Nigerian President Muhammadu Buhari at the UN general assembly at UN General Assembly in New York, on September 24 2019. Picture: REUTERS/LUCAS JACKSON
Nigerian President Muhammadu Buhari at the UN general assembly at UN General Assembly in New York, on September 24 2019. Picture: REUTERS/LUCAS JACKSON

Accra/Abuja — Nigeria and Benin are embroiled in a trade dispute two months after signing the African Continental Free Trade Area Agreement (AfCFTA) to free up the movement of goods and services throughout Africa.

Nigerian President Muhammadu Buhari ordered the partial closing of its boundary with Benin last month to curb smuggling of rice and other commodities. The blockade has had a ripple effect across West Africa, with factories and traders struggling to import key raw materials and having to use alternative routes for their exports, according to the Lagos Chamber of Commerce.

The border restrictions come after Nigeria and Benin in July agreed to join AfCFTA, which targets greater economic integration through the removal of trade barriers and tariffs on 90% of commodities. The duty-free movement of goods is expected to boost trade in the market of 1.2-billion people, similar in size to India, and a combined GDP of $2.5-trillion.

“More than 80% of West African cross-border trade is by road,” said Muda Yusuf, the head of the Lagos business chamber in the Nigerian commercial hub. “The cost is quite enormous and the closure is not sustainable.”

Benin is a key transit route for traders and operates a system that allows landlocked neighbouring countries to use its harbours for imports.

The impact of the dispute is being felt as far afield as Ghana, which is separated from Nigeria by Benin and Togo. Manufacturers have complained about the impact on costs, John Defor, research director at the Association of Ghana Industries, said by phone. In Nigeria, units of multinational companies, including Unilever, are in talks with the government to find a solution.

The restrictions are the latest taken by Nigeria to protect its foreign-currency reserves by curbing imports. The central bank has restricted access to dollars for the import of more than 40 items from cement to soap, while the government wants Africa’s most populous nation to become self-sufficient in the production of staples such as rice.

Protectionist policies

Traders and smugglers in Benin have taken advantage of Nigeria’s protectionist policies to import and re-export goods to their bigger neighbour, said Ahmadou Aly Mbaye, an economics professor at Cheikh Anta Diop University in Senegal’s capital, Dakar.

Rice is a good example. Benin, with a population of 11-million, barely 5% of Nigeria’s, is the biggest buyer of the grain from Thailand, the world’s second-largest exporter. Official shipments from Thailand to Nigeria have dwindled to almost nothing from more than 1.2-million tonnes in 2014, while those to Benin have increased by more than half.

“Benin is basically importing for Nigeria,” Mbaye, who is a senior fellow at the Washington DC-based Brookings Institution, said by phone. “Protectionism is difficult to implement in a globalised world, because people find ways around it.”

Buhari defended the blockade at a meeting in Japan with Beninese President Patrice Talon at the end of August. He said Benin and its northern neighbour, Niger, should take “strict and comprehensive measures” to curtail smuggling across their borders.

Nigeria is committed to AfCFTA, but the agreement “must not only promote free trade, but legal trade of quality, made-in-Africa goods”, Buhari said in a September 20 speech, which a spokesperson shared in response to questions.

A spokesperson for Talon declined to comment.

Bloomberg