Sunday, November 10, 2019

Border Closure: About $1Billion Loss Of Exporters Should Be Compensated

The decision of the federal government to close the land borders will be 3months old in a few days from now and the loss resulting from this exercise on the exporters that ship goods by roads to buyers in Western and Central African regions has been estimated to be about $1billion. This humongous loss is a compelling reason why the federal government must modify the way this exercise is currently being executed. In as much as the decision of the government is highly imperative to curb the excesses and nonchalant attitudes of our neighbours, it must also be done with discretion and wisdom so as to minimize the collateral damages that could result from the border closure.

This has been a very challenging moment for all those that will usually export to various countries within the ECOWAS region. This is because, a good number of them have inventories sitting in their warehouses while their bank loans and interests are running in various financial institutions. At the end of each month they will need to pay salaries and their obligations to their various banks. This is definitely an unsustainable business model and the further extension of the border closure will mean that the exporters will have to lay off some members of staff to avoid the payment of salaries and this will further aggravate the already bad unemployment situation in the country.

In as much as the government meant well in his decision to close the border because of our neighbour's inability to abide by  the ECOWAS treaty (which they signed), it is also important for the government to take a wholistic approach in addressing the issues. This is because, it will be very unwise to create another problem while trying to solve a particular one. It is like going three steps forward and five steps backward. This is because as the government is gaining from the border closure one hand (through increased revenue and increased demand for locally consumed goods), it is on the other hand, causing unemployment and foreign exchanges losses from the inability of the Nigerian exporters to ship their goods to their buyers in Western and Central African regions..

In order to ensure that government efforts to grow local industries and increase income through border closure does not create another problem among manufacturers that ship to buyers in Western and Central African regions, I will like to recommend that the federal government of Nigeria consider the compensation of the affected non-oil exporters. This should be done in a systematic manner that is devoid of corruption through the payment of extra charges incurred via the use of alternative forms of logistics and the extra cost of unfulfilled orders and keeping inventory for an unnecessarily long time. 

According the foreign trade data released by the National Bureau of Statistics (NBS) for the 4th quarter of 2018, the total export of Nigeria stood at about $62billion (calculated based on about N19trillion export divided by N305). According to the NBS, total export of Nigeria to ECOWAS region in 2018 is about 6% and this comes to about $3.72billion in monetary terms. Since the closure of the borders is mainly affecting the shipment to West Africa (due to the fact that shipment to West Africa is majorly via land) and this has been for about 3months this means that the shipment that would have been done via these land borders to the ECOWAS would be about $930million. This means that Nigeria, a country that is in desperate need of foreign exchange has lost about $1billion in the last three months due to the closure of the land borders.

This seemingly good decision might become a very bad decision for the Nigerian economy in the long run if the government does not quickly put in place a compensation programme that will cover the extra logistics of exporters in order to encourage exporters to still ship via alternative routes at a higher cost and thereby enabling them to pay their staff, service their loans and bring in the much needed export proceeds required to pay the growing import bills of the country. Individual companies with verifiable orders that could not be fulfilled due to this border closure should also be compensated. This I think is the logical thing to do considering the fact that there has been some increase in the revenue generated by the federal government via the collection of import duties and tariffs by the Nigerian Customs Service. 

Finally, It will be very great for the federal government of Nigeria not only to compensate the affected Nigerian exporters but to also reach out to other affected neighbours in West Africa like Ghana and Cote D’Ivore and workout a modality that will enable them ship their goods to Nigeria (since they are not the ones being targeted with the closure) while the border closure persist. 

For the love of Nigeria, Africa and Mankind.
Bamidele Ayemibo (
Lead Consultant at 3T Impex Trade Academy