Tensions Occur Between Ghana, Nigeria and China Over Retail Business
January 23, 2020
January 23, 2020
KJ-1. The economic relations between Ghana and Nigeria will worsen due to regional competition. While Ghana will advance its open-door policy for foreign investment and foreign workers, Nigeria is likely to lean on its long-term partner – China.
KJ-2. China will take advantage of the retail conflict between Ghana and Nigeria. The two West-African countries represent each other’s biggest trade partner. If relations between the two will become even more strained, China will step in as a major retail contractor.
This report seeks to offer a predictive analysis of the economic tensions between Ghana and Nigeria. For collection and processing the author used OSINT, therefore the report is safe to be further distributed.
Early October this year, the president of Ghana Union of Traders Associations publicly blamed the Economic Community of West African States (ECOWAS) Commission for failing to intervene in the action taken by Nigeria of closing down its border with Benin, outlining that this sort of actions represent a threat to the sustainability of the African Continental Free Trade Area (AFCFTA). Nigeria’s decision to block the wares bought by Ghanaians was seen as a reaction to the Ghana’s economic success, which determines foreign investors to choose Accra over Abuja.
Meanwhile, the Nigerian government justified its actions as counter measures against illegal trade and labour, as well as the free movement of the jihadist militants in the region. Nigeria is still seen as the economic giant of Africa and compared to other West African states, its economy is stable for now. However, recently, the government in Abuja adopted some more restrictive trade policies aimed at curbing the flow of Ghanaians workers and retail contractors.
Although the government claims these policies apply to Chinese merchants as well, given Ghana’s high dependency on Chinese investments, it is less probable that the Chinese contractors’ businesses will suffer any damage. China represents a crucial economic partner for both Ghana and Nigeria. The worsening relation between the two West-African countries will only facilitate China’s regional expansion in terms of soft power.
The closed border between Nigeria and Benin left many Ghanaian traders stuck inside Nigeria with thousands of tons of goods which were due to transit through Benin by road. Around 100 trucks of goods belonging to Ghanaian traders were left in Nigeria. The goods had to be transported to warehouses where the Ghanaians had to pay additional taxes for rents. The losses suffered by Ghanaians traders are substantial, thus this situation caused anger and frustration among the Ghanaian population over the Nigerian trading policies. In an effort to support the merchants stuck with their wares in Nigeria, Ghana sent a delegation to Abuja to commence trade talks. So far no agreement between the two parts has been reached.
The Nigerian government announced a partial closing of its borders with Benin in August this year as part of a broader policy aimed at curbing rice smuggling. The local authorities are concerned with illegal practices that menace the country’s attempt to boost local production of the cereal. Another security issues causing distress in the Nigerian society is the movement of illicit weapons and various smuggled goods due to porous borders. Amid a growing economy and a stable regime, the Nigerian state lacks the competence to deal with acute security issues that cover the entire West African region. One of the country’s main concerns is the presence of the militant Islamic movement of Boko Haram, which originates from Nigeria. During the last decade, Boko Haram increased its regional influence and although foreign interventions have recently managed to stall its advance, the group transcends borders and has the capabilities to operate transnationally. Nigeria fears that by keeping its borders open for regional trade, jihadist factions will flourish inside the country, as well is in neighbouring states such as Niger and Cameroon.
According to the UN economic classification of countries, both Ghana and Nigeria are considered developing economies, there is a recent regional competition between the two, as many foreign investors started to shift their businesses from Abuja to Accra. In 2018, Nigeria’s FDI inflows summed no more than $1.9bn, a sharp decrease compared to $3.5bn in 2017. Meanwhile, Ghana reached $3.5bn in 2018, an increase from $3.2bn in 2017. As Ghana’s growth continues, Nigeria keeps on enforcing austerity measures and protectionist policies due to security concerns. Observing the Nigerian policies, the Ghanaian government is now trying to build the image of an alternative to the Nigerian economic hub in West Africa. This new initiative is part of the ‘Year of Return’ campaign, which includes an open-door policy for foreigners, with the purpose of boosting the economy.
In December 2019, as a response to Nigeria’s closure of the Benin border in August 2019, members of Ghana’s traders’ union GUTA, raided the capital city’s main shopping district, closing down more than 100 foreign–run shops. Concerns were raised by the affected businesses who accused GUTA of violating Ghana’s law against barring non-nationals from operating in the domestic retail space. Ghana’s president Akufo-Addo supported GUTA’s decision to close foreign-owned shops in Accra, underlining that until the conflict with Nigeria is settled down, no foreigner shall operate in Ghana. He mentioned the Chinese merchants as well as being banned from conducting businesses in Ghana.
In 2014, a BBC World Service poll concluded that Nigeria was the most pro-Chinese country in the world, with 85 percent of Nigerians perceiving Beijing’s influence in the world positively. At the same time, the economic partnership between China and Ghana continues to grow. The lack of retail imports from Nigeria will cause a gap in Ghana’s economy, meaning that China will meet a new opportunity to further its interests in the region. However, If the Chinese will provide Ghana with retail products, the costs are likely to increase, while the regional production of goods will be stalled. This will only increase the African states’ economic dependency on China.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Grey Dynamics LTD.
Ana Maria Baloi is analyst at Grey Dynamics and a MA candidate at Brunel University London, where she studies Intelligence and Security. Her research is focused on China’s policy and strategy towards Africa.
In the last years, Ana has participated at numerous NATO Youth summits and Model United Nations conferences, while working as an intern for the Romanian Senate.