I had written in the past why our current tariff system, especially on importation may be one of the safest things we face in our economy. Many did not understand this. The reasoning government gives is that it hoped to dissuade excessive importation which could turn Nigeria into a dumping ground. It sounds good on paper, but in practice, do we have substitutes for our imports?
The answer is sad NO. This means that the same importation will go on but this time around, it comes as smuggling or wrong declaration. This will explain why in spite of extant laws, we still see cars of over 20 years old being “legally” imported into Nigeria. Toothpicks, pencils etc inclusive.
The sad part is that much of the revenue from such continued import finds its way into the pockets of corrupt customs officials and their middlemen. This means that Nigeria still remains a dumping ground, whether or not, we have a policy against it.
In the obverse view, the customs report “good” figures which should naturally conduce government to spend on things that matter. But alas, this is not the case. In reverse, however, other countries, especially UAE, finding itself in a similar situation as Nigeria had followed the “Less is More” approach to kick-start their economies. What they did was to drop almost all customs duties both in import and export. This automatically created them into, rather than a dumping ground, a trading/distribution hub and they earn a killing out of it.
What it also meant, was that many manufacturing firms, desirous of selling their products in the GCC area, rather than export manufactured goods there, set up factories to produce in UAE and leverage on the GCC treaty to distribute at almost no cost. They also eliminated the cost of shipping raw materials to parent countries and shipping finished goods. They simply ship raw materials to the UAE, produce there and distribute.
The first effect of this is the creation of jobs for the local population. The next is the availability of products to the end-users at a ridiculously low price. This has been one of the biggest drives towards shopping in Dubai.
I’ll give an example closer home. John West Tuna Chunks made in Europe sells for N750 in Nigeria for the can of 160grams. Same John West Tuna Chunks Made in Ghana sells for N650 for 400grams! So the buyers get more fish, the same quality at a lower price.
Now building on such a model, and considering our population advantage, it follows simple logic that Nigeria can shut down importation into other West African Countries. It will become unprofitable to do so and if they attempt to compete with our population, will face serious financial crisis.
Their best bet will be to buy either finished or imported products from Nigeria. Cars have remained cheaper in Cotonou because of a low tariff. If they lose their Nigerian patronage, they will close shop. They have less than 15 million population and cannot consume all they import.
It will be soundly logical for them to simply buy in Nigeria where the price would have been lower than theirs and thus only import what they can consume.
Another major advantage to Nigeria is that several partnerships, technological transfer and entrepreneurs will be created. A young school leaver with a good head can actually export made in Nigeria goods to landlocked countries like Niger, Mali and Chad.
This concept is not new to Africa. Several of the goods consumed in Nigeria today that are produced in Africa are either made in Ghana or South Africa. Overtaking them simply requires doing very simple things. I am aware that many people have a divergent view but if the recession in the US after George Bush taught us anything, it would be that you spend out of a recession and not save out of it.
While our current system is feeding smuggling, sleaze and the growth of industrialization in Ghana and South Africa, our conservative approach has not helped us grow our own industries.
This clearly means that our problem is not the volume of import but rather our financial and fiscal value system. Because when these borders are opened and tariff dropped, it puts more money in the pockets of the masses and allows it to spend more which can be recovered in simpler taxes. With more earnings and more savings, the average guy can buy a car or build a house and thus reduce the burdens of government.
In closing, the revolution we are looking for may actually come by opening our borders and not by closing it. We could start a monopoly in the subregion by undercutting all other nations and forcing them to buy from us, as Ghana is currently doing. I won’t be surprised to wake up one day and find their GDP, in spite of their population, is bigger than ours… I might be wrong though.
By Obinna Onyekachi