Review of Border Closure Policy Key to Assess Cost, Benefits –Vetiva
Analysts have asked the Federal Government to review border closure policy in order to assess the effectiveness, cost and the benefit on overall economic performance.
With food prices rising steadily, the agriculture output gap is yet to be bridged, and the impact of this on food prices is further aggravated by the restricted access to foreign exchange, Vetiva Capital said in a note.
Increased prices of food items has turned to a pressure points on households whose income level hardly adjustment to dictates in the market places.
Unemployment rate has remained abysmally high at 27.1% with more than 60% of Nigerian youth out of meaningful engagements.
Since closure of land border, local manufacturers and retailers have been able to jerk up prices of commodities, goods and services.
Also adding to the pressure is the increased in electricity tariff and another upward price adjustment in petroleum motor spirits with drill down effects on logistics.
In its breakfast report, Vetiva cited that preferential access given to large cement players to export their products through the land borders was met with unpleasant reactions from Nigerians.
Recall that the borders had been closed since August 2019, thus contributing to the extended recession in the trade sector.
Despite the sincere intentions to curb the smuggling of goods and people through the country’s borders, Vetiva said the border closure has also restrained legitimate exports and attracted retaliatory actions from neighbouring countries.
In addition, the firm believes that the continued closure of land borders has contributed to the persistent rise in food inflation.
Headline inflation rate for October, 2020 hits 14.23%. This is the level it was 34-month ago having expanded for 14th consecutive months.
“The restrictive border policy exposed the magnitude of food insecurity in the country”, analysts at Vetiva Capital noted.
Analysts explained that with the sluggish rise in investment in the agriculture sector – no thanks to incessant ethnic clashes, and adverse weather conditions – the agriculture output gap is yet to be bridged, and the impact of this on food prices is further aggravated by the restricted access to FX.
“A review of the border policy would be needed to effectively assess its cost and benefits on the economy and reduce the adverse spillover effects on SMEs and the overall economy.
“By so doing, trade could recover from its four-year-long recession, which has been recently hit by the pandemic”, Vetiva Capital explained.
Read Also: Nigeria’s firms exporting goods through land border lose earnings
Ultimately, a review of the border policy could strengthen Nigeria’s ties with its neighbouring countries, and help it position favourably to take advantage of the Africa Continental Free Trade Agreement (AfCFTA) – whose operational phase is scheduled to kick off in 2021, the firm added.
Review of Border Closure Necessary to Assess Cost, Benefits –Vetiva
