Border closure has mixed impact for Nigeria’s economy

Border closure has mixed impact for Nigeria’s economy
Nigeria closed its land borders with Benin, Cameroon, Chad and Niger in Auguest, claiming it needed to protect itself from smuggling. (Reuters)
Updated 21 October 2019

Border closure has mixed impact for Nigeria’s economy

Border closure has mixed impact for Nigeria’s economy
  • Smuggling crackdown creates pressures for Africa’s most populous country
  • Sales of gasoline in Nigeria fell by 12.7 percent after the border closure in August.

LAGOS: Two months ago, Nigeria slapped restrictions on cross-border trade with its neighbors, but there are mixed signals as to whether the controversial move is benefitting the country.

On August 19, President Muhammadu Buhari dramatically closed Nigeria’s land frontiers to goods traded with Benin, Cameroon, Chad and Niger, saying its economy needed to be protected from rampant smuggling.

The move has met with howls of pain in Benin especially, and cast a shadow over a newly-minted agreement to scrap restrictions on trade among African economies.

But has it been beneficial for Nigeria, as the government has sought?

Evidence seen by AFP suggests that any benefits are at the macro level — and the country’s many poor are likely to be among the losers.

The two main commodities being smuggled were petrol and rice.

Petrol was being sneaked out from Nigeria, where subsidies make the fuel half as cheap as in its neighbors, and resold.

Rice, on the other hand, was being brought into Nigeria, where consumers favor imported Asian-grown varieties over the locally-grown competitor, from Benin via its port in Cotonou.

The most visible winner from the closure is the Nigerian treasury, which has benefitted from the falling cost of petrol subsidies and from a rise in customs receipts.

“Nigeria, to its detriment, may have inadvertently subsidised (fuel) supply to a few West African countries for more than 12 years,” the Nigerian consultancy Cardinal Stone said in a report this month.

Sales of gasoline in Nigeria fell by 12.7 percent after the border closure, which indicates that millions of subsidised liters are being secretly taken abroad for resale, it said.

The reduction in consumption, if sustained at current levels, could lead to subsidy savings of around 13.5 billion naira ($37 million) monthly and 162.1 billion naira annually, it estimated.

In early October, Nigeria’s customs chief, Hameed Ali, said customs receipts had reached a record level, of five billion naira daily, since the closure, with the bustling port of Lagos benefitting most as imports rise through official channels.

As for rice, the country’s agriculture lobby is loudly supporting the border closure.

Ade Adefeko, a senior executive in charge of corporate relations with the food giant Olam, said investment in the Nigerian agricultural sector was being hamstrung by the rice trafficking, which is estimated to reach two million tons a year.

Olam has the biggest rice-growing business in Nigeria, owning 13,000 hectares of cultivable land of which only 4,500 hectares are being used because the sector is “not profitable” in the face of competition from Asian rice, he said.

However, “since the border closure, locally-milled rice has started selling, and the entire rice value chain has been positively impacted by the closure,” Adefeko said.

He called for the border closure to be maintained “until the end of the year, and see how it goes on a longer term.”

On Monday, Hameed told reporters there was no “time limit ... It will continue as long as we can get the desired results.”

But if the border closure is a boost for domestic growers, it has led to price increases for consumers.

The price of a 50 kilogram bag has more than doubled to 20,000 naira, roughly the entire monthly income of a Nigerian living in extreme poverty — of whom there are an estimated 87 million in the country.

Traders in Lagos Island, a vast market of “made in China” textiles and gadgets, say the closure of the borders had crippled supplies via Benin’s largest city Cotonou.

“Lagos’ port is too slow, and you have to pay too many bribes to get your goods out,” said a swimsuit hawker, adding “I have to cut down my margin by half.”

The annual inflation rate edged up to 11.24 percent in September, while food inflation ran at 13.51 percent.

A similar complaint is heard among people in Nigeria’s industrial sector, which is already struggling with the country’s notoriously poor transport system, as well as its frequent electricity shortages.

Trade with neighbors is essential, they say.

“The intention of stopping smuggling is praiseworthy but the point is that measures have an impact on us,” said a foreign investor who specializes in the import and export of manufactured goods.

“As usual in Nigeria, it’s all down to a question of strength — you crush first and talk later.”

Between 10 and 20 percent of Nigerian manufactured goods are sold to other countries in West Africa, with many of these items, such as pasta and cosmetics, exported through informal routes, mainly through small sellers who travel around the region.

“We need direct investments, we need industries to create jobs in this country,” said Muda Yusuf, director of the Chamber of Commerce in Lagos.

“Some people can celebrate but while they put their money to the bank, the rest of the people are suffering.”


OECD hikes 2021 world growth forecast to 5.6% on vaccine, stimulus rollout

OECD hikes 2021 world growth forecast to 5.6% on vaccine, stimulus rollout
Updated 5 min 22 sec ago

OECD hikes 2021 world growth forecast to 5.6% on vaccine, stimulus rollout

OECD hikes 2021 world growth forecast to 5.6% on vaccine, stimulus rollout
  • The “top policy priority” is to deploy vaccines as quickly as possible, to save lives as well as to speed economic recovery.

PARIS: The OECD sharply hiked its 2021 global growth forecast on Tuesday as the deployment of coronavirus vaccines and a huge US stimulus program greatly improve the economic prospects.
The Paris-based Organization for Economic Co-operation and Development said it now expects the global economy to grow 5.6 percent, an increase of 1.4 percentage points from its December forecast.
“Global economic prospects have improved markedly in recent months, helped by the gradual deployment of effective vaccines, announcements of additional fiscal support in some countries, and signs that economies are coping better with measures to suppress the virus,” it said in a report.
The recovery will be largely led by the United States thanks to President Joe Biden’s $1.9 trillion stimulus program, Laurence Boone, chief economist of the OECD, told AFP.
The OECD sees the US economy growing 6.5 percent this year, a very sharp increase of 3.3 percentage points on its previous forecast, with the world as a whole returning to pre-pandemic output levels by mid-2021.
But for the moment, only China, India and Turkey have surpassed pre-pandemic levels and the picture is very mixed elsewhere.
“Despite the improved global outlook, output and incomes in many countries will remain below the level expected prior to the pandemic at the end of 2022,” said the OECD, which groups the world’s most developed economies.
It said the “top policy priority” is to deploy vaccines as quickly as possible, to save lives as well as to speed economic recovery.
“There are huge and significant risks to our economic projections, most notably the pace of vaccination,” Boone told AFP.
“What we know is the faster countries vaccinate, the quicker they can reopen their economy,” she said.
Britain, which also has rolled out vaccines quickly, got a 0.9 percentage point increase to 5.1 percent — higher than the UK’s own forecast, which was lowered last week.
The eurozone, where vaccination campaigns have been slower, received only a 0.3 percentage point bump to 3.9 percent, as the recoveries in both Italy and France were revised lower.


Abu Dhabi opens region’s first COVID-19 test lab inside an airport

Abu Dhabi opens region’s first COVID-19 test lab inside an airport
Updated 26 min 35 sec ago

Abu Dhabi opens region’s first COVID-19 test lab inside an airport

Abu Dhabi opens region’s first COVID-19 test lab inside an airport
  • assengers arriving at Abu Dhabi International Airport through terminals 1 and 3 will be tested at the new facility
  • Results will be available in 90 minutes

DUBAI: Abu Dhabi is set to open the region’s first airport polymerase chain reaction (RT-PCR) testing laboratory for COVID-19.


The laboratory will be located within the Abu Dhabi International Airport (AUH), and will provide quick coronavirus test results in line with global travel standards.

“Through partnering with Pure Health and Tamouh Healthcare, Abu Dhabi International Airport is now able to offer travelers state-of-the-art rapid testing services delivered by a dedicated laboratory facility,” said Shareef Hashim Al-Hashmi, chief executive of Abu Dhabi Airports.

The move comes as airports around the world explore new ways to accelerate the revival of air travel demand, which was heavily affected by the COVID-19 pandemic.

“The introduction of the RT-PCR COVID-19 testing is a milestone achievement in our ongoing efforts to facilitate the safe resumption of international air travel and support the recovery of the aviation industry,” Al-Hashimi said.

The 4,000-square-meter testing site has the capacity to test more than 20,000 travelers per day, according to a release.

Passengers arriving at Abu Dhabi International Airport through terminals 1 and 3 will be tested at the new facility, where results will be shared via SMS, WhatsApp, and the Alhosn mobile application in 90 minutes.

Those who test negative and are coming from predetermined low-risk countries will not have to self-isolate. Otherwise, quarantine rules will apply – 10 days of self-isolation and mandatory use of quarantine wristband, which will be fitted at the facility.

Abu Dhabi Airports, the operator of AUH, earlier implemented safety mechanisms at the airport as it restores people’s confidence in traveling.

These airport enhancements include touchless elevator technology, thermal scanners with facial recognition capabilities, as well as sterilization tunnels.


Pandemic to stall UAE banks’ recovery in early 2021: A&M report

Pandemic to stall UAE banks’ recovery in early 2021: A&M report
Updated 42 min 51 sec ago

Pandemic to stall UAE banks’ recovery in early 2021: A&M report

Pandemic to stall UAE banks’ recovery in early 2021: A&M report
  • Growth in loans and advances during 2020 slowed sharply to 1.4 percent from 13.2 percent in 2019

DUBAI: The pandemic will continue to affect profitability for banks in the United Arabia Emirates (UAE) in the early quarters of 2021, after a sharp drop in return on equity last year, consulting firm Alvarez & Marsal (A&M) said on Tuesday.
Return on equity fell to 7.7 percent in 2020 from 13.3 percent the previous year, A&M said in a report on the UAE’s top 10 banks.
“We possibly have not turned the corner,” Asad Ahmed, head of Middle East financial services for A&M told a briefing, saying this goes for banks globally as well as in the UAE.
“In terms of the region and the UAE, 2021 will continue to be a year which does not produce stellar results, but hopefully next year onwards we will see the numbers turn around.”
Growth in loans and advances during 2020 slowed sharply to 1.4 percent from 13.2 percent in 2019, the report said.
2021 is expected to be less volatile than the past year, but banks might see a deterioration in their asset quality after the completion of the central bank’s stimulus scheme later this year, it said.
Total loan-loss provisions jumped 79 percent year-on-year to 28.1 billion dirhams ($7.65 billion) for the top 10 UAE banks last year, as a challenging economic environment and banks’ exposure to several high-profile cases boosted impairments, A&M said.
UAE banks have been hurt by their exposure to hospital operator NMC Health, which disclosed more than $4 billion in hidden debt after short-seller Muddy Waters questioned its financial reporting.
The hospital operator filed for administration in London in April last year.


Vodafone towers unit set for 14.7-bn euro valuation

Vodafone towers unit set for 14.7-bn euro valuation
Updated 51 min 20 sec ago

Vodafone towers unit set for 14.7-bn euro valuation

Vodafone towers unit set for 14.7-bn euro valuation

LONDON: British mobile phone giant Vodafone on Tuesday announced the price range for the upcoming German stock market flotation of its towers business, valuing the unit at up to 14.7 billion euros ($17.4 billion).
The float of up to one-quarter of Vantage Towers comes amid increasing demand for mobile telecommunications connectivity across Europe, driven by data growth, 5G roll-out and regulatory coverage obligations.
Mobile phone giants are also floating or selling off their tower businesses in order to slash debt.
German-headquartered Vantage Tower will have its first day of trading on the Frankfurt stock market on or around March 18, with a price-per-share range of between 22.5 euros and 29 euros, Vodafone said in a statement.
The initial public offering (IPO) “implies a total market capitalization for Vantage Towers of 11.4 billion euros to 14.7 billion euros,” it added.
Digital Colony, a digital infrastructure investor and operator based in the US, has agreed to be a cornerstone investor in the IPO, alongside RRJ, a global equity fund based in Singapore, with commitments of 500 million euros and 450 million euros, respectively.
“The Vantage Towers IPO is moving ahead at pace,” Vantage chief executive Vivek Badrinath said in the statement.
“Today’s price range announcement is accompanied by the news that two leading global investors have committed to cornerstone our IPO with the purchase of 950 million euros of shares at the offer price.”
Vantage Towers’ portfolio includes 82,000 macro sites — towers, masts and rooftops — across 10 European countries.
“Demand for data and connectivity across Europe is powering growth in the towers sector,” Badrinath said.
“Our superior grid and leading market positions mean we are well placed to benefit from this growth and our recent financial results highlighted the good commercial and operational momentum across the business,” he added.
Vodafone said it was targetting proceeds of up to 2.8 billion euros from the IPO, helping to reduce its debt pile.
Earlier this year, heavily-indebted Telefonica agreed to sell its telephone masts in Europe and Latin America to US-based telecom infrastructure firm American Towers for 7.7 billion euros.
The Spanish group said it would use the proceeds to cut debt by 4.6 billion euros.
Vodafone meanwhile rebounded into profit during the first half of its financial year, or six months to September.
During the same period a year earlier, the group had suffered a hefty loss after India’s Supreme Court ordered telecoms companies to pay long-standing licensing fees.


UAE-based venture builder eyes Saudi startup market

UAE-based venture builder eyes Saudi startup market
Updated 09 March 2021

UAE-based venture builder eyes Saudi startup market

UAE-based venture builder eyes Saudi startup market
  • Hatch and Boost has launched two tech startups in the UAE, with three more in the pipeline

DUBAI: Hatch & Boost, an Abu Dhabi-based venture builder (VB), was officially launched this week to spur further growth in the region’s hyperactive startup scene, particularly supporting homegrown “impact-driven business models.”

The venture builder will co-create startups alongside entrepreneurs – from concept stage to market introduction – and help to reduce costs by offering a shared pool of resources to participants.

“Our mission at Hatch & Boost is to bridge the gap between ideation and growth through our unique venture building model, which offers hands-on support from a startup’s early-most stages,” Faris Mesmar, the VB’s co-founder and managing partner, said.

Hatch and Boost has launched two tech startups in the UAE, with three more in the pipeline.

“The startup scene in the UAE has evolved considerably in recent years, and today it is a hotspot for startup activity, supported by an excellent entrepreneur-friendly infrastructure,” Mesmar added.

This startup outlook also applies to Saudi Arabia, he told Arab News, adding that they plan to bring the venture builder to the Kingdom to capitalize on its potential.

“KSA is on our radar, predominantly because it is a flourishing market with an ecosystem that’s suitable for startups,” he said.

“The PIF (Public Investment Fund) is a great example of this, as it continues to move the needle on supporting the startup ecosystem and creating a successful SME infrastructure,” Faris explained.

He added: “We have our eyes on the market, as do investors, on the rising talent and wave of entrepreneurship in the Kingdom.”