Guest Columnist: Sonni Anyang
Save for a newspaper editorial the recent closure of Dangote’s tomato processing factory in Kano has not attracted much public commentary – as far as I know. But the unfortunate development and the reasons advanced for it merit extended examination, especially in the light of the optimism recently expressed by both President Muhammadu Buhari and CBN Godwin Emefiele, about the prospects of the economy going forward.
According to the Dangote Company, it has had to shut down its tomato processing plant because of unfair competition from Chinese imports that are largely smuggled into the country. With the Nigerian market as their target, Chinese producers are said to have ‘crashed’ the price of the product by up to 50%. Some of them have gone as far as setting up shop in at least one ECOWAS country, the better to access the Nigerian market. Even retail packs are being smuggled into the country. The five per cent import tariff imposed on tomato paste has proven ineffective in discouraging its importation. So has the Central Bank of Nigeria policy of not selling foreign exchange for its importation (tomato paste is one of the 41 products on the CBN list of items that are not to be imported with foreign exchange from its coffers). In the circumstance, of course, Nigerian tomato farmers are not getting prices that can keep them in business and are therefore unable to produce enough to feed the Dangote processing plant.
The successful and widespread processing of locally grown produce like tomato for local consumption is precisely the sort of outcome President Buhari expects from the policies of his government. It is a mantra for the regime that Nigerians must produce what they consume and consume what they produce. In this way, the country can cut down on imports, reduce pressure on its foreign reserves and insulate itself somewhat from the vagaries of the international market for crude oil. The net result would be economic diversification, growth of employment and output as well as meaningful national development.
The government in fact, believes that such an outcome is already being achieved, going by the recent pronouncement of the Minister of Agriculture, Chief Audu Ogbeh. According to Chief Ogbeh, the country is on track to self-sufficiency in a number of food products, including rice. Central Bank Governor, Godwin Emefiele thinks so too. In a recent speech to the Chartered Institute of Bankers, Emefiele credited extant policies with the resumption of growth and the relative stability of the naira that the country has witnessed in recent months.
In particular, the CBN governor said that the policy emphasis on the promotion of local production, exemplified by the restriction on the sale of foreign exchange from official sources for the importation of 41 items, has succeeded in bolstering reserves, which grew by over US$10 billion from US$23 billion in October, 2016 to US$33 billion by October, 2017. According to him, the country’s average monthly import bill has declined from a high of US$5.5 billion to US$2.1 billion in 2016. For the first half of 2017, average monthly import bill stood at US$1.9 billion. He said further that Nigeria now produces many of the items on the famous list of 41 products that it used to import, including toothpicks. He further told the bankers that we are so close to self sufficiency in rice production that Thailand, which used to export 1.2 million tonnes of the stuff to us, is now feeling the unsalutary effect of the 99 per cent decline in the volume of our off-take of its rice. On the back of these positive developments, the CBN boss expressed optimism that if the present policies are maintained, our reserves should hit the US$40 billion mark next year. That would of course, impact positively on the fortunes of the much-battered national currency.
Against the high hopes of the Buhari; government and the rosy picture of an economy on the mend painted by Godwin Emefiele, the collapse of local tomato production (for reasons other than nature-induced crop failure) and the Dangote retreat from local processing of the product, represent a significant setback. Should the unfortunate development be generalised across many products, it might turn out that both the government and the CBN governor counted their chickens before they were well and truly hatched. The situation with tomato may well be a warning that what we are trumpeting as successes in the pursuit of increased local production, diversification and value addition are not sustainable.
It is well known that Nigeria is not yet a producer’s paradise – by a long shot. From agriculture to mining, processing of any sort and manufacturing, if the issue is production; all the usual suspects remain present and fully accounted for: inadequate or non-existent/functioning infrastructure, limited or no access to finance at costs that make competitive sense, limited application of modern science and technology, dependence on importation for equipment and machinery as well as spare parts for same, high costs of operation, dearth of appropriate skills, unequal foreign competition (legal and illegal), incoherent and unpredictable regulatory/policy environments, pre-modern socio-cultural attitudes and practices, wide prevalence of rent-seeking activities, etc. Although casual observation marks out Nigeria as a country that should be an economic powerhouse given its resource endowments, size and a large, mostly young and dynamic population, the sober reality is that ours is neither a very competitive economy nor a particularly productive one.
Since this essay is hinged on the fortunes of an agricultural product, international comparisons of yields in selected farm produce can serve to illustrate the point here. In tomato production, for instance, average yield per hectare in Nigeria is 5/7 tonnes against 50/80 tonnes in the US, Italy and China. Should we be surprised that Chinese producers can ‘crash’ the price of tomato paste by over 50 per cent, as complained by the operators of Dangote’s processing plant? With yields in China at many multiples of what Nigerian farmers can produce, the real surprise is that the Chinese ‘crashed’ the price of only 50 per cent! Nigeria is further rendered uncompetitive by the likelihood that Dangote’s plant was imported stock, lock and barrel. Chinese tomato processors on the other hand, likely bought their equipment from Chinese manufacturers and therefore have few or none of the issues with maintenance and replacement parts that Dangote might have to deal with.
For rice, a product that Nigerians have become inordinately fond of, average yield in the country is three tonnes per hectare. The international benchmark is six tonnes. But, the one that shows us up as laggards extraordinaire is cassava yields. In total volume produced, Nigeria is the world’s number one. And we eat it the most. In fact, cassava, along with its derivatives, is a staple of the Nigerian diet. In production though, average yield for cassava in our country is 10 tonnes per hectare whereas in Thailand, where the people don’t eat the stuff directly, it is upwards of 22 tonnes per hectare! Elsewhere, yields of 50/60 tonnes per hectare have also been demonstrated.
As if low productivity is not enough of a disadvantage, Nigerian tomato producers (as well as producers of virtually everything else), must contend with unequal competition from overseas producers who often benefit from open and hidden help from their governments. I refer here to direct and indirect subsidies that foreign producers who export to Nigeria receive but which are not available to our own producers.
Take power for example: farmers and manufacturers in many of the countries that export to Nigeria benefit from relatively cheap power supplied by state-owned entities at less-than-market prices. The point being made here is not quite the same as the usual complaint about non-availability or inadequacy of power (and utilities generally) in Nigeria. The point is that elsewhere, power is not only available but because it is supplied by the state, users in such countries are unlikely to be paying market prices for it. The story is the same with availability and costs of funds. State-owned banks and finance houses extend credit and guarantees that are cheaper and easier to access than what the CBN and the Bank of Industry have been able to offer with their schemes and programmes. In some countries, unwritten policies ensure that as long as misappropriation for private gain is not involved, no delinquent borrower from state-owned finance houses that is in production, employing workers and exporting its products to earn foreign exchange can be foreclosed upon or shutdown. Instead, when such borrowers run into trouble, they get more help to stay afloat!
Even the limited protection that the present international trading arrangements (WTO and ECOWAS rules are in reference here) offer is denied to Nigerian producers because of smuggling. Like other manifestations of corruption, smuggling in Nigeria is an industrial-scale activity. In most places in the world, smuggling largely involves the surreptitious conveyance through customs, of limited items of contraband; perhaps a few packs of cigarettes or the occasional bottle of drink hidden in-between clothes in a suitcase. In Nigeria though, thousands of containers and whole shiploads of contraband are ‘smuggled’ into the country and sold openly; advertised in the media even. Powerful interests regularly secure duty exemptions and waivers or pay minimal duties for imports of items that complete with locally-produced ones. The furore that erupted when the CBN restricted access to foreign exchange from official sources for the importation of 41 items that it felt could, and should, be produced locally showed clearly that powerful interest groups are dead set against the expansion and diversification of local production. These interests even succeeded in mobilising the media to support their campaign against the measure.
It is not a little curious that in the same breadth that he was claiming success for a policy package that restricted imports, CBN governor Emefiele was promising for 2018, an improved (presumably higher) naira exchange rate on the back of higher reserves. Given the handicaps that they already face, can Nigerian producers survive and thrive under a naira that is substantially stronger than what it is at the moment? Has the CBN thought through the implications for local production of a stronger naira? If our reserves are tending northwards, shouldn’t our focus be on how to use them to sustain expanded local production and diversification instead of encouraging importation?
There are strong indications that what is being celebrated today is, to a large extent, the result of fortuitous developments for which we should not be in a hurry to claim too much credit, for either effort or policy. President Buhari, as usual, has been quite honest about the reported increase in food production. On some of the occasions he has spoken about it, he acknowledges the contribution of nature in the form of abundant rains. Going forward, and in the interest of sustainability, our agriculture should not depend on nature to that extent. No country that has raised its agriculture game depends to a critical extent, on rainfall and nature generally. Modern agriculture that generates the type of yields that put ours to shame is driven by the widespread application of science and technology. It is also bolstered by subsidies at every level and price support schemes. Even the Western nations who worship at the altar of neoliberalism do not believe that the gospel of markets and limited government should be extended to agriculture.
The president is also right about corruption. If that monster is not effectively decapicitated, industrial-scale smuggling will not be curtailed and local production will not, thrive for long. The closure of Dangote’s tomato processing plant was a pointer to what can happen in this connection. And if, because of buoyant foreign reserves, Nigeria returns to the era of “cheap” dollars, as many are yearning for, we should add rice, toothpicks, vegetable oil, margarine, etc. to the list of items, the local production of which is likely to go the way of tomato paste.
On the foreign reserves front, the heavy lifting seems to have been accomplished by higher earnings from crude oil. More of the stuff is being produced and sold at higher prices these days than in late 2015/early 2016. Which, is not to belittle the effects of import restriction/reduction. As we cannot absolutely guarantee that our luck will hold out with crude oil sales, more import restriction/reduction should be the focus of effective (as opposed to nominal) policy.
Even if the successes about which the government and the CBN are so pleased were to be attributable generally to effort and policy, in the area of import restriction/reduction at least, the lesson we ought to learn contradicts the neo-liberal worldview that lies behind the overall thrust of current policy. At the height of the recession and foreign exchange crisis from which the country is said to be emerging, the clamour was for more deregulation and market-determined ‘reforms’. Mr. Emefiele stubbornly refused to yield. Should this not urge pause on the country in the unconditional surrender of policy and national development to so-called market forces?
Our relative and absolute backwardness in production (as typified by agricultural production in general and tomato production in particular) suggests that we have a very long way to go before we arrive at a diversified and competitively productive economy. And to get there, we have a lot of work to do; the sort of work that requires literally rolling up our sleeves and getting our hands dirty, in short, the sort of work we are yet to do.
• Anyang, who has been variously a journalist, banker and Commissioner for Economic Development in Akwa Ibom State, writes Port Harcourt