The continuous closure of Nigeria’s land borders may be doing more harm than good at the moment, as a report from FSDH Merchant Bank Limited shows that some textile firms in one of Nigeria’s commercial city, Kano, have shut down operation.
According to the FSDH macroeconomic report for October, some textile firms in Kano have shut down operations with a large pile of inventories due to the inability to export to other African countries via the borders.
FSDH stated that for firms that rely on imported inputs via the land borders, the closure had resulted in higher production costs and this would have further implication on Nigeria’s outputs in the fourth quarter of 2019.
Border closure pressuring prices
Analysts at FSDH believe that the border closure comes with high inflationary pressure and this does not look good for the economy. Basically, FSDH stated that although almost 99% of Nigeria’s formal trade is done via air with land borders largely dominated by informal trade, the border closure is expected to have implications on food prices and core inflation in the economy.
The Nigerian economy maintains a weak outlook
Providing forecast for the Nigerian economy, FSDH stated that the Nigerian economic outlook remains weak as pressures build on the country’s reserves, prices and output.
“Nigerian economy is expected to grow at around 2% in 2019. This will be lower than the 2019 target of government’s ERGP of 4.5%. Growth will remain below population growth of 3.1%, with implications on real income per capita.
Growth will continue to be driven by the Services sector- Telecoms and Transport will play a major role in driving growth.
For output, local producers could take advantage of the border closure; however, there are still pertinent supply-side challenges of infrastructure, logistics and quality of produce.”
Concluding the report, FSDH highlighted major risks the Nigerian economy would face in the medium run, and these include slow pace of implementation of fiscal reforms and uncoordinated policies, a possible decline in crude oil price, interest rate hike in developed countries, insecurity and Shortage of skilled labour.