Ban on rice import and reality check
This is the right time to do some reality check and indeed evaluation on the implications of a recent rice ban in the context of noisy border closure. The business and economy journalists and analysts should not be carried away by more prominent political events at the expense of weightier matters in the economy, which should be considered more significant at this time. They need to pay better attention to such issues of urgent national importance – yes the economic outlook.
There appears to be some quiet and acceptance of reality after the initial loud noise about the inappropriateness of the Federal Government’s policy on rice importation. The Christmas period was the time the policy was really tested. The ban was not lifted yet rice was sold and eaten during the Xmas and New Year celebrations. Could this be an affirmation of government’s position that given the right policy framework, rice can be cultivated locally to feed Nigerians? But more important, this is the time to do some review and stock taking to ascertain the success or otherwise of the ban.
If indeed Nigerians have, in these past few months, been eating rice in spite of the ban, the thing to do right away is to start a campaign to realign permanently the taste buds of Nigerians with locally produced rice to save us the embarrassment of continually importing what we can sufficiently produce. We can even get quantitative by specifically stating jobs that have been created as a result of the expanded capacities of local producers to stem the shortfall created by the ban. The amount of foreign exchange saved by the ban on importation can be computed too. The point should then be stressed that it is the way to go in the production of about anything where the local capacity to produce is visible but latent. This was what this newspaper examined the other day when we examined the reality of the border closure in Nigeria.
Even a British national broadcaster and a global brand noted at the time that, “Nigeria, one of Africa’s superpowers, closed all its land borders… to tackle smuggling – but the unprecedented move is affecting trade across the region. Bustling borders have come to a standstill, with goods rotting and queues of lorries waiting at checkpoints in the hope the crossings will reopen. The closures were imposed without warning on 21 August – and Nigeria’s neighbours are angry….”
These are consequences that can’t be ignored. Thankfully, the same broadcasting station in its digital platform stated clearly in a relevant question: “What prompted the move?” It answered: “Mainly rice. It seems Nigeria was fed up about the flouting of its ban on the importation of rice over its land borders….Smugglers bringing in rice from Benin appeared to be making a killing. The biggest contraband route was between Cotonou, Benin’s biggest city, and Nigeria’s commercial hub Lagos, which is just a few hours’ drive away….” This is important to deepen understanding about the dilemma of Nigeria that most critics of the border-closure-for-rice hardly appreciate, in this regard.
According to even the World Bank, Benin’s economy is heavily reliant on the informal re-export and transit trade with Nigeria, which accounts for about 20% of its GDP, or national income.And about 80% of imports into Benin are destined for Nigeria, the global bank once revealed.
Nigeria banned the importation of rice from Benin in 2004 and from all its neighbours in 2016, but that has not stopped the trade.Why is rice so profitable as a business? Nigeria is only allowing in foreign rice through its ports – where since 2013 it has imposed a tax of 70%.The move, it should be understood, is intended not only to raise revenue but also to encourage the local production of rice. But smugglers have been taking advantage of the fact that it is cheaper to import rice to Nigeria’s neighbours.
According to Nigerian maritime site, Ships and Ports, in 2014, Benin lowered its tariffs on rice imports from 35% to 7% while Cameroun erased it completely from 10%. Accordingly, neighbouring Benin then recorded an astronomical rise in imports from Thailand, the world’s second-largest producer.
At its height, each of Benin’s 11.5 million citizens would have had to consume at least 150kg (330lb) of rice from Thailand alone. So it seems pretty clear that the rice was making its way into Nigeria to meet the shortfall in local production for a country of almost 200 million people. This is a big and disruptive business that authorities cannot close its eyes to.
Which was the reason in October last year this newspaper noted that the Federal Government’s closure of its land borders with some neighbouring countries in the West Coast then deserved some deconstruction – for the purpose of understanding its essence at that time. 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 then triggered another period of uncertainty around the affected borders. We said the lacunae had their own implications, especially for those that make legitimate use of the borders for personal and business purposes.
As we had noted then, it is still somewhat curious that despite various interpretations, apprehensions and extrapolations, government officials in the fiscal sector have not been proactive in educating the citizens who have been feeling the consequences of the controversial closure.
It is just gratifying, though paradoxical that the best clarity of purpose on the policy thrust came then from the Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, who provided technical details of the long-term gains of the new deal beyond the incipient pains. The CBN governor, who just then arrived at the creativity and innovation sector to reduce the high cost of import of bank ICT, among others, again we rightly noted then, deserved some thumbs up for his unusual executive intelligence to think out of the box, in which most government officials have always hibernated.
As we have always observed on this score, the objectives of closing the borders appear multi-faceted and can be derived from some vague comments by officials of the government who always harp on meretricious revenue point without stressing the strategic economic reasons. It is curious that these clueless officials hardly emphasise that the borders need to be closed so that Nigeria and its people can be protected from negative impact of smuggling through the closed borders. They often do not tell us that we need to secure agreement from Nigeria’s neighbouring countries on the type of goods that should be traded across the borders. Nor do they say to us that we need to conserve foreign exchange to build the nation’s foreign exchange reserves.
There is no doubt that countries have the right to close their borders if they have genuine, legitimate and unavoidable justifications for such closures. But because there are no insular countries in today’s world and there have been various business and other signed agreements, countries must not close their borders without being guided by whatever relevant regional, continental and global agreements they might have entered into prior to any need for border closure. Besides, they need to put in proper perspectives the advantages and disadvantages the border closure can attract bearing in mind that except there is a net benefit, they have no good grounds to embark on such an exercise. These are issues the citizens need to understand. It is unfortunate that agencies of government especially in the fiscal sector, have been passive. Where is the National Orientation Agency (NOA), in this connection?
What is worse, some observers have noted that it is not clear whether all land borders in the country are closed. No question, all borders are critical but some are more critical, in this regard, than others as we once noted before. It stands to reason therefore that if some borders are still open, there is a good reason to believe that goods can be diverted to such places, of course, with the attendant increased costs than can trigger inflation. These are obvious consequences, which of course, no serious government should use as alibi to abdicate responsibility in the name of free trade and other dubious forces of globalisation.
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. This is true but only in the short run. In the long run, the demand push will necessitate investments in the relevant sector that will bring all-round benefits; job creation, food-sufficiency, stronger currency, etc to the economy. When those 41 items were banned by the CBN, the initial reaction was the same until the reality of the policy started pushing manufacturers to integrate backward to access raw materials. This has counted for the economy.
Although the border closure is more of a fiscal policy, it is composite in impact. One, the CBN’s initiatives in rice production for instance will be rubbished if foreign rice keeps flooding the market. This is also true of poultry farming where farmers cry of low patronage amid bombardment of the domestic market by foreign poultry products. This is the significance of the CBN governor’s inconvenient truth the nation should not ignore at this time. What should matter, in the circumstance, is the sincerity and resourcefulness both on the sides of government and the farmers to use the policy to truly test the much-touted capacity in local food production. So, instead of seeing only the initial challenges, it is also important we look at the opportunities and possibilities in the long run as this newspaper noted in October last year.
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