Terrible economics of the border closure

Closing Nigeria’s borders to stop smuggling of rice and other goods into Nigeria from neighbouring West African countries is one of the most crude and retrogressive decisions and actions of the Buhari government in recent times.

A rational and deep-thinking government with long term strategies of maximising Nigeria’s strengths and advantages under the new African Continental Free Trade Area agreement would have taken a different policy and action route.

Let me share with us what we would have rationally done differently.

Nigeria is the biggest economy and market in sub-Saharan Africa. Benin Republic today has become a menace to us because we have leaders who cannot act strategically and have refused to do the right things.

The tariff regime at the Benin ports is low. As low as between five and 20%. Their port services are also very efficient, unlike the madness and bedlam we experience at the Lagos ports because successive Nigerian governments refused to open up Onne and Koko ports, perhaps, just to keep those they loathe under perpetual bondage.

What we would have done long ago is to decongest Lagos ports, open up Onne and Koko ports in Port Harcourt and Warri respectively and improve efficiency of port operations and services there, so as to make them far better than what we have at the Benin ports.

Once the above is in place, then, crash the tariffs on rice and car imports and allow those who want to import foreign rice to do so.

Then, impose a massive 50% consumption or local sales tax on the rice imported into Nigeria.

For the vehicles, especially certain categories of luxury vehicles, impose a consumption and sales tax of 80 to 100% on them, once they are cleared into the country at the point of registration. The Federal Inland Revenue Service should link its system to that of the car registrars.

By doing the above,  Nigeria is not denied the 10% that the importers will pay to customs at the  Lagos or Onne port.  We are also not denied the tax because the tax receipt that is verifiable online is issued by the FIRS. It is easy to track the true value of consumption tax that a luxury car owner is supposed to pay by matching the year that his car was produced,  through the Vehicle Identification Number,  to the date of registration and then cross-checking it with the amount paid.

Through this policy scheme, you would have cut off the shipment of rice and vehicles to Benin ports and impose sales tax on them within, so as to make the foreign imports far more expensive than locally produced rice. This will also encourage more local production for rice. With the involvement of domestic rice producers, cooperatives and distributors in the enforcement of this high consumption tax on foreign rice, people will be forced to seek for domestic options.

In the United Arab Emirates, despite being a Muslim country that abhors whisky and alcoholic beverages, the rulers of Dubai, to discourage people from drinking alcohol, always impose over 300% tax on the drinks in designated areas where they are sold.  They did not ban their sales or block their borders or create any Hisbah agency to destroy the business of the sellers.  We just need to stop this madness in Nigeria.

We will set up a task force working closely with local rice farmers and distributors to enforce it.

It is very unwise for us to put 70% tariff on imported tokunbo cars. Car is not a luxury. We do not manufacture cars in Nigeria and do not have the technology.

What we do here is car assembly.

Over 92% of Nigerians live on less than N60,000 income per month and N720,000 per  annum.  So, most of these categories of Nigerians, who spent years saving to buy a car of N1m , will prefer to go to Cotonou to buy it and smuggle it into Nigeria, rather than experience the pains of our policy foolishness.

If we crash the tariff on imported tokunbo cars to match what we have in Benin Republic and decongest Lagos ports by opening up the other ports for efficiency, Nigeria automatically, by the reason of our size and capacity, becomes the transhipment port for the rest of West Africa.

Other countries in West Africa will now be using our ports as a destination port for their imports. We will earn revenues from other sectors as the traffic from other countries now inflows into Nigeria.

By doing the above, we shall reverse the trend and turn the table against our neighbours.

Benin Republic will either go down or they will become the Puerto Rico of Nigeria.

These things are not sky rocket science.  You do not impose heavy tariff on goods and services you cannot produce locally and competitively.

May God help Nigeria from these analogous men in power!