Recently, the Nigerian government ordered a complete shutdown of its land borders until there is an agreement neighbour is reached with her neighbouring country. Interestingly, border closure affects both legal and illegal trade flows, leaving air and seaports as the only available option trade in goods while halting trade flows with landlocked neighbours such as the Niger Republic.
Notably, Nigeria’s western neighbours Togo and Benin, which are majorly re-export hubs into the Nigerian market, will be the most affected. Items such as cereals and second-hand vehicles are smuggled into Nigeria via the land borders. For context, while the total value of cereal imported into Nigeria fell 4 9.2% between 2014 and 2018 following a renewed effort to boost local production, the value cereal imports have doubled Benin and quadrupled in Togo, over the same period.
Accordingly, a complete shutdown of the land border will hurt economic activities not only in these economies but in trading ports across the world where shipments are sourced. Also, the impact of border closure is felt in Ghana, where the trade union is asking the Ghanaian authorities impose a retaliatory ban on Nigerian products, even though official trade data between both countries appear rather small in relative terms. In our opinion, the developing events around the border crisis not only show the degree of interdependence of economies in the W/African region but reflect the might of the Nigerian consumer market in the region.
Clearly, a speedy resolution of the crisis will be in everyone’s best interest but the economies of Benin and Togo in particular.
United Capital Research