The dual policies of border closure and the earlier exclusion of 43 items (FX43) from the Interbank foreign exchange market by the Central Bank of Nigeria (CBN) are a strategic combination aimed at plugging leakages and helping the economy by checkmating smuggling and unbridled importation, conserving foreign reserves and boosting local production, necessary for food sufficiency, and the long march towards industrialization. Though some analysts have noted the down side of the policy but the advantages are also obvious. It is believed that whatever pain the policy will inflict on citizens in the short term will turn to gain in the long run, all things being equal. As they say, no pain, no gain.
Smuggling is destructive to the economy. It results to loss of revenue, impedes local production, competition and economic growth and leads to lay-offs, bankruptcies and aggravates poverty. Prior to the border closure, in an article captioned, ‘’CBN: Battling Smuggling and Economic Sabotage’’, published in Vanguard newspaper, Tuesday, June 11, 2019, I highlighted the damage smuggling, especially through the Benin Republic flank inflict on the Nigerian economy, and how CBN threatened to wage war against smugglers.
CBN had threatened to investigate the account of any company suspected to be involved in smuggling to determine their source of foreign exchange, and if found guilty would be charged for money laundering. It further threatened to tag such companies, illegal importers of foreign exchange into Nigeria and to write to all Nigerian banks and instruct them to close all the accounts of such companies in Nigeria, and all the accounts of top management of the companies in Nigeria so that people could learn to obey and respect economic policies of the country.
Furthermore, I noted that smuggling is one of the serious problems facing the Nigerian economy which has contributed to its stunted growth and that the World Bank in a report had noted that N750 billion worth of different goods are smuggled into Nigeria through the Benin Republic alone each year, with uncollected taxes and custom duties which hindered economic growth.
The World Bank report further noted that ‘’$400 million representing 25 per cent of the total current annual revenue collected by the Customs is lost through smuggling across borders.’’ True to the report, the Customs Service, in a recent press report, collected N1.002 trillion in nine months after the border closure. Immediately after the closure, the Service reportedly collected N115.6 in September, which was N6.1 billion more than in August before the closure. But for the border closure, the huge revenue would have leaked out of the economy.
In a paper titled, ‘’Towards an Industrialized Economy for Sustainable Growth: A Case for Infant Industries,’’, the Chief Consultant B. Adedipe Associates Limited, Biodun Adedipe had noted that ‘’no industrialized nation ever emerged with open borders. Each of them had protective strategies that allowed their industries mature before they were open to international competition. Let us start to actively protect infant industries, creatively deploying both tariff and non-tariff barriers.’’
In the 1970s America used the Import Substitution Industrialization (ISI) policy to promote the ‘’But America Campaign.’’ Sri Lanka also used the ISI to improve local food production including rice. They achieved success in several commoditie4s but rice was the most spectacular success and Sri Lanka has been able to feed its 21 million population with rice.
Rice is one of the most imported items in Nigeria which drain foreign exchange with an import bill of $2 billion annually. It is also the most smuggled and most consumed food in Nigeria. It is a staple food of over 70 per cent of the population as a result of which the demand is greater than supply. Rice consumption in Nigeria is estimated at 6.5 million tonnes per annum out of which about 3.7 million tonnes are produced locally. PwC had predicted that with increased mechanization local production could increase to 7.2 million tonnes.
Central Bank of Nigeria had initiated the Anchor Borrowers’ Programme (ABP) other development finance initiatives to boost local rice production and the results are becoming glaring. Dangote Group of Companies had inaugurated the Dangote Rice Out Growers Scheme in Gorongo Local Government Area, Sokoto. And recently, Coscharis Group of Companies launched a $35 million Rice Mill in Anambra State.
The launch which was attended by CBN Governor, Godwin Emefiele and some State governors was for the first phase of 40,000 metric ton per annum. The total capacity is 120,000 metric ton to be completed in 2020.
The Food and Agriculture Organization (FAO) had noted that rice generates more income for Nigerian farmers than any other cash crop.
Nwobu, a Business Journalist and Chartered Stock broker wrote via [email protected] Tel 08033021230.