With Segmental Benefits, Border Closure Harmfully Impact Nigerians
Having noted that border closure has negatively impacted the Nigerian economy much more than any associated benefit, analysts has considered plan to reopen land border as a welcome development.
The policy has cost more than it offers, and coming from pro-poor people’s government give the protectionism stance a red colour.
Inflation rate has consistently maintained upward trajectory for 14 months before it printed at 14.23% in October, according to data from the Nigerian Bureau of Statistics (NBS).
It is safe to say that the policy drives inflation rate significantly, driven majorly by rising cost in the food items as agricultural output falls below expectation.
In actual fact, the closure of the border may have opened government mind to lack home advantages.
Notably, agricultural sector and some manufactures have benefited immensely with price increment due to lack of substitutes.
The Minister of Finance, Budget and National Planning, Zainab Ahmed revealed that Federal Government plan to open up land border for inter-trade activities yesterday.
After the Federal Executive meeting on Wednesday, Ahmed said the committee on border closure set up by the President would soon submit its report, noting that the borders would soon be reopened.
The probable reversal may not be unconnected with rising price level as the policy somersaulted amidst poor comparative production advantage.
There have been backlashes over selective policy implementation, as some industrialists accused government decision to excuse some companies to export through the same border closed against others.
Recently, the Federal Government decided to grant limited approval to some companies such as Dangote Cement and BUA cement waiver to export its products via land borders.
This, according to CSL Stockbrokers Limited in a commentary note, was interpreted as a sign that the government may be softening its stance on the land border closure.
In the West African region, some countries are implemental reprisal policy attacks. For example Ghana Investment Promotion began to demand one million dollar capital from Nigerians traders.
Ghana claim was hinged to border closure, which in effect reduce advantages of being a member of the Economic Communities of West Africa Countries.
Recall that last year, the Federal government announced closure of its land borders due to several reasons ranging from; prevention of smuggling of illegal goods, prevention of entry of illegal persons to curbing insecurity
In its note, analysts at CSL Stockbrokers noted that the total closure of the border was inadequate to achieve the goal of promoting local production for as long as the local business environment remained hostile.
“We also suggested the government limit the ban to items that were been smuggled where the country has a decent supply level to meet demand.
“We noted that the consequence of the total closure would mean upward pressure on prices of goods particularly food items”, the firm added.
Food inflation has been on the rise, increasing to 17.38% in October 2020 from 14.09% in October 2019 when the full border closure was announced.
Explaining further, CSL Stockbrokers stated that the last GDP numbers announced also showed a contraction of the Trade sector – plunged 12.1% year on year.
“We note the steep contraction in the Trade sector GDP is reflective of not only covid-19 related pressures but also adverse trade policies such as closure of land borders”, CSL posited.
Analysts said there have been both losers and beneficiaries emerging from the closure of the borders in the last 15 months.
Some listed companies in Food processing and Agriculture such as Flour Mills of Nigeria, Dangote Sugar, Presco, Okomu etc. have benefitted significantly from the lack of competition from smuggled products and have seen significant growth in earnings since the border closure.
On the other hand, analysts noted that manufacturers, freight forwarders and transporters, who operate across the land borders, have been negatively affected.
CSL said there have been reports that many manufacturers have closed down their export segments because of border closure.
That said, the firm expressed that the closure of the border has negatively impacted the overall economy much more than any benefit that could have accrued to the economy.
“Overall, in our view, the most adverse effect of the border closure is the steep rise in prices of goods and services especially food prices.
“The Nigerian consumer’s purchasing power has been significantly stifled and an opening of the land borders would be a welcome development”, CSL Stockbrokers stated.
With Segmental Benefits, Border Closure Harmfully Impact Nigerians
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source https://dmarketforces.com/with-segmental-benefits-border-closure-harmfully-impact-nigerians/