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As FG extends border closure, more facts emerge from CBN

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CBN

By Emeka Anaeto

The Federal Government has extended the timeline for re-opening of its land borders with some neighbouring countries in the West Coast. The new date for the re-opening is now January 31, 2020.

The extension is coming against the backdrop of huge criticisms that greeted the initial measure of closing the borders.

Synthesising the criticisms analysts believe the measure deserves some deconstruction for the purpose of understanding its import at this time in Nigeria’s economic condition and the future.

However, some genuine complaints made by segments of the affected stakeholders include the suddenness of the measure which left many businesses, especially the legitimate ones, in adverse situation.

‘‘The exercise came without any prior notice and expected terminal date. In other words, the fiscal policy was imposed without availing people the opportunity to prepare for the consequences of the ‘homeland security’ measure. The restriction has triggered another period of uncertainty around the affected borders. These lacunae have their own implications, especially for those that make legitimate use of the borders for personal and business purposes’’, a freight forwarder noted.

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The other germane complaint was that despite the various interpretations and apprehensions, government officials in the fiscal sector were not proactive in educating the citizens who have been feeling the consequences of the closure. Perhaps the government’s initial position that the main reason for the closure was for security purposes may have informed the near-secrecy. But this has now proved to be counter-productive.

It is against this backdrop that one begins to appreciate the explanations coming from the Governor of the Central Bank of Nigeria, CBN, Mr Godwin Emefiele, which dwelt heavily on the strategic economic reasons for the border closure.

Not underplaying the security issues raised by the government, the insight provided by Emefiele seems to point to a multi-faceted rationale for the measure.

The first major emphasis is that the borders need to be closed so that Nigerian economy and its people can be protected from negative impact of smuggling through the closed borders. The lead impact is the dumping of goods on the economy which strangulates local industries while eliminating employment opportunities that would have come with a thriving domestic real sector economy.

Related to this is the issue of foreign exchange management which has been put under pressure for so long until the Emefiele’s CBN regime began to tackle the menace, first by denying 43 items restriction of access to the official foreign exchange resources. By this, the pressure on foreign reserves was relatively contained.

Now this positive development has been reinforced by the stifling of smuggling which would obviously further reduce demand pressure on the available foreign exchange resources of the country.

But the strategic gain of the border closure, according to Emefiele, is even far more than these. Beyond the need to plug customs duty revenue leakages, there is the need to protect local producers of the products being smuggled.

Rice, for instance, has been the dominant smuggling line across all Nigeria’s land border. The local producers have been pains while the illegal trade thrived before the border closure.

Doubtless, there have been some arguments that the borders were closed when the capacity to produce certain food items, especially rice, has not been properly cultivated thus causing hike in the price of rice and other imported food items.

However, this is true but only in the short run.

In the long run, the demand push is expected to encourage investments in the affected sector that will benefit the economy in terms of job creation.

Rice Farmers Association of Nigeria (RIFAN) expresses support for the closure of borders by the Federal Government, assuring that rice farmers will work harder to increase local rice production in the country, thus giving indication that the immediate impact of the border closure on the major staple would soon be cushioned.

Mr Victor Korede, the South-West RIFAN Vice President gave the assurance saying the border closure would add a lot of economic benefits to the nation, create opportunities for the farmers to produce more rice and to have easy access to markets.

He stated: “Food security will be enhanced, a nation that cannot feed itself is a slave to other nations; we shall eat what we produce and our foreign reserve will grow.

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“The recent sudden high cost of rice is not that farmers are not producing enough as many think.

“Nigerians have penchant for foreign products thus importers, especially smugglers will go to all fronts to protect their businesses. They will wipe up sentiments and force government to rescind its decision.

“Our rice is available in markets, small, medium and large scale processors are springing up by the day embracing government’s policy, while farmers are not slacking enlarging their coast of production.

“A collaboration between smugglers who eke their living through illicit business and their foreign rice producers who boost their national economy with our huge market, and will not want us to realise our potential, are part of the problems,” he said.

He implored the government not to back down its decision as the hike in price of rice would not last, rather efforts should be further gathered to encourage local rice production through existing windows.

Korede said that appraisal of various food security programmes should be duly carried out to improve upon successes attained, while loopholes found should be blocked.

He said that mechanisation should retain its prime place in farming with recognition of micro, small and large scale farmers; awareness of planting quality seeds should increase and made available at affordable price to farmers.

Korede further urged government agencies to wholesomely implement duty free agricultural inputs for the farmers.

He said that local production of quality modern farm implementation should be encouraged to save capital flight and create employment opportunity.

Korede urged research institutions to always give farmers all necessary support in capacity building and research findings on high yielding variety of seeds.

“Our colleges of agriculture should be tasked in production, students being induced to engage in production through competitions and projects with rewards or grants to proven ones.

“Security agents should be involved in bringing out the culprits who are swapping and hoarding rice in various warehouses.

“We commend the government’s effort and agencies for working tirelessly for what has been achieved thus far, the increase is just to test government’s willpower to thwart its decision, and price will soon come down.

“Available data shows that farmers have increased production from less than three million metric tonnes that was produced in 2015 to six million metric tonnes last year.

“Not relenting, 14 million metric tonnes is the target for the year.

“The current market price of rice is not real as our target price is N10, 000 per bag and we hope to attain this in the shortest possible time,” he said.

It is notable that reactions to the border closure, is similar to the CBN restriction of forex on the 41 items until the reality of the policy started pushing manufacturers to integrate backward to source for raw materials.

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Although the border closure is more of a fiscal policy than monetary intervention, it is seen to be complimentary to:

One, the CBN’s initiatives in rice production for instance will be rubbished if foreign rice keep flooding the market.

This is also true of poultry farming where farmers cry for patronage amid bombardment of the domestic market by foreign poultry products.

What should matter in the circumstance is the sincerity on both sides – government and the farmers to ensure the closure translates to economic benefits and not more profit for some people through high prices of locally produced brands.

Vanguard

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