Strengthening Domestic Food Production

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Muhammadu Buhari

Nigeria must adopt structural reforms to preserve its hard-earned foreign exchange, support local manufacturers as well as to achieve its much-desired quest for economic diversification, writes Obinna Chima

“In 1960, Nigeria was the preferred investment destination – preferred to Japan according to US investment advisory – which has always had potential, but which has never been able to realise that potential.
“A country that specialises in exporting what it does not produce and importing that which it produces. One of the world’s largest producer of crude oil, that does not refine its own petroleum products and has to import petroleum products.
“The world’s largest producer of cassava, but does not produce starch or ethanol. A large tomato belt, yet the world’s largest importer of tomato paste.”

A former Central Bank of Nigeria (CBN) Governor and presently the Emir of Kano, Alhaji Muhammadu Sanusi II, made the above remarks at the TEDxYouth platform in Maitama, Abuja, in August 2014.

Regrettably, exactly five years after, Nigeria is still faced with the debate of whether or not to continue with the policy of allocating foreign exchange for food importation.

In fact, a recent comment by President Muhammadu Buhari that he had asked the CBN to henceforth stop the provision of foreign exchange for importation of food items has continued to attract mixed reactions.
Buhari had said if the policy is implemented, it would improve domestic agricultural production and support the country’s quest for food security.

According to the president, foreign reserves will be conserved and utilised strictly for diversification of the economy and not for encouraging more dependence on foreign import bills.
But the president did not, however, specify the items to be banned, indicating a blanket ban on food importation into Nigeria.
The CBN currently has 43 items that are not eligible for foreign exchange at its foreign exchange windows.
Clearly, Nigeria’s heavy import dependence is majorly responsible for the high forex outflow and the perennial weakness suffered by the naira.

The country’s high import dependence explains why the exchange rate is often the bellwether for Nigeria’s economic health, and why there is a swift pass-through of exchange rate movements to inflation.

Beside, a recent report by Agusto & Co., had stressed that Nigeria is currently in, “a dire fiscal strait and the numbers are quite grim,” adding that despite the positive spin about Nigeria’s benign debt to gross domestic product (GDP), currently around 20 per cent, interest payments as a percentage of revenue are over 60 per cent.

“Other fiscal indicators also put Nigeria at the bottom of the rung even among sub-Sahara African peers. Nigeria’s five-year average of capital expenditure as a percentage of nominal GDP is a meagre 2.1 per cent which pales in comparison to Angola (seven per cent) and Kenya (7.6 per cent).

“However, with a projected budget deficit of N3.8 trillion in 2019, capital expenditure as a percentage of nominal GDP could decline further to 1.1 per cent this year.

“The implication of this burgeoning deficit is that in 2019, Nigeria will have to borrow to meet its obligatory spendings – interest payments, transfers and payroll – projected at about N5.4 trillion with a revenue of about N4 trillion.
“This implies a cash crunch for capital expenditure. Thus, with this fiscal backdrop, macro reforms that will improve the revenue position of the government and pare back the deficit by cutting spending are non-negotiable,” the report predicted.
According to Agusto & Co, Buhari in his second term would have to work to raise revenue while also restructuring government spending.

This, they noted would require, “politically unpopular, but inevitable choices.”
It added: “Overall, we believe that Nigeria cannot sidestep reforms without severe consequences that could last an entire generation. History beckons on Buhari to prove the naysayers wrong.”

CBN’s Clarification
To the CBN Governor, Mr. Godwin Emefiele, the president’s comment was not new, as the apex bank had already begun implementation of the policy by withholding forex for the importation of 41 items, most of which are food items since 2016.
But the CBN governor said the president’s comment only strengthened the CBN’s action, adding that the bank would even go beyond the 43 items whose importation had hitherto been restricted.

According to him, the CBN would now be more aggressive in ensuring that importation of those items is restricted, adding that importing items that can be produced locally into the country is unacceptable.

Emefiele expressed disappointed over the allocation of scarce foreign exchange or importation of items that could be produced in Nigeria, just as he accused critics of misrepresenting the comment of the president and described such criticisms as unfair.
He also said the bank would widen its net of restricted items by deliberately ensuring that prospective importers of such items are denied access to foreign exchange.

“Let me say this, Mr. President’s comment on the issuing of forex to people who import food items into the country, is in the logic of CBN management’s foreign exchange policies that we started since 2016.

“If you recall, we started with about 41 items (food and non-food items) because we believe that those items can be produced in the country. As we stand today, there are about 43 items on that list and I will say substantially most of them are food items. We are basically saying if we have a food item that can be produced in the country, why should we waste scarce foreign exchange importing those items into the country when those items can be produced in the country?

“It is important for me to say that the attempt to misrepresent the comments of Mr. President is very unfair and unfortunate. But, what we will say from the CBN is that Mr. President has made this comment purely to strengthen the position of the CBN to say that he believes in what the CBN has been doing since 2016 and there is need for us to reinforce that going forward.
“I will say that to be honest, we would aggressively go more into the list of items that are being imported into the country, items that can be produced in Nigeria. I will like to stress that we would ensure that more of these items will get on the list of items that are going to be restricted from accessing foreign exchange in Nigerian banking industry not just from the CBN source because I have heard some comments that maybe it’s about the CBN’s source.

“It is not the CBN’s source. We are saying you will not be able to access foreign exchange from the Nigerian banking industry because it is important for us to produce these items in Nigeria and we will follow through on them.”
Asked if the policy would not run contrary to African Continental Free Trade Agreement (AfCFTA) recently signed by Buhari, Emefiele said terms of engagement on the agreement had not yet been determined as negotiations were still ongoing.
He said what was important now was for Nigeria to stand out as not only the most populous country in Africa, but also the largest African economy.

Emefiele added that it was untidy to allow the importation of items that can be produced locally into the country, saying doing so will militate against job creation and economic growth.

He explained: “It will not affect the content of the AfCFTA. In any case, the AfCFTA is an agreement that is ongoing. The terms of engagement are still being discussed and negotiated. The important thing is that Nigeria needs to stand as the largest economy in Africa and the largest populated country in Africa.

“We need to stand and dictate the terms under which we want to be in it and this is what we are saying. But what I am saying is that it is wrong, it is inappropriate that an item that can be produced in Nigeria should be imported into Nigeria.

Stakeholders’ Position
However, mixed reactions have trailed the proposed policy.
The Nigerian Association of Small and Medium Enterprises (NASME), applauded the proposed policy, saying it would be favourable to the small businesses.

The Chairman, Lagos State Chapter of NASME, Mr. Solomon Aderoju, noted that the policy would help in strengthening the country’s currency, conserving Nigeria’s foreign earnings and enhancing the already weakened naira. According to him, that is the only way MSMEs could grow. Aderoju added that more jobs would be created if the policy was well implemented.

Also, the Vice President, South-west, NASME, Mr. Oladipo Jemi-Alade, said the government’s pronouncement was a new opportunity for the members of the association and other manufacturers in the country to explore the AfCFTA.

“Now that AfCFTA is open unto us, we have to be prepared for the next level. We want to be in a position to compete favourably with our foreign counterparts. For this reason, we are upgrading our skills and we have embarked on membership training nationwide to build skills and capacity,” he added,

The Chairman, NASME Cooperatives, Mr. Adam Adebayo, said the group had been calling for a ban on imported food.
He added, “We have been exporting primary produce; but now that there is a new development, we are happy because we would be able to add value by processing all our produce through our value chain. With this, the government will now bring back the commodity board, which will be responsible for price control so that the farmers will not record losses.”

Also, Chairperson of the Association for Small Scale Agro Producers in Nigeria (ASSAPIN), Hajiya Amina Bala Jubrin, lauded the move. She, however, said efforts should be geared towards creating a conducive environment for agricultural producers to thrive.
“For me as a farmer, it is a right step in the right direction. It is high time Nigerians started patronising Nigerian products.
“My only take on this is that the federal government should take a giant stride in supporting or creating favourable conditions for producers such as bringing in machinery at a subsidised price for farmers to be able to afford.

“Like in the case of milk, our livestock products should be enhanced to have good breeds of cows: they can promote artificial insemination that would have our local breeds inseminated with the semen of the exotic breed so that if we don’t have at least 75 per cent, at least we can have 50 per cent, which is better than allowing our cows that can give 1 litre or 1.5 litres of milk. We should start getting cows that can give us at least 10 litres per day.

“These are some of the things the federal government can do. It is not necessary that our people have to go out and start bringing in every type of cow into this country and feed us with them. It is high time we produced our own,” she added.
The Nigeria Employers’ Consultative Association (NECA), also supported the move by the CBN.

The Director General of NECA, Mr. Timothy Olawale, said: “We note most especially the ‘Agricultural Promotion Policy’ championed by the federal government through the Federal Ministry of Agriculture and Rural Development since 2016.”
According to Olawale, though the recent thrust towards withdrawal of forex for imported foods is laudable and welcome, the timing calls for concern.

“While in the long run, with consistent support and policy stability, local food production might meet demands and also provide foreign exchange through exports, the reality, however, is that we presently lack the capacity for sufficient food production to meet local demand.”

While calling for clarification and more time before the policy is implemented, the NECA boss said, “a wholesale immediate withdrawal of forex without giving a buffer period for businesses to adjust and source for alternatives will only breathe life to the unresolved monstrous smuggling activities with serious consequences for the economy.

“And with the recently signed AfCFTA, Nigeria will further create a thriving market for other countries and remains a dumping ground for imported goods.

“Also, the argument of conserving foreign exchange through the withdrawal or ban of forex for food importation is not tenable.”
But the Association of Food, Beverage & Tobacco Employers (AFBTE) appealed to the federal government to engage members of the organised private sector (OPS) and stakeholders before implementing the policy.

The President, AFBTE, Chief Patrick Anegbe, said implementing the policy in the short-run would cause distortion in the system.
“The negative economic implications of this move in the short run on the performance of the affected Companies and the overall economy have been widely highlighted by experts, industrialists and managers of the targeted businesses.
“One critical aspect is the impact the sudden ban will have on the overall financial results of the companies affected which will also likely lead to loss of jobs among others.

“The OPS had tried to draw the attention of CBN to the danger in not allowing for a reasonable period of time for those concerned to make adequate preparations to source their imported milk and dairy products locally,” he added.
He stressed the need for clarification on the latest directive regarding whether all food products or some food products were to be affected.

“We appeal to government to engage the OPS and stakeholders in the food industry to discuss the issues involved in this matter more thoroughly before a final position on how to proceed is taken,” he stressed.

Also, Nigerian Association of Chamber of Commerce, Industry, Mine and Agriculture (NACCIMA), Hajia Saratu Aliyu, said the president’s pronouncement was in the right direction and in the economic interest of Nigeria.

The NACCIMA president said efforts by both the federal government and the association to attract young Nigerians to farming business was beginning to yield positive results given the increase in agricultural produce.

When viewed against this backdrop, “it will not be proper for the country to begin to import the same products into the country.
“Only those food items we do not currently produce should be imported,” she added.

She said what the federal government could do now was to provide the environment for the local farmers to enable them to put more efforts, adding that NACCIMA has been making efforts to encourage and sensitise local farmers.

Also, the National President, Rice Farmers Association (RIFAN), Alhaji Aminu Goronyo, said all farmers’ groups lauded the pronouncement, adding that they were committed to ensuring the country achieves food security.

He said: “It is not a new thing at all as the Central Bank of Nigeria (CBN), in the last four years, has not been issuing forex to most of the essential commodities that were being imported into the country.

“For over four years, rice and other commodities, including maize, had not enjoyed any support from the CBN to import them into the country. So, this is not a new thing; nevertheless, it is a welcome idea as Nigeria in no distant time will be self-sufficient in all commodities going by this instruction from the president.

“It is a welcome idea and all the commodities associations in Nigeria welcome the idea and we have tightened our belts to make sure we do not fail the president in this laudable effort he has made to stop taking our money to foreign countries in the name of food items.”

The foregoing obviously shows that the motive behind the proposal by the federal government is to preserve Nigeria’s external reserves and protect local manufacturers. But there is need to ensure that they eliminate any form of uncertainty as they forge ahead with their economic protectionism model. It must ensure that it engage stakeholders in the sector before implementing the policy, so as not to cause any distortion in the system.