President Muhammadu Buhari gave a new directive to the Central Bank of Nigeria (CBN) to stop providing FOREX for food importation. According to the President, the directive was given to improve agricultural production and attain full food security in Nigeria.
The President reportedly said, “The Central Bank of Nigeria should stop providing foreign exchange for importation of food into the country, with the steady improvement in agricultural production, & attainment of full food security.”
Implications of the President’s Statement
Note that rice and other items make up the 43 items earlier placed under FOREX restriction. Hence, the latest announcement is apparently a follow-up to the recent move by the CBN to restrict FOREX for milk importation.
Following this, If all food items are declared ineligible for FOREX during importation, it means that importers will no longer have access to the Investors & Exporters Window (I&E) for foreign currencies required to carry out transactions.
Consequently, the investors will have to source their own FOREX by patronising bureau de change or other sources. This comes at a higher cost and the implication is that consumers will be made to bear the brunt of the extra costs incurred by the investors.
On the flip side, the President also stated that Nigeria has recorded steady improvement in food production and attained full food security. This suggests that the President is of the opinion that Nigeria has attained food self-sufficiency, thereby making food importation unnecessary.
According to Food and Agriculture Organization (FAO), although agriculture remains the largest sector of the Nigerian economy, employing two-thirds of the entire labour force, production hurdles have significantly stifled the performance of the sector.
FAO further revealed that the main factors undermining production of agricultural products include reliance on rainfed agriculture, smallholder land holding, and low productivity due to poor planting material, low fertilizer application, and a weak agricultural extension system, amongst others.
As a result of the several factors inhibiting the growth of the sector, food remains one of the major commodities currently being imported into Nigeria.
As it stands, Nigeria occupies a tripartite position. FAO reported that Nigeria is the continent’s leading consumer of rice; the country is one of the largest producers of rice in Africa and simultaneously one of the largest importers of rice in the world.
Livestock development is an important component of Nigeria’s agriculture sector with abundant social and economic potentials. However, 30% of live animals slaughtered in Nigeria are imported from neighbouring countries.
Food Importation Statistics
A close look into the National Bureau of Statistics (NBS) foreign trade report shows that Nigeria still imports food items that gulp trillions of naira. According to the Bureau, between 2015 and 2018, Nigeria imported food and beverages estimated at N5.46 trillion or $17.8 billion. As at first quarter of 2019 only, Nigeria’s food and beverage importation stood at N389 billion or $1.2 billion.
A further breakdown shows that Nigeria’s food imports are categorised into primary (raw) and processed. In Q1 2019, industries imported N196 billion worth of raw food, while households imported N87 billion.
For processed food, industries imported an estimated N82 billion worth of food items, while household consumption of processed food was put at N110 billion.
This means that a total of N389 billion was spent on both industrial and household food importation in Q1 2019.
According to the NBS, food items largely imported into Nigeria include prepared foodstuffs, vegetables, animals, vegetable fats and oil, other cleavage production and beverages.
Mixed reactions have continued to trail the directive. While much emphasis has been placed on whether the move is an apparent breach of the CBN’s independence or not, some have asserted that the announcement might worsen the economy as Nigeria has neither achieved food security nor sufficiency.
Reacting to the policy, a former Deputy Governor of the CBN, Kingsley Moghalu, reacted that the issue isn’t whether or not CBN should allow access to Forex for food imports. According to him, it is about whether such an economic policy should be imposed by a political authority. Moghalu said, “Our economy will not be saved by Ad Hoc political decisions like this, handed down by the very institutions that should be shielded from the whim and caprice of politicians.
“Nigeria’s entire economy appears to have been sub-contracted to our Central Bank, including industrial and trade policy. In the process, the economy has fared poorly, and the Central Bank has lost its independence. This is sad!”
No doubt, Nigeria’s agricultural sector is full of potential and there is a large room for growth. While the current administration has introduced several policies to help improve food security, not much progress has been recorded and the government should address this.
According to global hunger index (GHI) 2018, Nigeria ranks 103 out of the 119 qualifying countries with a score of 31.1. This means Nigeria suffers from a level of hunger that is very serious.
A closer look at GHI report shows that Nigeria is worse off in hunger index between 2000 and 2018.
Nigeria’s fragile economy still manages to import more Agric. products than export. This means that the current domestic production cannot meet demands.
While FOREX restriction on food importation is laudable, the government needs to carefully work on the gradual implementation of the policy in order not to heap more misery on the economy.