President Muhammadu Buhari.

Border: Nigeria flirts with autarky as Abuja doubles down on protectionism

Economic experts have said that Federal Government is flirting with autarky, by closing its borders to other region to access. The Nigerian government unexpectedly banned all trade -imports and exports- across the country’s land borders on this week.

Officials said the closure, which they described as an effort to combat smuggling, would last indefinitely. Meanwhile, some stakeholders see the issue around border closure as a sensitive one where government needs to balance opposing views with diverse interests.

Stakeholders think that the decision is not all wrong, but government should find a leverage point to where balance of trade can be maximised. The need to maintain regional economic agreement is as important, analysts told MarketForces Africa.

Official figures suggest that Nigeria’s trade with neighbouring countries is only worth 0.1-0.2% of gross domestic product (GDP).

Capital Economic think that widespread informality means that this is almost certainly an underestimate, although the actual number is probably still small.

It is noted the vast majority of Nigeria’s exports consist of oil, which is shipped via ports. In principle, the policy will add to inflation, which rose in September.

Capital Economic stated that the failure of other protectionist campaigns suggests that enforcement will be patchy and that the move will have little effect on domestic prices.

More importantly, this will add to investors’ worries about the erratic and protectionist policymaking that is holding back growth, the firm noted.

Experts at Capital Economic said: “The move is, after all, of questionable legality since it breaches Abuja’s commitments as a member of the Economic Community of West Africa States trade bloc and raises questions about the government’s commitment to the pan-African trade deal it signed in July”.

It connects disappointing Q2 GDP figures which underlined the weakness of Nigeria’s economy to protectionist standing of the government. This was supported by consensus view that growth will remain trapped at around 2% in 2019 and 2020.

The second quarter 2019 GDP figures showed that economic growth in Nigeria slowed from an upwardly-revised 2.1% year on year in Q1 to 1.9% in Q2.

Capital Economic said: “We had expected that growth would accelerate to about 2.5%, which was also the consensus forecast collected by Bloomberg. This marked the 15th consecutive quarter in which headline growth was weaker than population growth, causing incomes to fall”.


It added that the weak outturn came despite a big rise in oil production, which jumped by 13.2% in Q2. But oil GDP growth has been weaker in recent quarters than the headline production figures would suggest. This seems to be because processing activity is falling due to problems at Nigeria’s aging refineries.

It said GDP figures underlined the damage that President Muhammadu Buhari’s protectionist policy making is doing to the Nigerian economy.

The president has claimed that a combination of import limits, FX restrictions, and preferential loans will reduce Nigeria’s dependence on the oil sector and support growth in the agricultural and manufacturing sectors.

Instead, his policies have hurt manufacturers, most of which are dependent on foreign inputs. Growth is now increasingly dependent on oil volumes. Indeed, if oil refining is excluded, manufacturing volumes are lower now than they were in 2015.

Capital Economic stated in a report that so long as the current policy framework remains in place, growth will remain stuck at about 2%.

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