‘Why illicit trade booms in Nigeria’

Dr. John Isemede is the National Expert on Value Chain at UNIDO and a former director-general of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA). In this interview with Taiwo Hassan, he speaks on the menace of illicit trades in Nigeria and Africa, including other sundry issues. Excerpts:

 

 

What is your assessment of the impact of illicit trade on Nigeria’s economy?
When you talk of illicit, it means illegal. It is a latin word. Some of us who can speak multi-lingual languages know that when we say illegal, it is forbidden, it is not done. So, this illicit trade we are talking about is not only restricted to goods importation alone, it encompasses all sectors of the economy.
Like Nigeria, we have signed a lot of trade agreements in Africa with our African brothers to boost bi-lateral trade relationships. For instance, we have trade agreement with Benin Republic, Ghana, South Africa, Mali, Senegal and others in Africa. So, what you think is forbidden here in Nigeria is not forbidden in those countries despite the trade agreements we share.
So, when you look at illicit trade in all ramifications, you will see that there is no country around the world that is not involved in it. For instance, in US, illicit trade occurs there. In Benin Republic, it is there. In Argentina, it is there and so on and so forth. If you look at it historically, trade started from the time of the slave trade. Then, human beings were not taken like human being, but they were taken like commodities with human face. It is the same way you bring yam from Ibadan to Lagos, that was the way the slaves were taken away during the Stone Age. So when today some people are talking about repatriation of Africans, I say repatriation for what? Because it was on the basis of illicit trade. So, illicit trade is a threat to global economy. It is estimated to account for eight to 15 per cent of global Gross Domestic Product (GDP) and it reached $12 trillion in 2014, according to World Economic Forum.
In Nigeria, it cuts across a wide range of consumer goods and brands; including electronics, apparel, alcoholic drinks, vehicles and auto parts, drugs, arms, pharmaceuticals, cigarettes, counterfeit currency as well as humans, impacting virtually every product, industry, and the economy.

How has this affected the growth and development of Africa’s economy?
It has affected the growth and development of Africa’s economy in all ramifications. Africa has become the hub for illicit trade globally.
The continent is at the mercy of actors of illicit trade of the world. For instance, China is a major source of the counterfeit goods. North Korea engages in illicit trades involving drugs, arms and counterfeit currency.
Precisely, in Africa, when you talk of child’s trafficking as illicit trade, I saw it in Libya, Mali and Chad, including everywhere I had visited around Africa and beyond. Go to the Nigeria-Benin Republic border (Seme), you will see under-aged girls trading in oranges on their heads, but at the end of the day, they will be harboured by the security agencies there. Before you know what is happening, they moved them to Cotonou, in Benin Republic, for trafficking. If you go to Senegal, you will shed tears on how girls are being trafficked. So, when you talk of illicit trade that of human beings is even the worse in Africa. Besides, do you know the number of people moving from here to Benin Republic and to other neighouring countries on a daily basis? The Nigeria and Benin Republic border (Seme) is the busiest border in Africa. Then the best organised border in Africa is between Togo and Benin Republic and this is because of the Francophone arrangement.

As a seasoned economist, what is responsible for rising illicit trade in Nigeria and beyond?
Today, as a catch up with all this illicit trade, we don’t even have records in Nigeria on what our economy has lost to illicit trade and you see people talking about African Continental Free Trade Agreement (ACFTA). In Nigeria, we have over 600 trade agreements with our African brothers despite that our economy is still very weak. That shows that something is wrong with our import and export value chain distribution. When you talk of illicit trade in Nigeria, you have to mention production, supply, shipping, and others. But the bottom line is what is responsible for this illicit trade in our country. One key thing is tax variation. In Nigeria, valued added tax (VAT) is five per cent. In Benin Republic, VAT is 18 per cent plus two per cent, making 20 per cent. We are talking of smuggling of goods and commodity shunting, so there are many ways of describing illicit trade in Nigeria and Africa.
With the sharp difference between Nigeria and Benin Republic in terms of tax, duty and tariff, illicit trade or smuggling of goods along the Seme border, Idi roko, Ewekoro, Saki Iseyin road and other places will continue to boom.
For instance, VAT in Ghana started with 12 per cent, from 12 per cent to 15 per cent, from 15 per cent to 17.5 per cent. Then why do we seal trade agreements with neighbours and friends we don’t even know in Africa. In this part of Nigeria, the organised private sector is so weak. You cannot do any business in Benin Republic without going to the chamber of commerce in Cotonou, because today, you are talking about sub-standard products, you are talking of illicit goods, you cannot trace certificate of origin. But that is not the case in Benin Republic. I have been going to Benin Republic as far back as 1967 when we were going through Sango Ota. When the border was opened in 1977 by General Olusegun Obasanjo (Rtd), I was there. So, the rules are not alike when compared with Nigeria’s export rules.

What is your view on AFCFTA? Would you advice President Muhammadu Buhari to sign it?
Most of the people that are going to tell Mr. President to go and sign the African Continental Free Trade Agreement (AFCFTA) are only involved in illicit trade and don’t know what import and export trade is all about in Africa. I must tell you authoritatively, we are looking at Nigeria as a giant of Africa on a peripheral level. For instance, how did we sign the ECOWAS Trade Liberation Scheme (ETLS)? When it came up in 1992 by the African Union Organisation that Nigeria should sign the ECOWAS ETLS, at first, we were afraid because the Francophone states have eight countries in West Africa and before we knew what was happening then, Guinea Bissau had joined them and in Cape Verde, you cannot do anything without going to Senegal. And we said to them, if we have to sign this ECOWAS ETLS, they should give us the first year for information, sensitisation and registration. CBN was involved then. That was the time the late Chief Asabia was leaving First Bank to Inter State Bank. We started with a bank, PIBN in Benin Republic, which did not work out, before we started Eco Bank. We told General Ibrahim Babangida (Rtd), we are going to sign the ECOWAS ETLS, but what will be the role of the Federal Government in this? What are you going to provide for us the OPS?
So, on this continental trade agreement, Nigeria will be left in the cold because the trade policy of Nigeria does not match that of Ghana, Sierra Leone and Gambia. And Liberia is an American colony. For the organised private sector, what and what do we need to fly? It’s not just to sign agreement without assessing the economic implication properly. As it is now, if we sign this AFCFTA, there will be no Nigeria again. We are not saying we are not going to sign, but the Federal Government must put certain things in place, otherwise we are going to be in the backseat of African economy. We cannot compete with Morocco. I worked in Morocco for 14 years. We cannot compete with Egypt; Kenya and South Africa are in a different world on their own and we are saying we are the giants of Africa. How many of those asking Mr. President to sign the agreement has done business before? How many of them have travelled by road to Ghana before to experience regional trade export. I have travelled from here (Nigeria) to Algiers, the capital of Algeria by road. I have travelled from here to Senegal by road before. So let us be very careful with what we are saying on AFCFTA in this country because we are not ready for it.
For me, before the Federal Government go ahead to sign the continental free trade treaty, it should give assignments to each organised private sector group involved in trade export and import in Nigeria, so that at the end of the day, we will see in three years time how it has impacted positively on our exports and economy. For instance, after the ECOWAS ETLS, we started exporting goods after the three years of signing the trade agreement. The first company to carry out legitimate export under the ECOWAS ETLS in Nigeria is Beta Glass in Agbara, followed by Nestle Plc and Unilever Plc. So, for those who are asking Mr. President go and sign AFCFTA, ask them, which business have they done before?
This continental free trade agreement is not fundamentally structured properly and Nigeria will be the loser at the end of the day if Mr. President goes ahead to sign it.

Is Nigeria home of pirated goods in the world?
Where is the home of pirated goods? It is Nigeria. Go to Otigba, Alaba international market, Ladipo market, Trade Fairs and other places to see for yourself. Even here in Lagos, people are being pirated. A gentleman collected a copy of my book and put his name and started selling it in the marketplace. Also, a Professor in the University of Lagos (UNILAG) took my book to far away Japan because he wanted to get $20,000 grant from a Japanese institution for a research and the question they asked him was that this book is not written by you, but by somebody who has carried out this research on his own. It became an issue and a letter was sent to the Former Finance Minister, Ngozi Okonjo Iweala by the Japanese institution to investigate the matter.
Another area of pirated goods as illicit trade is transportation. The trade agreement in port of Benin is different from that of our Apapa port. Niger is a landlocked country. So goods coming in from France would rather go to Niger Republic and are not supposed to pay surcharge on them. That is why people go to Cotonou to document their vehicles papers and say it is going to Niger Republic. Sometimes, petroleum product is cheaper in Niger Republic because when you pay duty, you don’t pay surcharge based on the World Trade Organisation’s arrangement. If you do that, there will be high rate of smuggling because things will be so cheap in Benin Republic and things will be so expensive in areas such as Burkina Faso and other countries in the East Africa. We know how to do this calculation in the World Trade Organisation (WTO) but who is teaching Nigerians. When we talk, they say that boy knows too much and he is going to suffer.

Why is Nigeria having challenges with Certificate of Origin for goods exported to other countries?
It is so sad that most of the things we do here in Nigeria are not traced back to their state of origins. What gives a product a premium price is traceability. When you go to Shoprite in Ikeja, you will see South Africa apples there. Even if they tell you to pay 10 times the price, you prefer to pay for it than the one they sell in supermarket. Another issue on the certificate of origin is that where a product is coming from is different from where a product is produced. If you bring Mangoes from Kaduna State to Lagos, it is still within Nigeria. But if you take it to Benin Republic, leaving the airport or seaport, the origin is no longer Benin Republic. That is why we are failing in export trade in Nigeria. If you go to the Far East China, Shea butter, sesame, cocoa and all that are from Nigeria cannot be traced back to Nigeria again. When it is good they put it in other packaging materials and they said it is made by them. Then when I was working in Nairobi, Kenya, we were buying cocoa from Netherlands. There is no cocoa tree in the whole of Netherlands. Netherlands is not bigger than Borno State. Today, the biggest cocoa plant is located in Netherlands. Is this not what is called illicit trade?

How has the multiple agencies at the land borders and airports affected Nigeria’s economic growth?
The effect of the multiplicity of agencies of government at the airports and land borders on our country’s economy is killing. Precisely, this is happening because what we are lacking in this country is value addition and standardisation. Look at the area of export promotion which is the market, how can you develop a market without export activities? If you talk about all the documents required before you are allowed to cross the Nigerian borders, I have them with me here. But what they do is when you go to meet these big boys in the Ministries Departments, Agencies (MDAs) to collect export forms and you go to the seaport, land border or airport for goods export, I bet with you, there are more than 37 agencies of government waiting for you there to check your documents. So because of lack of coordination of standards in our export system, people are in the process of selling fake forms to you even when you have the genuine ones already. These are some of the things that led to rejection of our agric produce at European Union and some other developed countries. You know this problem also leads us to lose revenue and attract foreign exchange into the country.

What are the economic implications of multiple check points on trade facilitation?
As I told you earlier, I am an authority when it comes to import and export value chain distribution. I have driven across many countries in West Africa. I have driven from Guinea to Senegal by road. I have driven to Algeria border by road.
In the day time, there are more than 20 checkpoints from Mile 2 to Seme border, while at night there are over 40 checkpoints you will meet on the road along the Francophone Benin Republic and Anglophone Nigeria international highway.
So I found out that there is persistent collection of illegal fees at the borders and along the corridors and these have been impeding international trade and integration at the border. Notably at Malanville, Hillacondji, Krake, Benin axis and at Seme, Nigeria side, the unwholesome trend has continued unabated with its dire consequences on the regional economy.

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