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Total land border closure: Food prices hit the roof

As the world recently marked the International World Food Day and The International Day of the Eradication of Poverty, ironically, in Nigeria, a food crisis looms. A few days ago, the gauntlet finally came down when the Nigeria Customs Service, NCS, announced the total closure of all Nigerian borders indefinitely. Nigerians, who have hitherto groaned under the cost of rising food prices have been charged to brace up for even harder times ahead. BABAJIDE OKEOWO in this report takes a look at how this decision will affect Nigerians.

“All goods, for now, are banned from being exported or imported through our land borders.” That was the statement from Hameed Ali, Comptroller-General of the Nigeria Customs Service, NCS, a few days ago while announcing the total ban on the importation and exportation of goods through any of the country’s land borders.

Addressing journalists in Abuja, Ali said goods could only come into the country through the seaports and airports. This, he said, was to ensure that the government has total control over what comes into the country.

The latest total closure of the borders comes on the heels of a partial closure announced by the Federal Government on August 20, 2019.

Nigerians, businesses groan as effect bites harder

Already, the impact of the partial border closure is being felt across the country. In a little above a month after the partial closure of the borders, food inflation went up to 13.51per cent in September 2019, food-price growth accelerated for the first time in four months, rising 1.3 per cent from August, annual consumer-inflation rate grew to 11.2 per cent in September, after falling to a three and a half low in the preceding month.

Not only has headline inflation spiked, all other sub-sets and baskets have been affected. Core inflation, food, urban and monthly inflation have all surged. The last time that this happened was 23 months ago.

The principal factors responsible for the increase were cost-push and shortages at a time of seasonal stockpiling. The National Bureau of Statistics data shows that the prices of some products, such as bread and cereals, fish, meat, potatoes, vegetables, yam and other tubers have all increased.

Month-on-month inflation, a more relevant measure of prices, moved in the same direction with headline inflation, increasing to 1.04 per cent (13.25 per cent annualized) from 0.99 per cent (12.54 per cent annualised) in August. This was prompted by higher food prices especially for smuggled commodities such as rice and frozen foods.

Equally, food sector inflation increased to 13.51 per cent and 1.30 per cent respectively. This is not surprising as the combination of border closures and broad money supply growth pushed up prices of commodities.

Dr. Yemi Kale, the Statistician-General of Nigeria, confirmed the above inflationary scenario, in the recently released report from the National Bureau of Statistics.

Prices of food items double

The prices of food items, such as rice, frozen foods and other commodities have also continued to increase by up to 75 per cent. Prior to the partial closure of the borders, a bag of “imported” rice was selling at about N14,000 at the local market in Sango Otta. However, a bag of locally produced Mama Pride, Mama Gold rice goes for more than N20,000 at one of the leading supermarkets, one of such places where one can find the rice. In the open market in Sango, Ile-Epo, Abattoir markets, a bag of the locally produced rice goes for as high as N22,000.

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Rice is not the only item, which its price seems to have gone through the roof. A kilogram of frozen turkey, chicken which previously sold for about N1,200 now sells for close to N2,000. Similarly, a carton of frozen chicken that sold before at the rate of N8,000 to N10,000 now sells for N15,000 to 18,000.

Availability is another challenge most consumers are now facing. A major supplier of frozen food, Mama Yinka told The Nigerian Xpress that frozen foods are now very scarce while those that have it have increased the price.

“To be frank, frozen foods are scarce in the market now. Only a few of us that have it in stock increase the prices, so, maybe some customers don’t have a choice but to buy, while those that can’t buy will be forced to settle for something else, ” she said.

According to Johnson Chukwu, MD/CEO of Cowry Asset Management, the closure of the border is not a permanent solution but an indictment on the Nigeria Customs Service, which has failed its mandate.

“This is not the permanent solution to the issue of smuggling which necessitated the closure of the border in the first place. The major issue we should be addressing is the ineffectiveness of the NCS, the agency which is supposed to regulate the importation and exportation of goods into the country is not alive to its responsibilities, for me, this is not a permanent solution.

“The only reason we are closing the borders is that the Customs has failed to discharge its duty effectively and we need to address that. If we think that the border closure is the solution, what happens two years down the line when the AfCFTA comes into effect? We need to examine the bureaucratic failure of the NCS to discharge its duties,” he said.

According to Vincent Duruji, the closure of the border and the attendant ban on food importation is ill conceived while proffering solution to the issue.

“The ban on importation of food of any kind in Nigeria is ill-conceived. To place a ban on any product, you must first provide an alternative product at an affordable price. Nobody will be against the consumption of local rice by Nigerians if the policy was carefully managed from one stage to another. Below should be in place before this unacceptable ban.

“There is a need to educate the local farmers on how to produce good quality rice at affordable price, there should also be the provision of low interest loans for qualified local rice farmers, monitor these farmers and provide assistance when needed, provide machinery and logistics for standard rice productions, buy the excess rice produced by the farmers to make sure the business remains encouraging for farmers and build standard rice processing facilities in all rice-producing states. With this approach in place, the force of demand and supply will stabilise the Nigerian rice market. Even at that, we still don’t need an outright ban on rice importation. The government at that point can only tax imported rice heavily. The local consumers will now decide either to buy high-quality Nigerian rice at the cost of N10,000 per 50kgs bag or heavily taxed foreign rice at the cost of N25,000 for the same 50 kg bag of rice. We must always reflect soberly from both sides before churning out ill-conceived policies for the masses of this country” he said.

On his part, Authority Ben believed the decision to close the borders is not the solution to the problem the country is facing, hear him;

“There is a normal procedure in everything. The closure of the borders is never the solution right now, rather it will worsen the situation. Many Nigerians are dying of hunger. How much is the local rice now? N21,000 per bag. Does that proffer any solution in the standard of living or the economy?

This move is also described as a double-edged sword, which will have a ripple effect on every sector of the economy.

According to Nonso Obikili, Director at the Turgot Center for Economics and Policy Research in Abuja, this move by the government will come with consequences.

“Already we are seeing effects on prices and inflation and I’m guessing we will see the effects on Q3 GDP once that data comes out in November, bear in mind that exports are also restricted, this will stop movements of cocoa and sesame seeds via land borders,” he lamented.

Not only consumers are affected by the closure of the land border, Micro Small Medium Enterprises, MSMEs are also bearing the brunt of the closure.

According to Charles Orjiakor, the decision to close the border totally is injurious to businesses that depend on cross-border trades.

“Aba leather goods market supply the entire West African coast and Central Africa. The goods are moved every other day, the leather input is from Kano, the buckles from Onitsha, etc., with this closure, there is a stagnation of that line of business, trading in Nigeria local markets have slowed drastically, it seems the people who are behind this decision does not know how far our local products go into Africa. MSMEs will lose these customers and jobs. A closed border is a double-edged sword,” he said.

Chukwu supports Orjiakor’s position. “Those who proposed the land border closure seem to have forgotten that the land border is the only avenue for the export of the few things that we export out of the country to neighbouring African countries. Nigeria does not have the wherewithal to export goods from the Nigerian ports to neighbouring African countries, there is no shipping line in Nigeria that has Nigeria as its originating route to many of the neighbouring African countries, for example, you cannot export goods from Nigeria to Ghana by sea, you have to first go to Europe before going to Ghana despite the fact that Ghana is just a few nautical miles away from Lagos.

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So, if you close down the border completely, you are also shutting down those exporting products from Nestle, Cadbury, Nigerian Breweries, you are also closing the borders against those exporting plastic materials from local companies in Nigeria. Part of the unintended effects is that you are going to shut down the earnings of these people in the value chain,” he asserted.

Chukwu agrees. “We have already seen a sharp spike in the prices of foodstuffs like rice, wheat, poultry products and it has come to reflect on the Consumer Price Index. This is also coming at a time when you have a high demand for rice as we move towards the Yuletide season, people buy rice as a gift to their family, friends and associates. Now people will have to pay more. One basic economic logic is this, if you shut out any items that are demanded for by your citizen, such items will find their way in through the back channels into the market, where consumers will be required to pay more for such products and it will have a ripple effect on the end-user” he said.

According to data from the U.S. Department of Agriculture (USDA) for August 2019, Nigeria, with average local rice demand of 7.3 million metric tonnes is the world’s third largest rice importer behind China and the Philippines. However, the country produces just a little above 4.2 million metric tonnes of rice per annum. Since 2011, the government has made substantial efforts to encourage the domestic cultivation of rice and eliminate imports using various incentives such as subsidised loans, cheap fertilizer etc. The Central Bank of Nigeria (CBN) has also initiated lending schemes such as the Anchors Borrowers Programme (ABP) and Commercial Agriculture Credit Scheme (CACS) to stimulate the planting and cultivation of local crops.

Though production has improved and locally grown rice is now available in some markets, supply still dwarfs local demand. The decision to close the land borders has worsened the supply situation, resulting in a steep increase in price as seen in the past few weeks. Adding to the pressure of low supply, many dealers are said to be hoarding the commodity with the intention of selling at increased prices during the Christmas festivities.

Border closure: temporary pain, permanent gain

But Ali believes that the decision to close the border has impacted positively on the fortunes of Nigeria as the agency’s revenue had risen to over N5bn daily, since the closure.

He also revealed that more than 200 illegal immigrants were apprehended across the border and thousands of bags of rice and other contrabands confiscated.

“The border closure has impacted positively on revenue generation of the government which in turn will be used to build more infrastructures and develop critical sectors of the nation’s economy. Also, the National Assembly has supported the executive directive on the border closure and the efforts of security agencies in executing the task. Goods that are on the prohibition list to Nigeria, such as rice, used clothing, poultry products and vegetable oil should not be imported into the country. Let’s understand that all perishable items are on prohibition whether on export or import. Therefore, nobody can carry tomato to the border to import or export. So it makes it easier for us to close and ensure that all goods, for now, are banned from being exported or imported through our land borders. That is to ensure that we have total control over what comes in and what we do. We are strategising on how best the goods can be handled when we get to when this operation will relax. While we call on Nigerian local rice consumers to be patriotic by patronising Nigerian rice, as this will further help the country in reaching self-sufficiency in local rice production and boost our economy, we equally appeal to the business community to see the exercise as opportunity to further create a conducive environment for local businesses to thrive in the interest of national security and development” he said.

It is not only the NCS that has benefitted from the closure, the oil sector too has benefitted. In September, the Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari, tweeted that the closure of Nigeria’s borders, as well as other interventions, had helped to check the smuggling of Premium Motor Spirit (petrol) outside Nigeria as over 1.5m barrels of crude has been intercepted.

As Nigerians continue to live with the effect of the closure, it is left to be seen if this decision will, in the long run, be beneficial or hurt Nigeria, nay Nigerians.