13.51 per cent.

Filling a role –

A similar complaint is heard among people in Nigeria’s industrial sector, which is already struggling with the country’s notoriously poor transport system and electricity shortages.

Trade with neighbours is essential, they say.

“The intention of stopping smuggling is praiseworthy but the point is that measures have an impact on us,” said a foreign investor who specialises in the import and export of manufactured goods.

“As usual in Nigeria, it’s all down to a question of strength — you crush first and talk later.”

Between 10 and 20 per cent of Nigerian manufactured goods are sold to other countries in West Africa, with many of these items, such as pasta and cosmetics, exported through informal routes, mainly through small sellers who travel around the region.

“We need direct investments, we need industries to create jobs in this country,” said Muda Yusuf, director of the Chamber of Commerce in Lagos.

“Some people can celebrate but while they put their money to the bank, the rest of the people are suffering.” 

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Uganda approves return of over 2,500 nationals stranded abroad

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Over 2,500 Ugandan nationals stranded abroad amid the Covid-19 pandemic can now return home as approved by the Ugandan cabinet.

The cabinet on Monday, agreed that Ugandan nationals trapped in 66 countries can return home at their own cost.

The government is making arrangements with the UN World Food Program (WFP) to fly the stranded citizens home, Judith Nabakooba, the country’s minister for information, communication technology and national guidance says, adding that all the returning citizens will have to undergo a 14-day mandatory institutional quarantine. 

President Yoweri Museveni last month, directed Prime Minister Ruhakana Rugunda to study the possibility of evacuating dozens of citizens stranded abroad amid Covid-19 pandemic travel restrictions. 

To contain the spread of Covid-19, the country on March 22 suspended all incoming flights, except cargo flights. 

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Border closure hurts Tanzania’s horticultural exports

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A border closure between Tanzania and Kenya has hit Dar es Salaam’s horticulture sector due to long delays at the crossing for fresh produce truckers, resulting in a disruption of the supply chain.

Horticulture is one of Tanzania’s economic pillars.

This past week, Tanzania Horticulture Association (TAHA) Chief Executive, Jacqueline Mkindi asked the governments of Tanzania and Kenya to resolve the border issue for the sake of an already struggling exports industry.

Most of Tanzania’s horticulture produce is exported through Kenya’s Jomo Kenyatta International Airport (JKIA). “If this tug of war continues, we’ll be the first to suffer as we still rely on JKIA and the port in Mombasa to export crops whose routes are not open from Tanzania,” Mkindi adds. “Our government has all along been considerate to horticulture. We advise it to embark on economic negotiations with Kenya to allow cargo to continue crossing borders smoothly.”

After an international aviation halt, the TAHA signed a deal with Ethiopian Airlines.

Despite the deal with Ethiopian Airlines to ferry fresh vegetables, fruits, herbs and flowers to global markets from Kilimanjaro International Airport, the airline has still not been granted long-term landing permits.

Currently, TAHA has to apply for a landing warrant for every incoming flight at routine airport charges and has to attach backup documents each time.

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Ethiopia to divest 40% of Ethio Telecom

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The Ethiopian government is finalizing plans to sell a 40 percent stake in Ethio Telecom- the country’s sole telecommunication provider . The plan was announced by Ethiopia’s State Minister of Finance, Eyob Tekalign Tolina.

Ethiopia’s telecommunication industry is considered one of the last closed markets. It has been one of the government’s plans to liberalize the country’s economy launched by Prime Minister Abiy Ahmed. Ethio Telecom has a large market serving a population of around 110 million.

The government will retain ownership of the remaining 60 percent.

Foreign firms in the telecom sector will be invited to bid and a percentage of the minority stake will be sold to Ethiopian citizens. South Africa’s MTN and Kenya’s Safaricom have shown interest in expanding into Ethiopia in the past.

Ethiopia’s communications regulator says the country would proceed with the privatisation of the telecommunications sector despite the novel coronavirus outbreak.

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