Product Banning and Market Regulation
Banning the importation of certain products as an economic policy of Nigeria has always generated controversies. In this piece, Ndubuisi Eluwa reports that introducing such policies as a way of regulating the market and encouraging local production can only go as far as the people, as well as the agencies charged with enforcing the policies, are ready to obey the attendant rules.
Introduction
All things being equal, is a classical economic phrase. The implication is that certain desired results can only be achieved when, and if, all things are equal.
In the same vein, a national economy consists of different interconnected parts, and total growth ultimately depends on what the various parts supply. Experts posit that the world has increasingly become a global village and as such, a nation’s economy receives inputs from other economies to make needed advancements, though there has to be some tact here.
The emphasis on tact is because no local economy can grow by perpetually leaving its borders open for all manner of goods to come in from outside.
It is argued that many countries that export goods to other countries have developed manufacturing sectors with enlarged capacities for mass production. This, perhaps, informs the policy by some countries to forbid certain goods from entering through their borders in order to build their internal systems to produce such goods.
While many economic analysts encourage import bans, they advocate that certain measures should be put in place before such policies are enforced, or it would be counter productive. This school of thought believes that the best approach is to allow importation while actively investing in local production to meet local demands in quality and quantity.
Another school prefers an outright ban to encourage full scale local production.
The Nigerian Case
Government’s attempts to implement import policies at various times have, to a large extent, not yielded the desired results. Oftentimes, Nigerians complain that the policies are not well thought out before being introduced.
“As an economic policy, placing a ban on the importation of any particular good should be done with two things in mind,” says Mr. Andrew Abu, CEO, Seldrew Investment Ltd and first indigenous Director of Operations, Nigeria Paper Mills Plc.
“The first thing is to ensure the growth of the local industry to match consumer demands in the quality and quantity of the particular good. This will stimulate growth and employment. Second, is to ensure that the borders are adequately policed, else the policy be meaningless because if anybody succeeds in circumventing the ban by bringing in cheaper or better imports, then the overall economy will suffer,” he adds.
To buttress his stance, Abu recalls that the only regime in Nigeria that has been successful in policing the borders while implementing a ban on importation remains the Buhari/Idiagbon regime of 1984. According to him, the result was an unparalleled growth in cigarette production. That era also witnessed the fastest development of local alternative raw materials such as glue which was derived from cassava and used in the packaging of the cigarettes.
He further states that, “Although this all collapsed with the overthrow of the regime, it buttresses the simple fact that when adequate border policing accompanies the ban on importation of a product, the rewards can be tremendous.”
For Mr. Philip Trimnell, CEO, Philip Trimnell Productions Ltd, an outright ban on importation without putting the necessary incentives to encourage local industries and in turn create employment is ill advised. “To me, it is counterproductive and makes bad economic sense,” he says. He argues that global best practices encourage import control not outright bans.
He further decries the comatose state of basic infrastructure in the country and wonders why a sensible government should place a ban on the importation of any product at all. According to him, “As far as I know, almost all the textile industries have folded up because government has failed to provide the basic amenities that these companies need to operate in the country. Most of them have relocated to either South Africa or neighbouring Ghana, where the climate is conducive for their operation, thereby rendering thousands of workers unemployed. Yet those who can make do with trading on imported goods are still deprived of that opportunity.”
Mr. Trimnell is further irked that men and officers of the customs service, who are supposed to enforce import bans, place price tags on contraband products and continue to enrich themselves at the expense of the entire country. He alleges that “duties” on contraband goods differ from those of legitimate goods.
Regulating the Market
Ideally, placing a ban on the importation of certain goods is geared towards reducing or totally eliminating the presence of foreign competition to promote better patronage of local goods. This move, if properly implemented, can bring tremendous benefits that spiral to the whole economy. But banning the importation of certain goods to create a bigger local market will only make sense when local industries are producing in sufficient quantity to meet domestic demands.
Mr. Abu therefore calls on government to invest in internal domestic systems and encourage the citizenry to utilize them. He says, “Once people are focused internally, the doors can be closed on importation. That way they will have no choice than to grow the systems. Definitely, the growing period will not be convenient but in a short while we will arrive.”
However, Mr. Trimnell proposes that rather than an outright ban, import duties on such goods should be significantly increased to discourage local consumption. “This,” he believes, “will leave room for those products that are either not manufactured at all in the country or are in insufficient supply to still be available in the market for those who can afford them.”
It is no longer news that Nigeria is viewed as a dumping ground for all manner of foreign products. M2 open market survey reveals the huge presence of imported goods even in agro-based products where the country is richly endowed. These products also enjoy considerable patronage by Nigerians who have developed a preference for foreign products over time.
It therefore makes sense to infer that the only way the domestic economy can truly grow is to promote local production by curtailing the overdependence on imports.
