The Economic Community of West African countries declines Nigerian goods

The Economic Community of West African States (ECOWAS) has started declining Nigerian products possibly in retaliation to the country’s border closure.

Nigeria has the largest economy on the African continent, and it became the latest African nation to close its borders, following similar actions by Kenya, Rwanda and Sudan in recent months.

For some experts, the border closures of Nigeria are a slap in the face for the continent’s integration efforts. It is likely to damage the African Continental Free Trade Area Agreement (AfCFTA), which has the potential to be the world's largest free trade zone, even surpassing the World Trade Organization, established in 1995.

Foreign exporters in the region are counting their losses as countries within the ECOWAS sub-region have started rejecting Nigerian goods. According to the exporters, the move is gradually crippling their businesses.

During an interview with Vanguard Maritime Report, Chief Executive Officer of Multi-mix Academy, an export-orientated institution, Dr Obiora Madu, disclosed that Nigerian exports within the ECOWAS region are decreasing due to the border closure.

He said: “It is definitely impacting negatively on the economy as the exports done within the ECOWAS region and our neighboring countries are now in decrease. These countries that benefit from the open border, since we have closed it, even though we used to export to them before, you don’t expect to get the level of cooperation that we are getting before because they are hit hard by these closed borders.”

Last week, Ghanaians shut down Nigerian-owned businesses and Ghanaian officials went as far as closing almost 70 businesses belonging to Nigerians. 

Ghanaians claim that foreign retailers (referring to Nigerians) violated section 27 of the Ghana Investment Promotion Centre (GIPC) Act 865, which stipulates that “the sale of goods or provision of services in a market, petty trading or hawking or selling of goods in a stall at any place”, must be reserved only for Ghanaian citizens. 

However, many believe that the action by the Ghana Union of Traders’ Associations (GUTA) was a response to the decision by the Nigerian government to close its borders.

GUTA stated that the closure of Nigeria’s trade borders with its neighbours is against the Economic Community of West African States (ECOWAS) treaties.  

How did we get to this point? 

In 2015, Nigeria’s economy declined and shrank by 1.6 percent compared to the previous year, according to the IMF. The worldwide drop in crude oil prices in 2014 massively affected the country as crude oil accounts for more than 95 percent of Nigeria’s total exports and 90 percent of its foreign exchange earnings. 

Foreign direct investment inflows to Nigeria decreased significantly by 55 percent. Also Nigeria’s currency, the naira, slumped 30 percent against the dollar triggering a shortage of foreign exchange. 

As the crude oil accounts revealed, it seemed Nigeria neglected other sectors of the economy forcing it to diversify and restructure. Attention to the agriculture sector has increased, which had been neglected by Nigeria since the late 1960s.

In 2017, Nigeria’s Economic Recovery and Growth Plan revealed the aim of deepening investments and increasing the sector’s share in economic growth from 5 percent to 8.4 percent by 2020. The idea came to the fore in order to revive domestic farming and save on food imports which account for over $22 billion a year.

As a result, the plan accelerated the border closure process in which the Nigerian government wants to protect domestic farmers from the cheap importation of foodstuff. Nigerian rice farmers are happy about the decision, but there are genuine concerns about whether domestic production can meet with domestic demand.

In 2017 the demand for rice in Nigeria reached 6.7 million tons, nearly double the 3.7 million tons produced domestically. Since the border closure, the price of 50 kilograms of rice increased from 9,000 naira ($24) to 22,000 naira ($61). So while the move may be welcomed by farmers, consumers will bear the brunt of the cost.