How border re-opening will impact food inflation positively’

Following the decision of the federal government to open four of Nigeria’s land border, industry experts have highlighted how the development will impact food inflation which has been on the rising side since the closure of the land borders.

In an exclusive interaction with our correspondent, a Professor of Capital Market and former Head of Department, Banking and Finance, Nasarawa State, Prof. Uche Uwaleke, acknowledged that the reopening will moderate inflationary pressure on the food item, adding that federal government should ensure the decision doesn’t escalate to a health crisis in view of the current pandemic.

According to him, the reopening of land borders is a welcome development and timely because of the festive season. I expect inflationary pressure on food items to moderate in the coming weeks. I also expect smuggling to reduce while government revenue receives a boost.

“However, with the rising cases of COVID-19 every effort should be made to ensure that this does not present a health challenge,” he said.Commenting on this development, Head Research & Business Development, PAC Holdings, Moses Ojo, emphasised on the need for more intensive surveillance on the border to caution smuggling.

He adding that the decision to reopen our borders will also lead to a setback of domestic producers of agricultural and food products.

“This is a welcome development. It will bring back to life the intra-border trade that has been in comatose since the closure of the border in August 2019 especially SMEs intra-border trading. Also, this will have a positive impact on the prices of food especially staple food like rice that are being imported into the country. Ultimately, this is expected to have moderate effects on food inflation going forward.

“On the other hands, there will a need for more surveillance on the border in order to check the influx of small arms and light weapons that may likely be smuggled into the country for security reason. Again, border re-opening may also lead to a setback to domestic producers of agricultural and food products whose production has gained traction when borders were closed.”Also, a Developmental Economist and Chairman Board of Amaka Chiwuike-Uba Foundation (ACUF), Dr Chiwuike Uba said: “I commend the government for not only accepting its policy mistakes but, also taken a bold step to reverse/correct itself. Honestly, as I have always maintained, the border closure was a wrong decision. It is important to hear from the government if they achieved the objectives for closing the borders in the first place.

“Recall that the Presidency anchored the decision to close the borders on weapons and agricultural products smuggling. Was that purpose achieved? What was the success rate in that regard? Did the smuggling of goods and weapons stop? The answer is capital NO. Insecurity and armed banditry increased in Nigeria, following the closure of the borders.

“A good government should have accepted the failure of relevant government agencies saddled with the responsibility to protect our borders in doing their jobs. We have the customs, the immigration, the police, and other security agencies within our borders, yet, they couldn’t control smuggling. It is, indeed, a shame.

“Nigeria’s consumer price index (CPI)/inflation started increasing immediately the borders were closed because prices of staple goods started increasing. For instance, the inflation rate increased from 13.2per cent in August 2019 to 13.51per cent in September 2019 and then from 13.51per cent in September 2019 to 14.09per cent in October 2019.

“The government assumed that border closure is a one-way affair, which is, restricting imports, forgetting that Nigeria is actually a net exporter through land borders. Many businesses closed shops because Nigerian businesses that were hitherto exporting goods to neighbouring countries could not do so, following the closure of the borders. There are companies in Nigeria that export exclusively to neighbouring countries. Unfortunately, Nigeria attributed and celebrated the reduction in fuel consumption to the closure, even when part of the reason was the shutdown of some industries in Nigeria.

“Nigeria has a population with a high number of extremely poor people. Do not forget that Nigeria was recently designated as the poverty capital of the world. Border closure threw more into food poverty as a result of the significant spike in food inflation, which further reduced the purchasing power of the poor. Inefficiencies that cause transaction costs to rise cannot be reduced by insulating domestic markets.

“Agreeably, local production of rice increased; but, was on able to meet about 50per cent of the local demand for the goods. The law of demand and supply took the center stage, prices of goods increased astronomically and it has refused to decrease afterwards, despite government interventions in agriculture. Supporting private sector development requires more than just the protection of domestic producers from imports.

“The opening of the borders will increase local productivity, exports, and forex gain (capital inflow) into Nigeria. Recall that the closure of the border affected food prices and contributed to the rising inflation rate, therefore, the border opening may bring down the prices of food items.

“When the factories that either partly or fully closed earlier resume production, they will re-engage staff and this will also create employment. Opening the border will have a positive impact on the economy. Nevertheless, it is important for the government to strengthen and build the capacity of the Customs and other relevant agencies to do their work effectively, and reduce the incidence of smuggling through our borders,” he added.