Lessons from Nigeria's Border Closure

In a major blow to this pan-African moment, Nigeria indefinitely closed its land borders and halted all trade relations with its neighbours (Benin, Cameroon, Chad, and Niger), in August last year. According to President Buhari, the main reason for the closure was to curtail the smuggling of goods such as rice and textiles to boost domestic production. The Nigerian government also aims to curb the illegal supply of weapons into the country. Although Nigeria has a history of border closures, the present one is unique as it affects all of its neighbours and comes at a crucial time when African countries are trying to remove border restrictions. The implications of this border closure are far-reaching—not only for the West Africa sub-region but also for wider regional integration on the continent. However, the current border closure is a policy mistake that will produce dismal outcomes for Nigeria.

Nigeria’s neighbours are partly to blame for the seemingly unfair state of affairs regarding trade. For example, Benin has tactically become an entrepôt state, because it imports goods and then re-exports them into Nigeria. The country is the largest importer of rice from Thailand. According to a recent report on Benin’s informal trading with Nigeria, more than 90 per cent of this rice is smuggled into Nigeria despite a ban on rice imports through land borders that was implemented in 2016 by the Nigerian government. Other goods such as tomatoes, frozen chicken, and textiles, are similarly smuggled into Nigeria unlawfully or without proper custom procedures. The same report estimates that imports that are destined for re-exportation into Nigeria constitute 50 per cent of Benin’s GDP.

The entrepôt trade has created jobs and generated revenues for Benin to the detriment of Nigerian producers who are barely able to compete. For instance, the business of re-exporting cars into Nigeria is estimated to directly employ over fifteen thousand Beninese people, while providing even more indirect jobs associated with importing, storing and transporting the transit vehicles. In addition, taxes on car imports into Benin accounted for 25 per cent of its customs revenue between 2012 and 2015. In contrast, Nigerian automobile manufacturing has been moribund due to high importation of vehicles and cost of production, despite efforts by the government to revive the industry over the years.

While the trade policies of Nigeria’s neighbours can negatively impact its economy, there are also important internal factors that led to the border closure decision. Nigeria suffers from the resource curse, where oil rents (the difference between the value of crude oil production at world prices and total costs of production) have resulted in a weak agriculture and manufacturing base. Corrupt leaders have failed to deliver on their promises of effective governance and strong institutions that would enable a prosperous economy. Since he returned to power in 2015, President Buhari has reverted to his 1980s protectionist policies that have created further distortions in the economy over the past few years. For instance, Buhari implemented trade restrictions such as foreign exchange controls and import bans on many goods which have artificially increased prices in Nigeria and made smuggling even more lucrative across Nigeria’s porous borders. Nigerian ports are also ranked among the worst in the world due to poor infrastructure and long queues, making them unattractive for trade. Combined, these factors have crippled Nigeria’s development and positioned its neighbours as favourable gateways into the country.