Trade: Border enforcement should continue for as long as necessary- Dr. Olisa Agbakoba SAN
… Frowns on compromise at the borders that encourages continued smuggling from neighbouring countries
On this edition of ‘CEOs Talk Business’, Dr. Olisa Agbakob SAN, renowned maritime lawyer and Senior Partner at Olisa Agbakoba Legal sits ‘At The Marina Today’ to discuss issues of challenges with trade facilitation at the nation’s ports.
Agbakoba describes trade as tricky and states that Nigeria’s land borders should remain closed for as long as the nation’s interest is promoted and local industries supported to grow.
He supports revenue generation drive of the Nigeria Customs Service, but insists there must be a balance from the Customs operations to ease operational processes to make the nation’s ports attractive.
A key issue raised by Agbakoba is that it remains illegal and translates into smuggling when goods get to neighbouring countries as designated final destination and begin to find their way into Nigeria without any duty paid to the Nigeria Customs Service.
Border enforcement must be very effective to protect and grow local industries
Goods designated for a particular country as final destination means the end of that transaction there. Moving such goods from like Cotonou to Lagos, means smuggling, which the ECOWAS protocol does not allow. Which is what is happening. So, the goods destined for Cotonou are in transit to Nigeria, therefore we are then entitled to apply relevant trade remedies.
In that instance, we apply Trade Remedies Legislation, which means that you are able to assign duty or tariffs or quotas to protect your own market.
Trade facilitation does not translate into having an open border.
So, the importance of trade is to first of all promote your country. If trade does not, then you use tariff, quotas and high walls to stop it.
The land borders should remain closed to the extent that Nigeria needs it. To the extent that Nigeria is not violating any protocols. Which it is not.
What have been the challenges stopping Nigeria from generating about N7 trillion from the maritime industry, since the industry is said to have the capability of doing so? And if trade facilitation is said to support trade development, what in your opinion is the practical reality in the nation’s ports and what are the expectations regarding the operations of the Nigeria Customs Service?
It is a broad question you posed and my answer to that will be in the context of policy failure; the fact that the government of Nigeria and its component states are not as attuned to the issue of policy as one would like. But, interestingly, this is a very interesting year, depending on how you look at it. Covid-19 has made a lot of people to think. The disruption has taken place, there are new ways of doing things, and hotels are out of business. So, what you will do as a business person is to think through ‘how can I generate revenue.’ President Buhari just announced the 2021 budget, with a deficit. The minister of finance is saying that we are going into a recession in the third quarter. We are already in the third quarter. So, all the macro economic and fiscal policy parameters look negative. And when people challenged they tend to do better.
When Nigeria was awash with cash, Gowon as Head of State back in the 70s, once said that “I don’t know what to do with money.” I am sure President Buhari would be saying: I wish you can give it to me now.” So, because we are now strapped for cash, there is a lot of policy thinking taking place. And I was happy to see President Buhari in his retreat charge the ministers to be up and doing. He needed to see more coordination, more harmonisation, he needed to see more novel issues. So, any country that doesn’t understand how to shape its trade policy, is not ready to do business. So, Nigeria, as former Emir of Kano, Sanusi, pointed out, is a dumping ground. So, no one is inspired to produce.
So, are we fine with the land borders being shut for this long?
Absolutely! It is a very big misconception that because we are in ECOWAS, or that I am a French citizen and I arrive at the English border I will just walk in. Won’t I show my passport?
So, the only problem with the trade policy in respect of the border closure was that they called it a wrong name. The proper name in trade is called ‘border enforcement.’
And when goods are run from where ever to Cotonou, it is the final destination. There is no further exportation. So, the exportation of whatever is coming to Nigeria from there is illegal, even by ECOWAS Protocols.
But, the WTO makes provisions for goods even when they get to the border and taken beyond the border
But, not when the goods are designated for a particular country as final destination. That is the end of that transaction. But if I now take it on from Cotonou to Lagos, that is smuggling, which the protocol doesn’t allow. Which is what is happening. So, the goods destined for Cotonou are in transit to Nigeria, therefore we then entitled to apply relevant trade remedies. Of course, one of the biggest tools a nation should have to control trade is called the Trade Remedies Legislation, which means that you are able to assign duty or tariffs or quotas to protect your own market.
The fact that we have trade facilitation is not answer to have an open border. You can see what Trump is doing to the Chinese. If trade was such a sexy thing, why is Britain leaving the European Union? Because it doesn’t pay them, according to them. So, the importance of trade is to first of all promote your country. If trade does not, then you use tariff, quotas and high walls to stop it.
So now, how long more should this border closure continue?
To the extent that Nigeria needs it. To the extent that we are not violating any protocols. We are not. If Benin Republic now realises that they have been doing the wrong thing and they want to do the right thing, then they will be paying us duty. Right now, they are taking all the duty. They will be paying us because, their country is simply a country of throughput. So, we now receive duty. But we don’t, because they smuggle it. They compromise the Nigerian border authorities and things are smuggled and the Nigeria Customs get zero revenue.
So, what happens to the Africa Continental Free Trade Area (AfCFTA) agreement?
It is a tricky question. You know, trade it tricky. That is why we have not signed. We are thinking through what is the best angle. Trade for a country that is very weak domestically, in terms of production, is not a sexy thing.
So, what should Nigeria be doing?
I will not be very keen to sign for now, because we need to grow our industries.
What do we then do to grow our SMEs?
Not just the SMEs. Everything. So, we now need to have a conversation about how do we build our natural resources? So we do so by looking at what the minister of finance is doing. She now has a revenue growth initiative, which has a lot of components. One is revenue generation, which is good. Job creation, which is good. Growing the economy, which is good. Ease of process, which is good. Cost of governance, which is good. Wastage and leakage. All these combined means that there will now be money to make people begin to invest in the country. By little things like farming, I have a lot of clients now who are looking for crowd funding to do farming, small cottage industries. And that is how it starts. Then, we begin to grow. But we need to have strong economic policy support from the government. How can Nigeria, as big as it is, the two most important tools that facilitate trade; a vessel and an aircraft, we don’t have one.
Ethiopia that went through famine and war has come up to be Africa’s largest carrier. One day I was at the Addis Ababa Airport, five aircrafts took off to Nigeria; Enugu, Kaduna, Kano, Lagos and one other place.
Why has it been so difficult for Nigeria to have a national fleet, at least?
Cheap money. If you have cheap money you don’t think. That is why I am happy that finally, oil receipts are going down, so that we can think. South Korea has no oil, Singapore has no oil, Japan has no oil or resources, but they are doing well. Singapore has one of the largest fleet of vessels. So, how can we that produce things with all the importation not have a single vessel of aircraft? It doesn’t make sense. So, in order to support trade facilitation, we have to build these things. Ethiopian Air and Emirates have now gone to Lome, a small country and given them enough money and bought their Airport. So you can generate a flight from Ethiopia or Dubai via Lome. We are the ones who naturally are the port of call, we are bypassed.
The trading public cried lately that the Nigeria Customs is more concerned about revenue generation than facilitating trade. How can this be reconciled?
It is for them to just do the right things. I am shocked that Col. Hameed could say that since the border was closed they now get about N12 to N15 billion extra a day and not worry improving facilitation so that they can balance both. Revenue is crucial. You can’t dispute that. There is nothing wrong with Customs making money for the government, but they also need to enhance their skills. The fact that there is manual inspection at the port, you know the kind of delays it causes? And that is why our ports are not attractive. Eight out of 10 containers coming to the Central West African region are for Nigeria. But they would rather divert to other ports and then begin to smuggle. So, the only way to do it is to ensure that trade facilitation framework is super-efficient. And if it is super-efficient, you will very well know that Apapa is in dire need of massive infrastructure uplift. It needs rails, it needs good rail network. Even though I have told the MD of the Nigerian Ports Authority that the Apapa Port is technically finished.
What are some of the solutions you can proffer?
A multi-modal transportation system. When the colonials first came they understood how to export our rich natural resources. Now you have NIWA, the National Inland Waterways Authority. Then, we had Colonial Waterways Authority, made up of 44 ports, inland ports. Do you know that from Ondo River to Port Harcourt taking cocoa back then was only three and half hours?
Do you know that there was a massive port in Ihiala running into Port Harcourt, the River Niger? All these ports have collapsed. So, we are unable to move things around. That is why you have a glut of containers in Apapa. Now that the NIWA has operationalise the Onitsha port, though I am not sure. It takes six hours from Onne to Onitsha port. But it takes about two months from Lagos to Onitsha, the same container. So, you can see what trade facilitation will do and infrastructure. But we don’t have it. We have at least three or four deep seaports, but they are not being constructed. I am hoping that as government revenue is tighter on the oil side, it will increase the policy thinking about trade facilitation.
Give us your thoughts. What should Nigeria begin to do address the problem?
Thinking. That is important. You got to have a concept and think through things, have a blue print. And that thinking takes place at the ministerial level. The typical way government runs is to split it into about three or four modules. The thinkers are not the doers. The thinkers pass it on to what we call the executive agencies. We call them parastatals. The parastatals deliver what the thinkers have done. It is not Fashola’s business to run around the country or the work of Amaechi to pop-up around railway stations. There is the Nigerian Railway Corporation. I am so happy that my grandfather’s brother was the first Nigerian MD of the railways. Back then, he did his job to grow the railways.
The third level are the regulators. Those who ensure compliance. If you have these three well understood, then you will find government is growing seriously. I read the new economic sustainability plan, which took over from the EIGP, and that plan continues to make the same error of government being a businessman. Government is not a businessman, government is a thinker.
So, you look at that document, government is to build 300,000 houses. It is not its job. Government is to buy 5000 solar panels. That is not its job. Government is to create the environment. And I hope that when time comes for National Fleet, government will not start buying planes and aircrafts? Look at Air Peace, look at Arik. If they had been supported by Fly Nigeria.
In America, where I got the Cabotage Act from, it reinforces who will work in our coastal waters. We don’t need Nigerian government to own ships to work in our waters. We need for the Nigerian government to say “this is only for Nigerians.” Then, if I were a Nigerian vessel owner, the attraction of cargo in that space enables me to access credit and I get the work done. Until this is understood, the thinkers are the ministers, the executive agencies are the parastatals and the regulators are like the NCC, then the private sector carries the bulk. They take the risks.
In America, government owns nothing. So, we must make government very efficient and that energy is released to make private sector thrive. The modern way of building ports now is entirely private. But what I see from the plan is for government to build the ports and for the same government to provide 774 primary health care clinics across Nigeria. That is impossible. But if it can empower local doctors to say here is how we will do it, then they will do it.
The NHS in the United Kingdom doesn’t own all the hospitals, they don’t own all the schools. This ASUU issue, I will resolve it by leaving universities, giving schools back to the missionaries, so my budget will shrink and rather than spend N10 trillion, I will spend N2 trillion, because I am not doing anything that concerns business. There are enough businessmen like Dangote to flourish and develop the country. All that these guys want is stability of policy. The policy is stable so that they don’t somersault.
So, if I take money to buy 10 aircrafts and tomorrow government will now somersault and say we are going to start up 10 Nigerian airways owned by government. Government has no business in business. Then you will find the private sector thinking. And the trade issue will be easy. A private sector man wants to make money, but he is not allowed. That is the problem.