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Summary: In August, Nigeria blocked all land borders, including those with the Benin Republic. The closures were justifiable, given that smuggling from the Benin borders had reached dangerous levels. For decades, Niger has attempted to impose import restrictions on food, such as tariffs and a rice import ban to attain agricultural self-sufficiency. Unfortunately, these efforts have failed miserably. A more direct reason for this is the deeply rooted corruption in the system. Addressing this would require stricter border control strategies to make the smuggling business riskier and reduced.
In August, Nigeria closed its border with Benin without notice. Then, in October, the customs service announced that all goods trade would remain entirely, and indefinitely, banned across all land borders. Finally, on November 14 came the announcement that Nigeria, Benin and Niger would form a joint border patrol force.
Nigeria’s total land borders are 4,477 km long. The border with Benin is 809 km long; the one with Niger is 1,608 km long. The reason given for the closures was that smuggling had reached alarming proportions, in particular with Benin.
Since the 1970s a large share of trade at those borders has avoided customs and controls. Using 2011 data, we estimated that the value of unofficial cross-border flows from Benin to Nigeria was about five times higher than official ones – those recorded in customs data.
This is due to several factors. Geography and history are often mentioned. These borders are said to be “porous”: they are relatively easy to cross. Terrain in this area is largely flat. Bush roads across the borders are numerous and can easily be travelled with light vehicles, cars or motorcycles. And the lagoon which spreads over the border in the south allows for crossing on pirogues.
However, the scale and persistence of smuggling across the border has more fundamental causes. Nigeria has a restrictive trade policy, imposing high duties, or even import bans, on many products. This creates price differences between Nigeria and its neighbours: imports from third countries are cheaper in neighbouring markets than they are in Nigeria. In turn, these price differences create an incentive for smuggling goods across the border. The border patrol will not address this fundamental cause. Moreover, the experience from the past three decades also suggests it is unlikely to succeed.
Trade policy
For decades, Nigeria has attempted to restrict imports of food, such as rice, alternatively by imposing prohibitive tariffs on them or banning them altogether. This policy was supposed to deliver self-sufficiency. This is probably not a good policy objective, as it would deprive Nigeria of the gains from specialisation. But the experience of the past three decades has also proven that it is not a feasible objective. For example, the ban on rice imports goes as far back as 1986. It has not delivered on the promise of self-sufficiency. Nigeria currently produces 6.8 million metric tonnes of rice, while consumption is at 7.8 million metric tonnes.
Any argument that protection would allow domestic rice production to build up and become competitive has lost credibility by now. Meanwhile, the effect of high tariffs and import bans is to raise the price of some food items in Nigeria. This benefits the producers of those items, but consumers are hurt. It also fosters smuggling, as well as corruption.
Why a border patrol won’t work
The costs of patrolling a border that long are tremendous. The country’s taxpayers, as well as those of neighbouring countries, will thus be financing an expensive policy which serves to maintain high food prices in Nigeria.
Moreover, it is well-known that cross-border smuggling is only made possible by wide-scale corruption. The same factors that make smuggling profitable – import bans and duties – also sustain corruption, as the cross-border price gap is large enough to cover the costs of this activity, including bribes.
We recently conducted a study on informal trade on Benin’s border with Nigeria. Data from the survey, conducted by Benin’s statistics office, show that the payment of bribes is the norm in this sector, with above 80% of traders reporting they’d made a payment during their crossing of the border.
It is not clear that the border patrol should put an end to this practice. Stricter control at the border makes the business of smuggling riskier, but also more profitable as domestic prices rise. The measure might end up only raising bribe prices.
Even if the policy does succeed in restricting trade flows, this will hardly benefit Nigerians. The more effective the ban is, the higher the price of imported products on Nigerian markets.
The Nigerian customs office is claiming that revenues have increased. But this cannot be taken as a proof of success. It means that Nigerian consumers are now paying higher indirect taxes on their food consumption. This is not good news for the poor.
The border patrol is a costly effort to enforce a policy of high import barriers. This policy benefits producers of protected goods, at the expense of consumers.
The experience from over three decades has shown that smuggling and corruption are natural byproducts of this policy.
Recommendation(s):
• Nigeria’s smuggling problem is unlikely to be solved by a border patrol force alone, there is a need for stricter border control measures as well and trade flow policies that will benefit Nigerians with attention towards reduced prices of imported products
About the Author: Joachim Jarreau is an Economics Lecturer, Université Paris-Dauphine- PSL
Source: The Conversation
Keywords: Trade, Nigeria, Customs, Smuggling, Benin, Peacebuilding, border force, Niger
