A few weeks before Nigeria’s 60th anniversary, President Muhammadu Buhari directed that food and fertilizer importers should not be given access to foreign exchange by the Central Bank of Nigeria.
He added that the country would rather empower more local farmers, and use agriculture as a means to solve unemployment among youths.
“We have a lot of able-bodied young people willing to work, and agriculture is the answer,” he stated.
President Buhari’s comments should not come as a surprise to anyone, as he has focused heavily on agriculture and made it one of his main economic goals, even to the point of a border closure directive, that has lasted over a year now.
The most popular agriculture scheme is the Anchor Borrowers Programme launched by the CBN and the President in November 2015, as a means to merge the value chain gap between processing companies and smallholder farmers.
The scheme provides farmers with financing to increase production. The CBN said in 2018 that since the inception of the scheme, it had disbursed over N55.526 billion to over 250,000 farmers, who cultivated almost 300,000 hectares of farmland for rice, wheat, maize, cotton, soybeans, cassava, etc.
“Two years into the implementation, the programme has contributed to the creation of an estimated 890,000 direct and 2.6 million indirect jobs,” Godwin Emefiele, the CBN governor said.
This is a part of the President’s Home Grown Feeding Programme, which was implemented to end food importation into the country, or commodities that can be grown in the country.
Other agricultural policies by the President are the Presidential Fertilizer Initiative (PFI), Youth Farm Lab, Presidential Economic Diversification Initiative (PEDI), Food Security Council, and many others.
Agriculture vs other sectors
Agriculture, however, is still lagging behind the Telecommunication sector, a sub-sector of the Information and Communication sector, which grew by 18.1%.
Past administrations’ neglect of Agriculture
It is obvious to see that unlike past Nigerian leaders, Buhari has taken agriculture serious, to the point of banning food imports (border closure). However, the border closure directive has caused Nigeria’s food inflation to spike to 16%, as imports were disrupted, which meant that the limited local supply was stretched thin.
Feyi Fawehinmi, co-author of “Formation: The Making of Nigeria from Jihad to Amalgamation” says that the reasons for the neglect of other sectors during the crude oil boom era are a direct result of getting flushed with petrodollars.
“It’s one of the ways oil damages everything else. When faced with the choice of where to channel your energy based on the potential rewards, nothing can match oil and definitely not agriculture. But it’s easy to blame the government alone. Nigerians were also afflicted by the same problem. There’s a very old 1982 article which showed that in the late 70s, 40% of the senior agric researcher jobs advertised by the government were permanently vacant with no takers,” he says.
Joachim MacEbong, the Senior Analyst at socioeconomic research firm, SBM Intelligence, says that for Buhari, it’s more of old habits dying hard.
“He closed borders before as military Head of State. He has also talked about middlemen before, way back. Why now? He’s been going to great lengths to ‘protect the Naira’. He’s just defaulting to previous ideas.” MacEbong said.
Present Agriculture scorecard
According to Nairametrics Research, the last time the National Bureau of Statistics (NBS) released data on the number of Nigerians employed in the agriculture sector was Q3 2017, which showed that 32 million Nigerians were employed in the sector. The 2019 estimates of Agriculture places the percentage of total employment at 35.1%.
Affiong Williams, the founder of the food processing company, ReelFruits, told Nairametrics earlier stated that she did not think sending more Nigerians to the farms would increase productivity because “There is very little material productivity to achieve by increasing physical labour on the farms. Productivity increases in Agriculture, which moves the needle on production output, are more impacted by things like fertilizers, mechanization, and increased technical expertise. Manual labour is no match for any of those things.”
For exports, despite lagging behind our peers in the value of exports, Nigeria’s monthly exports earnings from agriculture have improved in the past 4 years. In January 2016, agricultural exports raked in N4.1 billion, according to Nairametrics Research, rising to N25 billion by January 2017 and maintaining its momentum to exports of N26 billion for January 2018. In one year (April 2019 – March 2020), total agriculture exports hit N289 billion for Nigeria’s top ten agriculture export products.
Agriculture exports for the first 6 months of 2020 were N204.45 billion, which is a sign that productivity is increasing in the sector to enable export growth.
However, the increased productivity does not replicate itself in the food inflation index, which could be a sign that Nigeria is not producing enough to meet local demands. Food inflation has grown significantly for the past 2 years, from a rate of 13.31% in September 2018 to 16% in August 2020. Nigeria’s increased food production and agriculture exports are not enough, as the gains of curbing imports are not being felt by the customer paying higher prices for food each month.
Strategies to refocus
Affiong Williams told Nairametrics last week that Nigeria’s over-reliance on smallholder farming might be the biggest hindrance by the government to improving Nigeria’s yields per hectare.
She added that even though the current model may be seen as a ‘development activity’ it barely achieved its true aim.
“To improve the output of any crop, one needs to do a lot of testing and control for so many factors to be able to arrive at the right conditions, which increase productivity. Smallholder farmers do not have the resources to do this type of ‘A/B testing’ as it were, and so it is very difficult to get true information and disseminate the right techniques that all of these farmers can apply. I think the government needs to enable more commercial farming by the private sector who are able to acquire the resources to increase productivity and disseminate such learnings at a faster pace.” Williams said.
Joachim MacEbong says Nigeria cannot deal with the food inflation problem without food imports, as the local demand is just too high to be addressed by local supply.
“Firstly, Nigeria cannot arrest food inflation without imports. The local demand is too great,” he opined
He adds that local production is also disrupted by factors like proper storage and the farmer-herder clashes, leading to insecurity in the sector.
Saying, “Secondly, Nigeria’s agricultural productivity is hampered by several factors that need to be addressed in parallel. From seeds, irrigation to appropriate storage, adequate security to allow farming carry on peacefully, to good roads to ensure the products reach the market in good time. All these issues need to be addressed in order to boost productivity. Also, smallholder farming is not ideal. Increased productivity goes hand in hand with increased mechanisation. As only 3% of Nigeria’s farming is mechanized, one of the lowest in the world. Our average yields are also very low. Types of seeds as well as irrigation and access to fertiliser are all crucial.”
Economic possibilities for Nigeria’s Agriculture sector
MacEbong says the opportunities are many but value addition to the sector needs to be a focus, followed by compliance to export market standards.
“There are a lot of possibilities, but Nigeria needs to focus on value addition to agric products, as well as strict adherence to the standards of the export markets. EU, for example, is rather strict with their standards, so in order to cultivate that market, the standards have to be followed. Also, our exporting system is so cumbersome due to our bad ports. That must also change. Many exporters have had goods go bad because of that,” he says.
Nigeria’s agric production and exports have increased significantly, as there is more exposure in the sector under Buhari’s administration. However, to increase production enough for the local consumer, Nigeria needs fewer bodies in the sector and larger mechanised farms. Nigeria also needs to be open to import, in order to balance out the supply deficit and deal with an inflation problem, that has already hit a rate of 16% and is expected to rise further.
Why exchange rate disparity remains high despite CBN’s intervention
Despite the intervention measures by the CBN, why does the disparity between the official and black-market rates remain high?
The Nigerian economy has been faced with serious foreign exchange crisis since the first quarter of the year, with severe pressure on the nation’s foreign exchange market and external reserve. The local currency is under the grip of tough external pressure, characterized by internal foreign exchange shortages and consistently high black-market rates. This has led to a high disparity between the official exchange rate and black-market rate.
The undesired situation is attributable to the crash in crude oil prices, triggered by the coronavirus pandemic that has impacted negatively on the global economy. The plunging oil prices have increased the pressure on the naira, as about 90% of Nigeria’s foreign exchange earnings is from crude oil exports.
Bank of Africa analysts, Rukayat Yusuf and Andrew MacFarlane, in its Global Bank’s latest report on Nigeria’s forex unification and shortages, said that Nigeria’s current foreign exchange pressure is likely to gain momentum in 2021, as the economy and imports recovery will trigger a future adjustment of the nation’s currency to N430/$1 next year.
Recall that despite several initial denials by the Central Bank of Nigeria (CBN), in response to the devastating impact of the coronavirus pandemic and oil shocks; the apex bank on March 20, 2020, devalued the exchange rate from N307/$1 to N360/$1. This was followed with the suspension of sales of foreign currency to the Bureau De Change operators on March 27, 2020, in the face of depleting external reserves.
In a move viewed as attempts by the CBN to unify the exchange rate, the apex bank further devalued the naira on August 6, 2020, from N360/$1 to N380/$1 on the official window and closed the gap with the parallel market – which is the unofficial market. The huge exchange rate gap has made round-tripping very lucrative and encouraged hoarding amongst forex dealers.
Goldman Sachs analysts had earlier predicted that the exchange rate will dip to N500 to $1 in the face of rising inflation and declining external reserves. The wide gap between the official and unofficial rates is seen by analysts as an indication of increasing pressure on the forex market and dollar shortages, which the CBN is trying to contain with several policies targeted at reducing the demand for the greenback, conserve the scarce foreign exchange, and help boost dollar supply in the market.
Some of these policies include:
- Resumption of sales of dollars to the Bureau De Change Operators and mandating them to sell at not more than N386 to a dollar.
- Removal of third parties from buying forex routed through Form M.
- Clampdown on exporters who refuse to repatriate their export proceeds to Nigeria.
- Restriction on forex allocation to importers of maize by the Deposit Money Banks (DMBs).
However, despite some of these measures by the CBN, the disparity between the official and black-market rates still remain as high as almost N70. So, the question is why the huge gap? Especially, with the resumption of dollar sales to the BDCs.
Some analysts and stakeholders have complained that the measures are hurting business operations and pushed more demands to the parallel market. They believe it has encouraged hoarding and speculations to continue thriving; thereby, making it difficult to reduce the black-market rate.
What they are saying
While expressing his view on why the exchange rate disparity is still high, despite the resumption of dollar sales to BDCs; the President of Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadebe, said the impact of the resumption of sales of foreign exchange to BDCs is expected to be gradual.
Gwadebe said, “Firstly, the impact is gradual. You know there was a time when the dollar reached N500/$1. N474, N480 to a dollar was when there were other interventions in the market. As soon as the news of the resumption of sales to Bureau De Change broke, we witnessed the dollar going for as low as N420, N430 to a dollar. However, after taking off, the rate is now N460, which is the parallel market rate.
“Don’t forget there is a huge backlog and every other buyer – authorized or unauthorized, queued in the parallel market. So, the pressure is on the parallel market from manufacturers and existing investors. In fact, the most unfortunate behavior is hoarding and speculation.’’
The ABCON President noted that people hoard and speculate when liquidity is low in the retail sector of the market. He pointed out that, although the liquidity is gradual, the rebound is expected to continue gradually.
Gwadebe said the role of the BDCs is to provide liquidity in the retail end of the market, which is what the CBN is empowering the BDCs to do and a key reason the rate has improved from the record high of about N480/$1.
He noted that the resumption of sales of dollars to BDCs is discouraging frivolous demands, adding liquidity into the system, aiding return of confidence and stability in the market.
He reiterated that the BDCs remain the only threat to hoarding and speculation, while expressing satisfaction that the reserve is growing and will increase the confidence of investors.
Crypto bounty: $1 million up for you
Harvest Finance has increased its bounty from $100,000 to $1 million for details of an unknown cyber hacker.
Fast-growing decentralized finance (DeFi) protocol, Harvest Finance, has increased its bounty from $100,000 to $1 million for details of an unknown cyber hacker – leading to the return of $24 million in siphoned funds taken recently.
What you should know
According to tweets seen on its official Twitter handle – Harvest Finance anonymous, Harvest is offering the bounty of $1M for “tracking down” the attacker and returning the funds.
At the moment, the attacker is known to:
- understand flashloans
- understand arbitrage and trading
- understand the curve internal code
- understand renBTC
- understand opsec
💵Increasing the bounty for tracking down the attacker and returning the funds to $1M
Here's what we know about the attacker:
1) understands flashloans
2) understands arbitrage and trading
3) understands curve internal code
4) understands renBTC
5) understands opsec
— Harvest Finance (@harvest_finance) October 29, 2020
Why it’s happening
Harvest Finance’s bounty is coming on the back burner when it observed its protocol was apparently hacked, with the cyber hacker reportedly exploiting about $24 million from Harvest Finance pools and swapping for renBTC (rBTC).
- Hence, Harvest Finance affirmed the hack, stating the protocol is “working actively on the issue of mitigating the economic attack on the Stablecoin and BTC pools.”
- To protect users, we’ve pulled y pool and btc curve strategy funds to the vault.
- At this point, all Stablecoin and BTC funds are in the vault (not deployed in a strategy). No other pools are affected.
- To be specific: to protect users, 100% of Stablecoin and BTC curve strategy funds have been withdrawn from the strategy to the vault.
Harvest, a new (DeFi) platform created on the Kava blockchain, plans to launch a product that will enable users to earn more on Bitcoin, XRP, Binance coin, and two other cryptos.
Harvest offers crypto users the platform to supply crypto assets for lending, and earn interest on them, as well as, use their crypto as security for borrowing; this is according to Brian Kerr, Kava’s co-founder and Chief Executive.
WTO: US opposing consensus to declare Okonjo-Iweala as DG – Foreign Affairs Ministry
The Ministry announced Okonjo-Iweala has secured the support of the majority of the member nations but is being opposed by the US.
The Ministry of Foreign Affairs announced in a statement that Nigeria’s candidate for Director-General of the World Trade Organization, Dr. Ngozi Okonjo-Iweala, has secured the support of the majority of the member-nations – but is yet to be declared and returned as the winner, as the United States is opposing the consensus.
This was announced in a statement by the Ministry on Thursday evening to inform the nation that the third and final round of the selection process of the WTO DG position was formally announced on Wednesday 28th October 2020.
Ministry of Foreign Affairs, Abuja __________________________________
PRESS RELEASE pic.twitter.com/K557KyJQzO
— Ministry of Foreign Affairs, Nigeria 🇳🇬 (@NigeriaMFA) October 29, 2020
What you should know
Nairametrics reported this week that Dr. Ngozi Okonjo-Iweala is close to being appointed as the new Director-General of the World Trade Organisation (WTO).
A group of ambassadors also known as “troika” had proposed Okonjo-Iweala to lead the WTO giving her a clear path to becoming the first woman to head the WTO since it started 25 years ago. The three ambassadors are thought to wield significant powers in determining what is a very “intricate and opaque” process.
The U.S President, Donald Trump blocked the appointment of Ngozi Okonjo-Iweala as the WTO’s next DG on Wednesday, citing support for South Korea’s Yoo Myung-hee.
Dr. Okonjo-Iweala stated that she is positive despite hiccups in her bid to emerge as the next DG of the organization. She said, “Happy for the success & continued progress of our WTO DG bid. Very humbled to be declared the candidate with the largest, broadest support among members and most likely to attract consensus. We move on to the next step on Nov 9, despite hiccups. We’re keeping the positivity going.”
The Ministry of Foreign Affairs said in its statement that, “Dr. Ngozi Okonjo-Iweala has secured the support of the majority of the member countries, but is yet to be declared and returned the winner. This is because apart from winning the election, all 164 Member States of WTO were expected to adopt the winner by consensus. In accordance with the rile of the procedure of the WTO.”
It is important to highlight that Dr. Okonjo-Iweala has secured cross-regional backing with only the United States opposing the consensus.
The Ministry added that a meeting would be held by the General Council of the WTO on the 9th of November 2020 to declare a final decision on the election process.