91124 POLICY NOTE NO. 42 OCTOBER 2014 Africa Trade Policy Notes Antoine Coste1 Domestic Obstacles to Trade and Transport in Nigeria and their Impact on Competitiveness Introduction HIGH LIGH TS Although traders in West Africa still face severe obstacles, regional trade  Despite the absence of border along facilitation has received considerable attention from policy makers and the Lagos-Kano corridor, the costs, donors. This agenda has largely focused on barriers to international and delays and uncertainties faced by regional trade, which it has aimed at lifting through initiatives such as traders within Nigeria are high. As illustrated here in the case of cattle, joint-border posts or arrangements to facilitate transit trade. However, this evidence suggests that unjustified should not obscure the fact that major hindrances are also faced on a daily charges and barriers along the basis by traders on transport corridors within their own countries, due to corridor increase transport and poor infrastructure and transport services, cumbersome procedures and related costs by around 18 percent, lengthen transport time by up to a other obstacles, such as roadblocks. The trade facilitation agenda therefore quarter and create significant risks has a strong domestic dimension and can have a positive impact on trade for traders. Such trade transaction and economic activity within the boundaries of a country. This note costs also make it harder for products from the north to compete illustrates the prevalence of such obstacles to domestic trade in the case of with imported goods. Nigeria, the largest economy in West Africa. It focuses on the barriers encountered in cattle and leather trade between the northern and southern  Combined with interventions to part of the country, along the Lagos-Kano corridor. enhance productivity and quality, reducing domestic trade and As several other industries, the Nigerian meat sector has been artificially transport transaction costs could improve the competitiveness of shielded from external competition by an import ban on raw/refrigerated Nigerian products such as meat meat for over a decade. Such restrictive trade policy instruments have had more efficiently than the current negative effects in terms of rent creation, price increase and loss of restrictive trade policy instruments. A combination of investment in customs revenue, but they are being circumvented and have not contributed infrastructure and policy to strengthen the competitiveness of Nigerian products (Treichel et al. interventions can contribute to 2012). For instance, a recent report suggests that prices for meat have facilitating trade and transport increased markedly in Nigeria over the last decade and are far higher than within Nigeria. international prices (GEMS 2011). According to this analysis, high prices  Reducing trade transaction costs is are less production driven than caused by the high level of domestic also essential to ensure that economic activity does not demand, the high transaction costs from farm gate to abattoir, and the ban excessively concentrate in the Lagos restricting area and that growth is shared with the rest of Nigeria. For instance, trade in cattle for domestic consumption and exports of leather 1 Trade Analyst, Trade & Competitiveness Global Practice, Word Bank are already important and growing (acoste@worldbank.org). economic activities in Nigeria, benefiting millions in the northern part of the country. 1 imports from producers of cheap meat. While Table 1: Cattle in Nigeria removing the import ban would therefore directly Share Growth 2012 benefit consumers by lowering prices, reducing ECOWAS 2005-12 domestic trade transaction costs should be an 19.2 Stock million 30% 21% objective of any strategy aiming at strengthening heads the competitiveness of domestic products and Meat 390,000 promoting domestic supply.2 production tons 36% 28% Hides 60,000 The note starts by presenting the corridor and cattle 34% 28% production tons and leather trade in Nigeria; it then describes the Source: FAO Stat 3 obstacles faced by traders in this sector based on recently gathered data; it concludes by suggesting Historically, livestock trade in West Africa has policy measures which could alleviate these taken place between supply sources in arid and obstacles. semi-arid Sahelian countries and demand centers in humid coastal countries in the south4. The value of this thriving, and largely informal, intraregional Cattle and leather trade in Nigeria trade is estimated to have increased in real terms Cattle domestication in West Africa dates back from USD 13 million to USD 150 million between millennia and the Zebu, by far the dominant cattle 1970 and 2000 (Williams et al. 2006). FAO data breed in northern Nigeria, is thought to have shows that Sahelian countries are net exporters of reached the region by 1,000 AD (Blench 1995). live cattle, while Nigeria is a net importer at around Although it is small compared to major sectors of 500,000 heads per year (Figure 1), though GEMS the Nigerian economy, such as oil and crop (2011) estimates that informal imports amount to production, livestock is an important sector for over two million heads annually. many Nigerians, notably in the northern part of the country where about one million households keep Figure 1: Net trade of live cattle in West Africa livestock and sizeable numbers are employed in livestock slaughtering, butchering and trading. In Thousands heads 300 Niger 2012, livestock accounted for a larger share of GDP Mali than financial, transport or construction services 100 Burkina Faso (NBS 2013). The Nigerian stock of cattle and Chad annual production of meat and hides have grown in -100 the recent period and represent a sizeable share of Togo total production in the ECOWAS region (Table 1). Benin -300 Moreover, the leather industry, centered in Kano, is Ghana one of Nigeria’s largest sources of non-oil exports. -500 Nigeria Source: FAO Stat 2 This note focuses on trade transaction costs and does not cover other essential issues for the competitiveness of the livestock, meat and leather sectors, such as the efficiency of production, processing and distribution, the regulatory 3 The figures presented give an order of magnitude but should environment, quality and standards, access to credit, etc. On be considered with caution, as they are estimates derived from these issues, see the GEMS project the last cattle census in Nigeria, dating back to 1992. (http://gemsnigeria.com/gems-1) and ILRI (2006) for an 4 analysis of the capital outlay and entry barriers for small See the map established by FEWS Net in Annex 1 for an traders in another West African context. overview of livestock trade patterns in West Africa. 2 The strongly growing demand for meat in West Within Nigeria, cattle trade links Kano (a major Africa in general, and in Nigeria in particular, has cattle distribution and exchange center for also resulted in a rapid increase of meat imports. centuries) and surrounding feeder markets in the According to official trade statistics, this has north6, to consumption areas around Lagos and amounted to a quadrupling of West African imports other regions in the southern part of the country, over the last decade, mostly from Europe, Brazil such as Port Harcourt. Such exchanges, which have and the United States (Figure 2). As mentioned been reported as early as the 1820s, intensified above, Nigeria currently implements a ban on throughout the 20th century in parallel with imports of meat with the objective to protect the livestock imports from Niger and Chad, as demand domestic market, but the strong demand and high increased due to population and income growth in prices have resulted in large smuggling into Nigeria the south (Okediji 1973). With the strong demand, from neighboring countries, especially Benin.5 higher prices in the south made this trade profitable Meat consumption is currently growing at 6-7 despite transport and marketing costs. As trade percent annually in Nigeria and consumption level flows grew, the supply chain became increasingly per capita is still significantly lower than in institutionalized, with a more complex set of neighboring countries (World Bank 2011). This informal arrangements and larger number of actors suggests that there are clear opportunities for more involved in the purchase, regrouping, transport, domestic supply of meat in Nigeria, provided it can marketing and sale of cattle (Box 1). A similar stay competitive compared to products from major pattern is observed for trade in leather, as hides and exporting countries. skins produced and tanned in the Kano region are transported to the south for processing at leather Figure 2: Origin of meat imports in the ECOWAS factories, shipment to foreign markets and local consumption (Chemonics 2002). Additionally, 800 USD millions Other imported chemicals used during the tanning process 600 ECOWAS travel in the opposite direction from Lagos to Kano. 400 United States 200 Brazil 0 European 2002 2004 2006 2008 2010 2012 Union Source: authors' calculations using Comtrade/WITS data (HS Chapter 2) 5 Being the largest African country in terms of population size and GDP, one would expect Nigeria to also be among the largest regional importers of meat. However, because of the import ban, only marginal meat imports are recorded in Comtrade, equivalent to USD 0.03 per capita in 2012. On the other hand, meat exports to Benin are recorded at USD 328 million the same year, which would make this country the 6 largest meat importer per capita in the ECOWAS at around Ungwa Uku is the main cattle market in Kano serving the USD 33. This suggests large unofficial re-exports of meat from corridor to Lagos. Major feeder markets around Kano include the latter to the former. In fact, the only significant intra- Wudil (45km south-east) and, going towards the Nigerian ECOWAS trade in meat recorded in Comtrade in 2009 and border, Dambatta (60km north), Daura (130km north), 2010 (cf. Figure 2) corresponds to exports reported by Benin to Maiadua (150km north) and Maigatari (150km north-east). Nigeria, which are not found in Nigeria’s import statistics for These markets are exchange centers for animals bred within these two years. Nigeria as well as across the border. 3 Box 1: Selected actors involved in cattle trade supply chain Herders: numerous herders, predominantly Fulani people, are breeding livestock in northern Nigeria and across the border in Niger. Part of their cattle is sold every year to traders and their agents at various feeder markets, notably in the Kano region. Cattle traders: traders, traditionally Hausa people, hire agents to source cattle in the north. In most cases they accompany the truck loaded with the cattle they purchased to southern Nigeria, or delegate this to a close relative. The majority of traders are small and Loading cattle, Wudil market medium operators who generally buy less than a truck (source: Hassan et al. 2011) load and hire trucks jointly with other traders. Market leaders: in feeder markets, several positions are The Lagos-Kano Corridor established to coordinate activities and oversee business transactions and transport deals, some of The Lagos-Kano transport corridor, the main which are hereditary. They include general market channel for domestic, regional and international leader (Sarkin Kasuwa), cattle market leader (Sarkin trade in Nigeria, is also the central axis of cattle and Shanu), loaders’ leader (Shugaban Nyan Lodi) and leather trade. It spans approximately 990km and truck park leader (Sarkin Tasha). links the country’s two most populous cities, Dillalis are middlemen who operate in all cattle passing through Kaduna, Ilorin and Ibadan (Figure markets with approval of the Sarkin Shanu to assist 3). The type and condition of the road on the with the purchase and sale of cattle. Thanks to the trust different sections of the corridors varies from dual relationships they build with both buyers and sellers, carriageway (i.e. centrally divided) in fair to good they play an important role to facilitate transactions in a condition with two lanes and an emergency lane in largely informal environment. Dillalis charge cattle each direction (Kano to Kaduna, Ilorin to Lagos), to owners or buyers a commission fee (La’ada) of USD 3 - poorly maintained single carriageway with one lane 5 per animal sold. in each direction and a paved gravel or dirt Yan’kwamishon link cattle traders with available surfacing (Kaduna to Ilorin) (USAID 2013). Severe truckers, consolidate loads and arrange the transport congestion due to traffic accidents or disabled price and time. trucks, as well as flooding from heavy rain, is Loaders are part of the loaders’ association at each frequent along the corridor and can stall cargo for cattle market and charge USD 20-25 to load a truck extended periods of time. Moreover, the number of with cattle. military roadblock and checkpoints increases as Livestock attendants are recruited by cattle traders to vehicles go north. Passing Kano and going towards assist them from purchase point to Lagos and look after the Nigerien border at Jibiya, there can be as many the cattle during the trip. Generally, two attendants are as one roadblock every two kilometers (USAID hired for each fully-loaded truck, each being paid 2013). around USD 77 per trip. Source: Hassan et al. (2011), Adamu et al. (2005) 4 There is also a railway from Lagos to Kano, which Table 2: Weekly volume of cattle truck loads, by was renovated and re-launched in early 2013. Some season livestock is transported south by train, a trip taking Season 30-48 hours on average. Although no detailed data Feeder on volumes is available, it is clear that only a small market Early dry Middle dry Early rainy Middle rainy (Oct-Dec) (Jan-Mar) (Apr-June) (July-Sept) fraction of cattle is currently moved by train. The demand of rail freight services is still underserved Maigatari 80 5 8 60 and there are plans to further upgrade the Maiadua 80 7 10 50 infrastructure and develop traffic (USAID 2013), Daura 50 3 5 45 which could release some of the pressure put on the road network. Dambatta 50 3 4 35 Ungwa 25 3 5 15 Uku Figure 3: The Lagos-Kano Corridor and cattle feeder market Wudil 60 5 20 50 Total 345 26 52 255 Source: Hassan et al. (2011) Transport costs and obstacles to cattle trade A recent study on the Lagos-Kano corridor commissioned by the World Bank, in collaboration with the GEMS1 project in Kano, provides specific information on transport costs and barriers to cattle and leather trade in Nigeria (Hassan et al. 2011). Data was collected through two methods, which gave consistent results: (i) structured interviews with over a hundred actors at different stages of these supply chains7, as well as (ii) direct observation by accompanying eight trucks carrying cattle, leather and tanning chemicals. The main The volume of cattle traded along the corridor results are described below. varies throughout the year, peaking at the end of the rainy season and in the following months  Transport cost and marketing charges: At (September-November). Table 2 gives estimates of time of interviews (mid-2011), the average cost the number of trucks loaded with cattle which reported by cattle traders to transport a truck depart from selected feeder markets every week loaded with cattle from Kano to Lagos was during the different seasons. With an average of 35 around USD 1,470, divided between transport cattle per truckload, these figures suggest that over cost (60%) and other charges (40%)8. The latter 300,000 cattle heads are transported south on the include official and unofficial fees collected by Lagos-Kano corridor every year from these State (9.8%) and local governments (5.3%), markets, not counting all the cattle coming from the charges of livestock attendants (10.2%), dillalis other feeder markets in the north and directly from 7 neighboring countries to the north and east. See Annex 2 for a summary of interviews conducted. 8 The collected figures in Naira are converted in dollars are the rate of USD1 = ₦ 156 (rate as of June 2011). 5 (8.7%), loaders/off-loaders (2.3%), market traffic on the corridor (cf. below) and costs at leaders (0.4%), as well as payments to the port (estimated at around USD 2,100 per hoodlums/“area boys� (2.7%). Direct data trip). Overall, importing chemicals is estimated collection during trips on the corridor resulted to cost around USD 4,300 per trip, slightly over in similar figures (Table 3). Assuming a fully 10 percent of the value of the goods. Smaller loaded truck, the total cost amounts to USD 42 leather operators, which cannot afford the same per head of cattle on average, which represents transport costs as large companies, reportedly 6 percent of the average selling price of a cattle resort to shipping small orders to clients located in Lagos and 45 percent of the price gap in the south through passenger buses. between northern and southern Nigeria9. Interviews with large export-oriented tanneries in Kano suggest that the cost to export leather products through Lagos are higher than for cattle at around USD 1,700 per trip on average, with lower road transport cost and fewer charges en route, but high costs at the port (42% land transport costs, 57% port costs and 1% other charges en route). The same operators indicated that the cost to import tanning chemicals in containers is much higher, due to the expensiveness of transport for northbound Table 3: Summary of charges on observed trips with cattle Paid by Share of Paid by Service provided trader (USD) trader's costs transporter (USD) Local government revenue 84 5.9% Use of truck loading area collection Coordinate transactions and Market leaders 4 0.3% conflict mediation Middlemen 39 9.7% Intermediary in buying/selling Loaders/ Load/off-load cattle onto/from 20 1.4% Off-loaders truck Livestock attendants 146 10.2% Look after cattle during trip Transport cost 859 60.1% Transport of cattle Abattoir market 40 Use of offloading area Sub-total services 1,253 88% 40 State government revenue 136 9.5% - collection Hoodlums 42 2.9% 22 - Police and other security forces 40 - Other agencies (NDLEA, FRSC, 12 - Customs, etc.) Sub-total non-services 177 12% 74 Total 1,430 100% 114 9 The average amounts determined for the study were ₦ 100,000 (purchase in Kano) and ₦ 115,000 (sale in Lagos). 6 much lower in the case of cattle/leather trade Transport costs for cattle and leather on the from the north to the south (USD 870) than for Lagos-Kano corridor do not seem prohibitively tanning chemicals from the south to the north high even if, as argued below, ways could be (USD 2,100). This is largely because the found to reduce them. In particular, recent primary route on the corridor is for goods estimates suggest that trucking costs around 4.5 which are produced or imported in the south US cents per ton-kilometer from Kano to and transported to the north. The much lower Lagos, and 9 US cents from Lagos to Kano volume of goods traveling in the opposite (USAID 2013). Although comparisons are direction means that numerous trucks return to always delicate, this is in the former case Lagos empty and that transport is discounted. similar to levels reached in Europe, China or the United States (Teravaninthorn and  Transport time: Under normal circumstances, Raballand 2009) and in the latter case in line trucks conveying cattle usually take less than with the regional average generally considered 24 hours to reach Lagos, including driving for West Africa10. However, these seemingly time, rest stops and delays at barriers (cf. low rates hide poor operational performances in below). Trucks loaded with leather and the trucking sector, characterized notably by chemical trucks are slower, sometimes the common use of dilapidated trucks prone to exceeding 48 hours, partly because the duration breakdown, lack of driving training, disregard of the trip is less sensitive than for cattle for for safety or hygiene standards, absence of which traders accompanying the trucks are cargo insurance and frequent overloading, likely to push for fewer and shorter rest stops. which contributes to the degradation of the road In all cases, these times are arguably long for a infrastructure. Moreover, it is not sure that domestic corridor of less than 1,000 km and for trading livestock in Nigeria compares favorably which driving time at an average of 70km per with other parts of West Africa once all costs hour should not take more than 14 hours. As related to transport, handling and extortion are explained below, a significant share of the considered: an older study estimated the extra-time is caused by delays due to average transport and handling costs for a successive barriers en route. truckload of cattle from the Sahel to the coast at around USD 870, divided between trucking  Delays and charges at barriers: Cattle traders price (44 percent), escort fees (17 percent), and truckers report an average of 20 roadblocks handling (16 percent), market charges (8 by various institutions (police, army, other percent), illegal road taxation (10 percent) and security forces and vigilante groups, customs, trader’s travel expenses (5 percent) (ILRI veterinary services, National Drug Law 2006)11. Enforcement Agency, Federal Road Safety Commission, etc.) and hoodlums on the  Freight flow imbalances: The average price corridor. On trips transporting cattle from the charged by trucking companies for transport is north to Lagos, consultants for the study observed an average of 23 roadblocks, a large 10 Transport price from Kano to Lagos on a per ton-kilometer majority of which were manned by the police, basis may be higher in the case of cattle, since truckloads army or other security forces12. For a 990km weight less than general cargo and overloading is difficult. With an average weight of 250 kg per head of cattle and a distance of 990 km, the average transport price of USD 859 per truckload of 35 animals amounts to around USD 9.9 cents/tkm, 12 See Annex 4 for a summary table of roadblocks and the which is fairly high even on regional standards. related costs/delays faced during the five trips with cattle from 11 Exchange rate used: USD 1 – CFA 550 Kano to Lagos observed by Hassan et al. (2011). 7 corridor, this represents 2.3 barriers per 100 km Figure 4: Number of roadblocks per 100 km and placed Nigeria among the countries in (2011) West Africa with the most roadblocks along 0 0.5 1 1.5 2 2.5 transport corridors at the time data was Mali collected (mid-2011) (Figure 4Figure 1). While Nigeria Ghana some West African countries have since then Senegal actively tried to reduce the number of Burkina Faso Cote d'Ivoire roadblocks, it is not clear that the same has Togo happened in Nigeria.13 Trucks loaded with Source: Author's calculations based on UEMOA/Borderless cattle are particularly likely to be stopped at (2011) and Hassan et al. (2011) every roadblock, as livestock is more vulnerable to delays and traders are more willing to pay the sum demanded to avoid Table 4: Summary of delays at barriers on wasting time14. Some checkpoints, such as observed trips with cattle intrastate veterinary control posts, are Delays Share of trip frequently used for revenue extraction rather duration16 Police and other security than for their intended purpose15. With an 3h 56 mn 16% forces average of 12 minutes spent at each barrier State government revenue 42 mn 3% reported by cattle traders and truckers during collection interviews (which can be much longer if traders Hoodlums 31 mn 2% refuse to pay or negotiate the amount), the total Other agencies (NDLEA, 26 mn 2% FRSC, Customs, etc.) delay per trip is almost 4 hours. At over 5 hours Total 5h 35mn 23% and a half, delays at barriers were even longer during the trips directly observed for this study, Source: Hassan et al. (2011) adding up to almost a quarter of the average  Regulatory charges for truckers: truck owners trip duration (Table 4). Truckers generally pay and drivers complain about the various licenses the mostly illegal charges demanded by public and charges that must be paid every year (often institutions at the different barriers, which without the issuance of a receipt) to operate. represented on average USD 52 for the trips Based on interviews, the estimated annual cost observed. They also pay part of the sum of these permits and licenses is around USD extorted by hoodlums (USD 22), the rest being 360 per truck (Annex 3). More than their paid by traders (USD 42). amount, the issue is that several of these licenses are imposed in successive States/Local Government Areas (LGAs) crossed on the corridor, are not mutually recognized between administrative authorities and must be renewed annually in each locality. Failure to do so 13 During interviews conducted for another study in 2013, a results in more extortion and harassment at sample of 30 truckers reported an even higher average of 44 roadblocks. Although it is unclear whether checkpoints between Lagos and Kano (USAID 2013). 14 transporters systematically obtain these licenses In this regard, this issue would be magnified if the refrigerated transport to the South of meat from livestock or prefer to make facilitation payments to pass, slaughtered in the North was developed in Nigeria, as refrigerated meat is more perishable than live animals. 15 16 www.vanguardngr.com/2010/09/%E2%80%98veterinary- Based on a 24-hour trip duration for a truck loaded with control-posts-not-for-revenue-collection%E2%80%99 cattle from Kano to Lagos. 8 the time and procedures required to get all the institutions. It is also not clear whether the quite documents theoretically required in every large charges perceived by Local Governments for State/LGA along the corridor appears to be the provision of basic amenities and security at the very high. markets are always proportionate with the services rendered and investments made. Moreover, several  Lack of security: anecdotal evidence suggests charges paid by truckers at the numerous barriers that transporting cattle along the corridor can on the corridor are factored in the transport price be a dangerous activity for traders, who usually charged to traders, amounting to 9 percent of this accompany their cattle to Lagos, and for truck price on the trips directly observed for this study. drivers. Besides the regular threats and Transport prices could therefore be lower in the intimidation at barriers, interviewees reported absence of illicit charges, assuming that savings are cases of traders or truckers being beaten or fully passed to traders (which could be the case in a even killed by thugs after having refused to pay context of scarcity of loads to transport from north the sums they demanded. There are also to south). Overall, transport and related costs could frequent reports of robbers stealing traders, be reduced by 18 percent in the absence of undue who generally carry large amounts of cash payments. On the basis of USD 42 per animal and during their trip back to the north, sometimes around 300,000 heads transported from the markets with the complicity of officials at roadblocks. listed above to Lagos every year, removing these According to Adamu et al (2005), insurance unjustified costs would represent a USD 2.3 million against such risks is virtually inexistent in cattle saving for cattle trade alone. trade, partly due to lack of trust in the functioning of the insurance system in Nigeria, although support can be provided to affected traders by fellow traders or dillalis. In other cases, traders had to leave their cargo and hide for several hours in order to avoid being attacked. In recent years, the increased violence and instability related to the rise of Boko Haram has added another dimension to the insecurity affecting trade, and more generally economic activity, in northern and northeastern Nigeria. Transport of cattle from Kano to Lagos is a high Trucks loaded with cattle en route, Mokwa (source: Hassan et al. 2011) volume and relatively well-organized activity, but it nonetheless faces serious obstacles which Finally, the hours of delays caused by barriers can significantly increase time, cost and riskiness. As also significantly impact the profitability of this was observed during the study, a significant part of trade, especially as they increase the risk of cattle the charges paid by traders to transport cattle from heads dying or being weakened during the trip (out northern to southern Nigeria, around 12%, is not of the 24 traders interviewed, 5 reported having lost associated with any discernible service (Table 3). animals due to delays at barriers in the recent This notably includes the charges paid for each period). A basic analysis of profitability based on head of cattle to authorities in the States crossed average purchase/selling prices for cattle and during transit and the sums paid at illegal observed transport costs suggests that the traders’ roadblocks manned by security forces and other 9 profit per trip for a fully loaded truck is around Jibiya corridor found that transporting a 20-ft USD 1,750, to be shared among traders in the case container by road costs USD 837 from Kano to of a jointly hired trucks (Table 5). These Lagos and USD 1,548 from Lagos to Kano (USAID calculations suggest that losing one head of cattle 2013).18 “Extra costs� were evaluated at 21 and 35 can result in a 40% reduction of traders’ profit percent of total transport costs from Kano to Lagos margin17. On the contrary, removing the charges and Lagos to Kano respectively, mostly due to paid by traders and transporters highlighted in inefficiencies/high prices in the trucking sector and, which do not correspond to services rendered could to a lesser extent, to unofficial payments. Average increase profits per trip by 14 percent, from USD reported transport time was around four days 1,751 to USD 2,003. As noted above, shorter delays which, given the less than 1,000 km distance, due to fewer barriers en route would also contribute suggests that a large share is caused by delays and to reducing the risk for traders. inefficiencies. Taking into account costs and delays incurred at the port, the study concluded that the Table 5: Profitability of a cattle trip from Kano Lagos-Kano corridor compares unfavorably with to Lagos the Tema-Ouagadougou corridor linking Ghana and If no barriers Burkina Faso, with 25 percent higher costs and 150 (in USD) Observed and undue percent longer delays for exports. This confirms charges that domestic trade costs can represent at least as Expenses high an obstacle as border crossings, and need to be Purchase price per head 606 606 given adequate policy attention. Total investment (35 21,210 21,210 heads) (A) Transport cost for the Lifting domestic obstacles to trade to boost 859 785 trader (B) competitiveness in Nigeria Other charges paid by the 571 394 trader (C) Revenue Overall, the bad condition of roads on some Selling price in Lagos per segments of the corridor, low quality of transport 697 697 head services, high number of roadblocks and level of Total selling price (D) 24,394 24,394 unofficial payments all contribute to increased Profit (D-A-B-C) 1,751(100%) 2,003 (100%) costs, delays and risks for traders within Nigeria. Profit if 1 loss 1,055 (60%) 1,306 (65%) Profit if 2 losses 358 (20%) 609 (30%) As illustrated by the case of cattle, domestic obstacles to trade can have a significant effect on Source: authors’ calculations based on data from Hassan et al. (2011) transport costs and on the profitability of trade within Nigeria. Beyond cattle, these obstacles negatively impact the capacity of products from The obstacles and trade costs faced in domestic regions distant from the coast to be brought to the cattle trade between Kano and Lagos also markets profitably. In fact, transaction costs along undermine Nigeria’s international trade. A study on road corridors affect the competitiveness of transport costs and time along the Lagos-Kano- domestic products vis-à-vis imports, which arrive directly in the southern markets by sea. Everything 17 This calculation is only a rough estimate, as it is likely to else being equal, it can be argued that high omit certain costs for traders, may not perfectly reflect domestic trade and transport transaction costs prevailing market conditions and does not take into account seasonal variations in prices. However, it gives an idea of the 18 order of magnitude of the sensitivity of cattle trade to the Data for this report was collected in 2013, and an exchange additional cost and time caused by barriers faced on the rate of USD 1 = NGN 157 is used, almost identical to the one corridor. used here. 10 reinforce incentives for economic activity to meat in consumption areas, increasing the concentrate around Lagos, as investors locate close competitiveness of domestic versus imported meat to markets to avoid additional costs and delays. in coastal areas more efficiently than the circumvented import ban. In the case of leather, Enhancing the competitiveness of Nigerian reducing domestic obstacles to trade and port industries features high on the priority list of inefficiencies would lower the cost of imported policymakers in the country. Protection from inputs and strengthen Nigeria’s export external competition has so far been seen as a competitiveness on regional and global markets. solution in some sectors, such as meat, but has had counterproductive effects, including inflating Given the analysis above, relatively easily domestic prices for consumers and disincentivising achievable interventions to reduce domestic trade modernization of the industry. As argued above, transaction costs in the short run could include: import bans are frequently circumvented and do not  Roadblocks: Barriers are still prevalent on the constitute an efficient or durable way to promote corridor, most of which are manned by security domestic competitiveness19. Strengthening the forces or other public agencies but unofficial. competitiveness of the Nigerian industries, such as While a certain number of controls can be meat and leather, will require action in several justified by current security concerns, measures areas, some of which are outside the scope of this must be taken at the federal, State and local note (e.g. modernize production techniques to levels to ensure that official or unofficial increase productivity and quality, improve hygiene, roadblocks are not used for rent extortion. The reorganize the value chain, develop access to experience in other countries in West Africa, finance). As discussed above however, one way to including for instance Benin, has shown that improve the profitability of trade in cattle and decisive progress on this front can be achieved leather between northern and southern Nigeria and with strong political commitment, and Nigeria enhance the competitiveness of domestic meat is to could seek to emulate this experience. In order reduce domestic trade transaction costs.20 This to raise awareness, delays and illicit payments could contribute to increase the volumes of cattle caused by roadblocks between Kano and Lagos trade and boost the income and jobs it generates for could also be monitored, as done for several the millions of households involved in the livestock years in neighboring ECOWAS countries and and meat sector. It could also lower the price of along the Abidjan-Lagos corridor21; 19  Insecurity: The risk of extortion, loss of cargo Moreover, the ECOWAS common external tariff (CET), which was adopted by Member States in October 2013 and will and physical harm for traders and truckers enter into force on January 1st, 2015, will require that caused by the presence of hoodlums between instruments such as bans and special levies be eventually dismantled and replaced by tariffs (35% for beef meat under Kano and Lagos is considerable, especially for the CET’s “fifth band�). a high value and vulnerable product like 20 A detailed study carried out by ILRI found that “the livestock. Despite their excessive presence livestock production system in the Sahelian countries, which is based mostly on pastoral systems, makes it possible for beef to along the corridor, it appears that security be produced at a globally competitive price […] However, in forces have so far not ensured sufficient addition to the negative effect of subsidies on non-African chilled meat landing along the coast, the above competitive 21 edge of Sahelian beef in coastal markets is considerably eroded See: www.borderlesswa.com. See also the Trade Route by the costs of transportation and handling. […] These Incident Mapping System (TRIMS) crow-sourcing initiative transportation and handling costs amount to 122,133 FCFA supported by GIZ in the context of the SEDIN program, which (US$ 222) for transferring the equivalent of a tonne of beef will be piloted in Ogun State in end-2014 and aims at enabling from the Sahel to the coast and are 250 percent higher than the the reporting via SMS, recording and mapping of roadblocks’ US$ 80 required to ship the equivalent from Europe to West location, agency involved and associated costs, delays and Africa.� (ILRI 2006). harassments (www.sedin-nigeria.net). 11 protection of traders and should strive to reduce maintenance and enforcing axle load limits insecurity; would help reduce the pace of degradation. Further development of the railway could also  Regulatory requirements and charges: contribute to relieve the pressure put on the Licensing requirements and regulatory charges road network, including for livestock; for transporters should be reviewed to ensure they do not represent an excessive burden due  Transport services: Adequate regulations to non-harmonization across States. regarding the licensing and qualifications of Interviewed truck owners have argued that road transport operators should be enforced, these should be recognized across States and and training should be developed for both Local Government Areas in order to avoid transporters and public officials in regulatory multiple taxation, and that the least relevant and control agencies. Better compliance with charges should be eliminated. Official taxes standards for vehicles roadworthiness, axle load perceived by local and State institutions at the and road safety would improve the quality of markets and en route should also be reviewed transport services and reduce the opportunities to ensure they actually correspond to services for controls and extortion. Policy measures are or investments benefiting economic operators. also needed to address other constraints faced The case of the livestock sector suggests this is by transporters, such as access to finance and currently not always the case. Efforts should be schemes for the renewal of truck fleets. made to eliminate unofficial payments and ensure that no unreceipted payments are asked Finally, domestic efforts aimed at reducing trade or given. transaction costs should take into account and leverage regional initiatives to facilitate trade,  Corridor management: Generally, international particularly at the ECOWAS level. In the case of best practices to improve the performances of livestock, this notably includes the activity trade and transport corridors in terms of “Promoting Regional Trade in Meat and Livestock- infrastructure, services and institutions should Related Products in ECOWAS� carried out under be followed. In this regard, Nigeria can benefit the West Africa Agriculture Productivity Program from the experience of other countries in Africa (WAAPP) by the World Bank, the ECOWAS and elsewhere which have established Commission and the regional agricultural successful corridors. In this regard, recent institution CORAF/WECARD. This project will information on the management of trade promote the modernization and harmonization of corridors can notably be found in World Bank livestock trade policies at the national and regional (2014) and SSATP (2013). levels through practical policy recommendations, action plans, awareness campaigns and capacity In the longer run, more structural constraints should building to address key constraints in the meat and be addressed, particularly regarding the quality of livestock value chain22. infrastructure and the efficiency of transport services:  Infrastructure: As argued above, several segments of the Kano-Lagos road corridor are in dire need of rehabilitation, and transport would be facilitated by upgrading the 22 The targeted countries are Burkina Faso, Cote d'Ivoire, infrastructure (e.g. dual carriageway, Ghana, Mali, Niger, and Nigeria (extended to Cameroon, Chad emergency lane). Moreover, ensuring adequate and Central African Republic in the CEMAC region), and the project is expected to be completed by end-2014. 12 REFERENCES Adamu, Fatima, Michael Filani and A.B. Mamman. 2005. Market and Transport Institutions in Nigeria’s Livestock Trade: Case Studies from Sokoto and Ibadan, Chapter 3 in Investigations on Building a Food Marketing Policy Evidence Base in Nigeria. Available online at: http://www.dur.ac.uk/nigerian.marketing. Blench, Roger. 1995. A History of Domestic Animals in Northeastern Nigeria. Cahiers des Sciences Humaines, 31(1): 181-230. Paris: Orstom. Chemonics. 2002. Subsector Assessment of the Nigerian Hides and Skins Industry. Report prepared for the USAID. Available online at: http://pdf.usaid.gov/pdf_docs/pnacy673.pdf. GEMS. 2012. Midi-Brief: Transforming the Nigerian Red Meat Industry. Available online at: http://gemsnigeria.com/gems-1 GEMS. 2011. GEMS Inception Report – Annex 2: The Meat Sector. Hassan, Umar, Ahmad Makarfi, Umar Bayi and Bala Abubakar. 2011. Assessing Barriers to the Flow of Goods Along the Lagos-Kano Corridor. Unpublished report prepared for the World Bank in collaboration with the GEMS1 project in Kano. NBS. 2013. Gross Domestic Product for Nigeria: 2012 and Estimates for Q1, 2013. Abuja: National Bureau of Statistics. Okediji, Florence. 1973. The Cattle Industry in Northern Nigeria, 1900-1939. Occasional Paper - African Studies Program, Indiana University. Available online at: http://hdl.handle.net/2022/283. SSATP. 2013. Corridor Transport Observatory Guidelines. SSATP Working Paper No. 98. Available online at: http://www.ssatp.org. Teravaninthorn, Supee and Gaël Raballand. 2009. Transport Prices and Costs in Africa – A Review of the International Corridors. Washington, DC: The World Bank. Treichel, Volker, Mombert Hoppe, Olivier Cadot and Julien Gourdon. 2012. Import Bans in Nigeria Increase Poverty. Africa Trade Policy Note No. 28. Washington DC: The World Bank. UEMOA/Borderless. 2011. 17ème rapport de l’Observatoire des Pratiques Anormales – Résultat des Enquêtes du Troisième Trimestre 2011. USAID. 2013. Lagos-Kano-Jibiya (Lakaji) Corridor Performance: Baseline Assessment Report on the Time and Cost to Transport Goods. Available online at: http://www.nigerianextt.org. Williams, Timothy, Ben Spycher and Iheanacho Okike. 2006. Improving livestock marketing and intra- regional trade in West Africa: Determining appropriate economic incentives and policy framework. Nairobi: International Livestock Research Institute. World Bank. 2011. Nigeria – Growth Employment & Markets in States (GEMS), Project Appraisal Document. World Bank. 2014. Trade Corridor Management Toolkit. Washington DC: The World Bank. Annex 1: Map of livestock trade flows in West Africa Source: FEWS Net (www.fews.net/sites/default/files/documents/reports/r1_fullmap_livestock_norm.pdf) Annex 2: Summary of interviews carried out in Hassan et al. (2011) Location Cattle Cattle Truck Truck Commission Cattle Leather Total traders loaders owners drivers agents market operators leaders Maigatari 4 2 4 7 3 1 - 21 Maiadua 7 2 3 8 2 3 - 25 Daura 3 1 2 3 1 2 - 12 Danbatta 2 1 1 6 1 3 - 14 Ungwa 1 1 3 2 1 1 - 9 Uku Kano City - - 8 - - - 13 21 Wudil 4 3 3 5 2 1 - 18 Lagos 3 1 5 - 1 2 12 Total 24 11 24 36 10 12 15 132 Annex 3: Annual permits and licenses for truck drivers Permits State Local Government Area Remark Amount (₦ ) Drivers’ License any - Obtainable once in any state 5,500 Road Transport Employees any - Obtainable once in any state 100 Association Vehicle License any - Obtainable once in any state 5,000 Insurance any - Obtainable once in any state 2,000 National Union of Road Transport Workers any - Obtainable once in any state 2,000 (NURTW) Road Worthiness (clearance any - Obtainable once in any state 1,000 certificate) Oyo, Applicable in Oyo and Ogun National Development Fund - 8,000 Ogun States only (N4,000 each) Haulage Lagos - Applicable in Lagos State only 7,000 Environmental Sanitation MG, WD, TR, MF, FT, BJ, Applicable in the 10 LGAs (N300 - 3,000 Clearance IG,KDN, MK, BG each) MG, WD, TR, MF, FT, BJ, Applicable in the 10 LGAs (N300 Refuse Disposal - 3,000 IG,KDN, MK, BG each) MG, WD, TR, MF, FT, BJ, Applicable in the 10 LGAs (N800 Joint Mobile Sanitation - 8,000 IG,KDN, MK, BG each) MG, WD, TR, MF, FT, BJ, Applicable in the 10 LGAs (N700 Mobile Sanitation - 7,000 IG,KDN, MK, BG each) MG, WD, TR, MF, FT, BJ, Applicable in the 10 LGAs (N300 Vehicle Mobile Outdoor - 3,000 IG,KDN, MK, BG each) Applicable in 2 LGAs (N1,000 Radio/ TV Clearance - IW, SG 2,000 each) Total 56,600 Total (USD) 362 Note: MG (Maigatari); WD (Wudil); TR (Taraumi); BJ (Bebeji); MF (Malumfashi); FT (Funtua); IG (Igabi); SG (Shagamu); KDN (Kaduna North); MK (Makarfi); Ibadan West (IW); Birnin Gwari (BG). Source: field interviews, Hassan et al. (2011) Annex 4: Roadblocks faced during five observed trips with cattle Charges (USD) Delays (minutes) Location of barriers LGA State Actor 1 2 3 4 5 1 2 3 4 5 Number of roadblocks 27 20 22 22 22 1 Kwangila Maiadua Katsina Customs 9.6 13 2 Daura Daura Katsina Police 1.3 10 3 Maigatari Maigatari Jigawa Police 3.1 8 4 Gumel Gumel Jigawa Police 0.6 0.6 5 5 Danbatta Danbatta Kano Police 1.0 5 6 Jido Wudil Kano Police 1.6 1.6 1.9 1.9 8 20 7 Unguwa Uku Tarauni Kano Police, Army 5.8 3.2 2.6 2.6 6.4 15 15 18 10 20 8 Naibawa Tarauni Kano Police, Army 1.3 1.6 1.6 1.9 20 7 10 12 9 Filin Paki Tarauni Kano Police, Army 5.1 4.5 4.5 4.5 3.8 8 20 13 10 14 10 Chiromawa Bebeji Kano Police, Army 2.6 2.9 2.2 2.2 2.9 17 10 16 2 15 11 Konan Dangora Bebeji Kano Police, Army 3.2 2.9 2.6 2.6 2.2 12 12 9 10 6 12 Daka Tsalle Bebeji Kano FRSC 4.2 2.6 2.6 2.6 2.9 4 6 12 10 13 13 Makarfi Makarfi Kaduna Army 1.9 2.6 2.9 2.9 1.6 10 10 21 20 8 14 Zaria Zaria Kaduna NDLEA 5.1 6.4 6.4 6.4 6.4 16 13 14 5 22 15 Mararraba Jos Igabi Kaduna Operation Yaki 1.9 2.6 1.6 1.6 1.9 20 20 8 5 5 16 Airforce Base Igabi Kaduna Police, Army 1.9 3.5 3.5 2.6 5 13 20 11 17 Mando Igabi Kaduna Police, Army 1.9 3.2 3.2 3.2 2.9 15 5 27 15 20 18 Airport Round about Igabi Kaduna Police 1.0 1.6 1.3 1.3 20 20 11 20 19 Buruku Chikun Kaduna Police 1.3 1.0 0.6 15 15 20 Udawa Chikun Kaduna Vigilante 0.6 0.8 1.2 1.2 0.6 20 15 25 23 21 Birnin Gwari Birnin Gwari Kaduna Police 1.3 0.6 0.6 1.0 19 10 25 22 Pandogari Rafi Niger Police 0.6 1.0 1.0 1.0 1.6 18 7 14 2 12 23 Gada Rafi Niger Police, Vigilante 1.6 1.9 1.9 1.6 7 7 10 7 24 Tegina Rafi Niger Police 1.0 1.3 1.0 1.0 10 10 12 10 25 Makera Mokwa Niger Police, Vigilante 1.0 2.2 0.6 1.3 14 13 8 10 26 Mokwa Mokwa Niger Police 2.2 6 27 Bode Saadu Moro Kwara Army, Police 2.2 2.9 1.9 1.9 2.9 20 22 23 20 5 28 Olurun Moro Kwara Police, Vigilante 1.6 2.2 2.2 2.2 1.3 11 14 13 10 13 29 Oyo Entrance Oyo West Oyo NDLEA 6.4 30 Ibadan Ibadan West Oyo Area Boys 22.4 19.9 20.8 20.8 25.6 30 48 13 Total 83.6 68.5 68.1 68.1 80.6 270 240 318 297 275 Source: field interviews, Hassan et al. (2011)