The President of Policy think tank, IMANI Africa, Franklin Cudjoe has observed Nigeria’s decision to shut its border with Benin, ostensibly to prevent goods it produces from entering the country, will not make Nigeria prosper in any way and rather make matters worse for them.
He has stated that the closure of borders for reasons of import substitution does not work but rather leads to inefficiency and a rise in the cost of production.
He has, therefore, cautioned the government of Ghana to resist the temptation to also close its borders.
“There is an assumption that Nigeria will automatically become prosperous by closing its borders to other markets, in furtherance of the age-old but discredited policy of import substitution.
Some are urging Ghana and others to do same. But lessons must be learnt from the mistakes of others who took that path.
In the 1950s and 1960s, governments of many countries in Africa and Latin America erected trade barriers. The plan was to enable the industries of their countries to grow, “protected” from outside competition. What actually happened was the opposite.
Although the industries in these “protected” countries grew for a short period, the lack of competition meant that their industries became inefficient and fell behind the rest of the world. Also, because imports were very expensive or even unavailable, their costs of production rose as they were stuck using old technologies.
Soon these “protected” industries were producing goods that few people wanted, exports fell and, in many cases, the industries – usually run by friends of the president – had to be subsidized by the state in order to keep them afloat.
Governments paid for these subsidies by taxing farmers (either directly or by forcing farmers to sell to marketing boards) and by borrowing – one of the reasons why so many African and Latin American countries have such large debts. Some governments, such as Brazil’s, printed money to pay off the debt and this led to hyperinflation, reduced confidence in the economy and caused massive disinvestment,” he wrote on social media.
For him, closure of borders to ward off competition has been proven not to work and should be discouraged.
“The lesson we should learn from this is that governments should not try to create national champions by “protecting” them from competition or by subsidizing them. There are reports of food inflation in Nigeria,” he argued.
For several months now, Nigeria has left mainly Ghanaian traders stranded at the Benin- Nigeria border due to its closure.
It cited the need to protect Nigeria from the activities of criminals but many observers believe it is an attempt to stop the importation of goods produced locally in Nigeria.