Nigeria lost at least $1.8 billion yearly between 2010 and 2019 as a result of the federal government’s protectionist measures, the World Bank has said.
According to the Washington-based global financial institution, these protectionist policies have been central to the country’s limited success in diversifying the economy and furthering the growth of the manufacturing sector.
“Nigeria lost $1.8 billion every year between 2010 and 2019 due to tariff evasion arising from protectionist measures,” it said in the June edition of its Nigeria Development Update.
The World Bank noted that these policies, which restrict imports, have led to a loss in revenue, an increase in consumer prices, an increase in the cost of production, constraining domestic firms’ competitiveness, and limiting their potential to export to regional and global markets.
“Nigeria’s trade policy has moved in a heavily protectionist direction, with an escalation of import restrictions through higher tariffs and levies, import bans, foreign exchange limitations, and border closures,” it said.
In 2015, the Central Bank of Nigeria announced restrictions on access to foreign exchange for the importation of certain products that could be produced locally, with the aim of bolstering foreign exchange reserves and supporting domestic industries.
“For the avoidance of doubt, please note that these items are not banned, thus importers desirous of importing them shall do so using their own funds without any recourse to the Nigerian foreign exchange markets,” the CBN said.
The items include rice, cement, margarine, fertiliser, milk and dairy products, maize/corn, palm kernel/palm oil products/vegetable oils, meat and processed meat products, vegetables/processed vegetable products, and poultry chicken.
The apex bank began the policy with 41 items in 2015, but the number has since reached 45.
The federal government closed the country’s land borders in August 2019 in a bid to curb smuggling.
The border closure was accompanied by a significant rise in inflation, especially for food products that are affected by foreign exchange restrictions.
“The closure only had a temporary effect in impeding the transit of illegal trade through Benin into Nigeria,” World Bank said.
The World Bank noted that the price increases recorded between mid-2019 and 2020, following the border closure, meant that households needed to spend around 1.8 percent more to maintain the same level of welfare.
The World Bank said increased openness to trade could help Nigeria achieve longstanding policy goals of economic diversification and industrial development.
Franklyn Akinsoloye, president of Association of Business Development Professionals, told the press that the government needed to embark on bold and holistic reforms to revive the economy.
“We need to embark on economic reforms that will restore our economy back to life. We must refine locally, ensure full deregulation to reap gains of global oil rise,” he said.
“The economic managers should look at how to improve exports. Once they increase exports, there will be more dollars and naira will strengthen.”
Ken Ifedi, a consultant to the CBN and economics professor, said beyond the concerns of the World Bank, Nigeria must identify an area of competitive advantage and build on it.
“We need to re-engineer our economy into productivity, riding on the digital economy. We need to do another rebasing of the economy to have a holistic view of where we can have strategic and appropriate interventions,” Ifedi said.