Effects of closing the Seme Border

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Coronation Merchant Bank

Coronation Research makes routine monthly rounds to local markets to track prices of Home, Personal & Care (HPC) and food items in major markets within the Lagos environs – a continuation of a study which informed our conclusions in our 20 May 2019 publication: Nigerian Consumer Report: Power to the Price Point.

On 13 August 2019, the Federal Government of Nigeria (FGN) closed Seme border, the major border with the Republic of Benin, without formal notice. The Seme border is one of the busiest in the country and is a major route for the importation of food items such as rice, chicken, and turkey.

In the course of our research, it was observed that prices for some food items increased significantly, especially rice – a major staple in the average Nigerian food basket.  A 25kg bag of imported (usually from Thailand) rice sold for N6,500 in July 2019, before the closure of the border. However, the same quantity now sells for N14,000, or 2.15x as much, on 10 October 2019. We also note that one of the major supermarkets had only locally produced, and not imported, rice on display.

The Federal Government of Nigeria (FGN), in partnership with the Central Bank of Nigeria (CBN), has tried to boost local production of rice. However, locally produced rice is yet to match local demand standards in terms of quality and quantity, in our view.

Other imported items such as frozen turkey also recorded significant price increases within the last two months. One kilogram of frozen turkey sold for N2,200 at 11 October 2019, a 1.7x increase since at July 2019. Another notable observation during the exercise was an increase in the prices of perceived complimentary food items such as beans, tomatoes and other vegetables premised on the closure of the border.

The Nigerian Bureau of Statistics (NBS) does not disclose the weighting of food items such as rice in the inflation food basket. However, should the ongoing closure of borders across the nation persist, we believe that this will have an adverse effect on subsequent inflation readings. September 2019’s Inflation print is due this week.

On the positive side, the price increases may give Nigerian producers improved economics, thus stimulating production. There is a good chance, in our view, of a boost to the agricultural sub-sector of GDP.