April 25, 2024/CSL Research
The Federal Government of Nigeria (FGN) recently issued a directive to reopen Nigeria’s land and air borders with the Republic of Niger, along with lifting other sanctions imposed on the country after the coup there. This move aims to reinvigorate export activities, as trade between Nigeria and Niger was valued at US$226 million in 2022 and is anticipated to further expand in the coming years.
The renewed trading relationship has led to an uptick in the importation of certain food commodities, notably rice. According to a report from Business Day, the price of paddy rice in Nigeria has decreased by a third over the past two months since the reopening of the Nigeria-Niger land border, providing a significant boost for struggling millers.
The closure of Nigerian land borders with neighbouring countries has always led to the limited supply of essential food commodities such as rice, poultry, fruits, and vegetables imported from these countries, contributing significantly to food inflation. We recall in August 2019; the Federal Government announced the total closure of land borders which was part of its efforts to prevent the smuggling of illegal arms on one hand and to prevent the influx of food & agricultural products into the country to stimulate and support local production.
We noted that the total closure of the land borders would result in higher prices of goods, especially food items. By implication, food inflation rose significantly, reaching as high as 22.95% in March 2021 from 14.09% in October 2019 when the full border closure was announced.
We note that while the total border closure in 2019 negatively affected the prices of goods and services, some listed companies in Food Processing and Agriculture such as Flour Mills of Nigeria, Dangote Sugar, Presco, Okomu, etc benefitted significantly from the lack of competition from smuggled products and the effect of this was seen in improved earnings for these firms.
On the other hand, the policy caused setbacks for Nigerians whose major business activities thrived on movement across the land borders such as the cement producers, manufacturers, freight forwarders and transporters and many other companies with viable export businesses. There were reports that many manufacturers closed their export segments following the full border closure. Consequently, the reopening of the four major borders in December 2020 and the subsequent reopening of four more borders was a big relief.
Though we believe the lack of border restrictions is positive for the Nigerian economy and supports improved food supply, especially amid current economic realities where food inflation has reached record breaking heights (40% as of March 2024), effective strategies need to be put in place to combat smuggling and ensure adequate security within the country. Border governance and the securitization of migration are widely accepted as strategies to prevent or address the proliferation of terrorism, and organized crime. Over the years, the authorities have linked foreigners with many acts of crime in Nigeria.
