A letter from the Poultry Farmers Association of Nigeria is touted as the trigger for the recent decision by the Central Bank of Nigeria to approve emergency importation of 262,000 tons of maize into Nigeria.
Nairametrics confirmed this, after sighting the letter signed by the President of Poultry Farmers Association, Onallo S. Akpa, dated July 3rd, 2020. In the letter, the association called on President Buhari to allow for guided importation of maize, in order not to shut down the poultry business in Nigeria, since poultry farmers rely heavily on maize to feed their chickens.
The laundry list of what they asked for include:
- The FG should instruct the Federal Ministry of Agriculture & Rural Development, to release 300,000Mt of maize and 10,000Mt of soyabeans to the association, at subsidized rates, in order to keep the poultry industry going.
- A guided importation of maize in order not to shut down the entire poultry industry in Nigeria. They specifically requested for a Feed Grade Maize of 2,100Mt and soyabeans meal of 10,000Mt.
- Poultry farmers will be the ones to import the maize and soyabean meal themselves, which they will make available to their members.
- That the importation will serve their needs for 5 months.
- That the FG should make available $70 million in forex at the prevailing exchange rate, for the importation of Feed Grade Maize and soyabeans.
- Import duty and VAT exemptions to sustain the poultry production business, and stabilize protein supply for the country.
- Halt the export of ‘critical commodities’ to neighboring countries, in order to ensure food security for Nigerians.
The motive for CBN’s import Ban
The Central Bank, in July, adding to its 41 items ban list, announced a ban on forex for maize importation into the country, so local farmers could compete. It is unclear if the CBN was privy to this letter when the circular was issued on July 13th, 2020.
However, soon after the ban was announced, criticisms poured in against the CBN directive.
The CBN has also heavily invested in agriculture, through several intervention funds directed at farmers. A source at the CBN informed Nairametrics that the quantum of investments in the sector was a major factor in deciding on the import ban.
The apex bank has resorted to restriction of access to forex as a monetary policy tool, to dissuade importation of items that compete directly with locally produced substitutes, backed by intervention programs.
Since last year, the Federal Government has closed the country’s borders to the importation of goods, piling pressure on Nigeria’s trade, and jacking up inflation. Nigeria’s food inflation has risen to 15.48% as of July 2020, on the back of several policy measures of the government.
Poultry Farmers Association is the trigger
The letter from the poultry farmers, who are also benefiting from a ban on the importation of frozen chicken, demonstrates how difficult it is to stir local production through government actions such as import substitution, bans on forex access, and increase in import duty.
It also highlights the challenges of policymaking, particularly by the CBN, who is often blindsided by several other fiscal policies working at cross purposes. The letter from the Poultry farmers is a classic example.
When the ban on importation of maize was first announced, policy analysts pointed to the likely effect it could have on poultry farmers. In a report, the Academic Director, Agribusiness, Lagos Business School, Dr. Ikechukwu Kelikume, explained that the policy could further compound the woes of poultry farmers, given that maize, which constitutes over 50% of poultry feed content, is currently very scarce, and where available, very expensive, with an ever-increasing price.
On the consequences of the CBN directive, “The situation spells doom for poultry farmers across the country, who are beginning to cut down on production, because of the high cost of feed and imported medication for the birds. A negative spillover effect of the high cost of feed is egg scarcity, and a consequent rise in its price across the country. The implications of the current challenges in the maize value chain are that, the gains of employing more people in the agricultural sector will be rolled back in the coming months.” said Kelikume.
Mr. Kalu Aja, CEO, AfriSwiss Capital Assets Management Limited, speaking to Nairametrics says it’s simple “supply fell,” citing that it is basic Economics 101, “if you ban a product supply where demand remains same, the price will increase.”
He added that banning the import of maize will affect the poultry industry, as other feeds go up, especially chicken feed, since maize is an important component for poultry, and with the chicken feed going up, the cost may have to be passed to the consumer.
As the controversy raged on, pressure piled on the government to assuage their request, culminating in the President deciding early in September, to release 30,000 tons of maize from the Federal Reserves to animal feed producers, in order to deal with the high cost of poultry production after the ban on maize imports.
The next day, the Nigeria Customs Service confirmed that four companies were given CBN emergency approval, to import 262,000 tons of maize into Nigeria. The companies are Wacot Limited, Chi farms Limited, Crown Flour Mills Limited, and Premier Feeds Company Limited.
A reliable source at the CBN also informed Nairametrics that the decision to select these four companies was because they were already implementing backward integration operations, and they are the largest importers of Maize in the country. They also will not be utilizing the nation’s forex reserve, as they will rely on their own forex exchange sources to process Form M required to facilitate the imports.
Despite the lifting of the ban for the importation of maize, the government is still insisting on its forex for food ban, maintaining that the policy was aimed at protecting local production.
Bottom Line: Nigerians will at some point have to choose between accepting foreign imports, and its attendant negative consequences, which include, killing of farming jobs, mothballing of factories, and risk of food security due to its heavy reliance on imports. The other option is to protect local production and forex reserves while facing the short to medium term pain of higher food prices.
Nigeria’s long road to metering: Who bears the brunt?
While consumers remain unmetered due to the inefficiencies of the Discos, the Discos continue to charge outrageous estimated bills.
One of the many challenges facing Nigeria’s electric power sector is the issue of metering. From being a pre-privatisation problem, lack of metering has evolved to be a more sophisticated post-privatisation feature skirting the corridors of the Nigerian power sector for the last few years.
Statistics show that the number of unmetered customers across Nigeria has continued to rise. In 2016, a metering status report from the Nigerian Electricity Regulatory Commission (NERC) showed that about 3 million of the registered accounts of customers were unmetered. In 2017, this number grew as NERC reported that over 4 million unmetered customers. In 2019, a NERC report showed that over 5 million Nigerians were unmetered and this number has continued to rise.
In a bid to address the metering gap, in 2013 at the onset of the privatised electricity sector, the Credit Advance Programme for Metering Implementation (CAPMI) scheme was launched. The purpose of the scheme was to relieve the Distribution Companies (Discos) of the burden of financing the cost of the meters. As such it enabled the customer to pay for the meter upfront while the Disco amortised the cost through electricity supplied to the customer over a period of time.
The CAPMI removed the initial capital outlay for financing meters from the Discos and Discos were to provide the customer with a meter within 45 days of payment. However, the scheme failed to deliver on its objective. As noted by the then Minister of Power, Works and Housing, Babatunde Fashola in 2016, “Discos that collected money from their customers to procure and install meters at their homes have mostly failed to do so”. The CAPMI was eventually discontinued in 2016, leaving the sector with at least a 50% metering gap.
In April 2018, the Meter Asset Provider (MAP) scheme was introduced by NERC in a bid to address the same problem. Under this scheme, there were to be third party meter suppliers engaged by the Discos, effectively removing the burden of providing meters from the Discos. The Discos were mandated to engage MAPs within 120 days.
The scheme, unlike the CAPMI, ensures that the customer received a meter from the MAP without making any upfront payment, while the payment was sculpted into the customer’s monthly electricity tariff as an energy charge until it was fully amortized. The scheme also gave customers the opportunity to choose to pay upfront and get their meters installed within 10 days in return for energy credits. It turned out that more customers were taking the alternative approach rather than the original approach as the rollout was not very favourable to those who chose to go the energy charge amortization route.
The MAP scheme has not been as successful as was hoped, with Discos missing deadlines to engage MAPs and MAPs facing the challenge of increased import tariffs and lack of local manufacturing capacity. In October last year, the Central Bank of Nigeria (CBN) launched its National Mass Metering Programme (NMMP) with a view to funding the local production, and in some, cases importation of meters by meter providers and Discos. Perhaps this was a case of putting the cart before the horse, since the facility came after the Federal Government had revised electricity tariffs upward of a 100%, not considering the fact that a teeming number of customers who had subscribed under either the CAPMI or the MAP scheme were yet to receive meters.
With the addition of the NMMP facility to CBN’s existing N213billion Nigerian Electricity Market Stabilisation Facility (NEMSF) advanced to the Discos in 2014, significant progress is yet to be seen from this facility gathering. While it is hoped that the NMMP will help close the metering gap, the brunt of the lack of metering since the privatisation of the sector has always been borne by the consumers, many of whom have had to pay exorbitant prices for meters under previous schemes, with nothing to show for it.
Interestingly, while consumers remain unmetered due to the inefficiencies of the Discos, the Discos continue to charge estimated bills even after the February 2020 NERC Order that capped estimated billing. While the Order may have merely reduced incidences of outrageous bills, Discos continue to bill customers outrageous amounts.
It is unfortunate that almost a decade after the privatisation of the Nigerian electricity sector, the Discos are unable to tackle one aspect of Aggregate Technical, Commercial and Collection (ATC&C) losses and continue to put the burden of metering or estimated billing on the customer, added to the increased electricity tariffs the customer has to pay in spite of epileptic power supply. NERC must really sit up in mandating compliance by the Discos in seeing that the NMMP combined with the MAP meet the December 2021 deadline of closing the metering gap.
Why buying Bitcoin in Nigeria is not cheap
It appears to have become much difficult for Africa’s most important crypto market to get Bitcoin at a fair value.
It’s no longer news that the recent CBN reminder restricting Nigerian financial institutions from Bitcoin and other Crypto assets have started to spur negative effect in the crypto industry when considering the cost of buying the world’s most popular cryptocurrency at Africa’s largest crypto market.
A recent study by Nairametrics revealed the flagship crypto asset, Bitcoin traded as high as 46% premium on some P2P exchanges and untraditional channels when compared to the use of Nigerian bank debit cards before the Crypto ban took effect, meaning the price of a bitcoin on such platforms was much expensive than its average price on other Crypto exchanges of around $49,000 at the time.
Crypto experts are of the bias that although the Central Bank’s recent directive does not criminalize ownership of Bitcoin, the circular will however make it difficult for them to process debit, credit card, and bank transfer transactions.
This is already increasing the complexity of a significant number of Nigerians that often use their local currencies in buying crypto assets. Many Crypto exchanges interviewed by Nairametrics spoke on the challenges many of its Nigerian users face buying Bitcoin at a fair value on the account that Nigerian leading financial payment providers such as Paystack, Flutterwave have arbitrarily cut ties with Crypto exchanges.
Adding more woes to young Nigerians adamant about buying the flagship crypto asset is the prevailing dollar scarcity in Africa’s leading economy which had often led many to buy the dollar at the black market rate of as high as N500, knowing fully well that all Crypto assets value are denominated in U.S dollar.
Adding credence to this, Rume Ophi a.k.a. Cryptopreacher, and Nigerian Crypto Educationist said;
“Nigeria’s bitcoin price isn’t consistent because it is pegged to the dollar (Usdt), which is a bit different from the parallel market, the one we call the black market or abokifx.”
He added weight to the exchange rate disparity on some Crypto exchanges and other channels Nigerians have been left with
“At the time of writing, Paxful an online peer 2 peer platform pegged 1 USDT to 475. This means you need 475 naira to get 0.0000004sat (the smallest unit of bitcoin is called sat). Whereas a black market vendor is also known as OTC will sell for 480/$,” Ophi said.
The effect of the CBN crypto ban is already breeding bad actors that are currently taking advantage of the high thirst for Bitcoin as Luno a leading African-based Crypto exchange in an email sent to Nairametrics sheds more light on the cost bitcoin buyers in Nigeria must bear;
“Pushing people underground also makes it easier for scammers to exploit Nigerians, and we are already seeing Bitcoin trade at huge premiums in the country as a result of the ban.
“Other companies have made the choice to find workarounds that are less visible for regulators – for example, Peer-2-Peer (P2P) trading. Our view is that P2P trading would go against the spirit of the CBN’s directive.
“We believe that the focus should instead be on demonstrating to the CBN that exchanges such as Luno have the necessary controls in place to address the concerns it has in relation to cryptocurrencies.”
What you should know
- Recall, the Central Bank of Nigeria had recently notified Deposit Money Banks, Non-Financial Institutions, other financial institutions against doing business in Crypto and other digital assets.
- In a circular dated 5th February 2021 and distributed to regulated financial firms, the apex bank of Africa’s largest economy warned and reminded local financial institutions against having any transactions in crypto or facilitating payments for crypto exchanges.
- Nigerian Apex bank further warned Nigerian financial stakeholders that any breach of this directive will attract serious regulatory sanctions.
Luno also spoke on the effect the CBN crypto ban will have on Nigerians in the long term, stating,
“Any attempt to restrict access to cryptocurrency does not protect Nigerians. It holds them back and leaves them vulnerable. It prevents honest Nigerians from taking advantage of all that cryptocurrency has to offer them.”
Bottom line: The rate of purchasing the most widely used Crypto asset in Nigeria is currently trading at a premium amid the Central Bank’s directive, suggesting it is getting much harder for Africa’s most important crypto market in getting Bitcoin at a fair value.
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