An indication has emerged that local firms that are exporting goods through land borders are not only losing earnings, some of them are actually shutting down.
In recent corporate review done by MarketForces (www.dmarketforces.com), analysts discovered that Dangote Cement, and other companies that produce goods and export same through land borders lose revenues.
“Revenues lose is an unintended consequence for border closure policy, that’s side effect of protectionism.
“So, government has to weigh both the cost and the benefits”, consultants at LSintelligence told MarketForces.
In its recent release, FSDH said the land border closure is expected to marginally affect agricultural and manufacturing output, trade figures and prices.
According to the firm, the closure of land border is expected to have mixed impact on investments and trade.
Analysts are of the view that the introduction of such policy without embarking on measures to improve local capacities would only result in higher prices and firms’ redundancy.
FSDH noted that already, several local firms involved in exports via land borders have shut production plants, with piled-up inventory.
They said this is expected to negatively affect investments.
The firm further stressed that closure of land border without commensurate and prior investment in ports infrastructure and implementation of port reforms would lead to increased pressure on the existing ports, and result in reduced trade volumes.
“On the positive side, real investors will take advantage of the border closure and make investments in the production of strategic products such as rice and poultry products” FSDH’s analysts stated.
Some textile firms in Kano have shut down operations with large pile of inventories due to the inability to export to other African countries via the border.
Analysts at the financial services firm said these will have implication on outputs in the fourth quarter of 2019.
For output, local producers could take advantage of the border closure; however, there are still pertinent supply side challenges of infrastructure, logistics and quality of produce.
FSDH said evidently, for firms that rely on imported inputs via the land border, the closure has resulted in higher production costs.
editor@dmarketforces.com
