When the federal government announced the closure of Nigeria’s land borders on the 20th of August, it sighted the need to establish a relationship of mutual coexistence between Nigeria and her neighbors. The Nigerian customs boss maintained that Nigeria’s land borders would remain shut until neighbouring countries comply with protocols on movement of goods and persons as established by the Economic Community of West African States.
While some experts have questioned the legality of the move, others have praised it for the economic advantages it supposedly offers Nigerian farmers.
Short cut to success
When the federal government launched the economic recovery and growth plan (ERGP) in 2017, one of its cardinal stanchions was to create over 15 million jobs by 2020, as well as drive food security by achieving self sufficiency in tomato (2017), rice (2018) and wheat (2020).
By 2018, Nigeria’s demand for rice had risen to 6.7 million tons, with domestic production falling well below 4 million tons in the same period. Despite a 70% hike in tariffs and levies since 2015, but with local production still far below demand, rice has found its way across Nigeria’s borders by hook or crook.
Since the recent land border closure intended to enforce an outright ban on rice importation, the price of rice has risen abruptly. Since June 2019, one kilogramme of rice (imported high quality sold loose) has gone from N352.82 per kilogramme to N540 per kilogramme. With local production hardly rising above previous levels and consumers moving away from the expensive foreign alternative, some experts predict that the price of a kilogramme of rice might stabilize at N800 by the years’ end (that’s N40,000 for a 50 kilogrammes bag).
Self sufficiency should translate to our local demand been met by local production and if this be the case, we are still half way there.
However, with time the federal government’s cosmetic approach if sustained might force a drop in general consumption, as Nigerian consumers bare the largest share of the policies burden.
If prices continue to rise as predicted and consumption falls with respect to the elasticity of rice, then that point comes when the general demand will match local production. At this point we can say we are “self sufficient”, but definitely not at the current disequilibrium.
Good or bad policy?
The Nigerian customs recently revealed that it has raked an average of N4.7 billion to N5.8 billion daily since the border closure. An estimate it claimed was above its initial revenue prior to the closure.
The federal government also claims that since the border was closed on the 20th of August, the diversion of petroleum products from Nigeria to neighbouring countries had ceased, saving us 10.2 million litres of premium motor spirit (PMS).
What’s the catch?
In its latest inflation report, the National Bureau of Statistics (NBS) revealed that consumer price index had risen to 11.24% by September 2019. Previous data from the NBS showed that inflation began to rise following Nigeria’s closure of its land borders.
With an outright ban on trade through the nation’s land borders, aggregate demand seems to outpace aggregate supply. This unavailability of adequate supply leads producers/suppliers to increase prices, thus leading to a demand-pull inflation.
From being forced to settle for low quality staple food, to increase in the general price level, the average Nigerian pays the price for the federal government’s border closure policy.
By Cephas Kadiri and Uwemedimoh Sampson