“Don’t give a cent to anybody to import food into the country. Foreign reserve will be conserved and utilized strictly for diversification of the economy, and not for encouraging more dependence on foreign food imports bills”, this was the instruction of President Muhammadu Buhari to the Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele, last week.
As expected, the President’s sudden decision to abruptly wean food importers of foreign exchange at the official rate has drawn divergent reactions from economic experts, agriculturists and stakeholders in various sectors of the economy.
While some have applauded the pronouncement, many others say it is economically hazardous, considering that Nigeria is yet to attain self sufficiency in staple food production like rice, wheat and milk among others.
They warn it will lead to higher food prices, severe austerity and escalate smuggling (with concomitant health hazards) since the quality and safety of the smuggled foods cannot be guaranteed.
Economic experts reckon that the president’s advisers and handlers must have fed him the wrong impression that the drop in the importation of rice through the ports was a pointer to the attainment of self sufficiency in rice production.
They contended that there has been increased rice import in neighbouring countries which is eventually smuggled into Nigeria to complement what is produced locally.
More so, in July, President Buhari signed the Africa Continental Free Trade Agreement (AfCFTA); and the directive to halt foreign exchange for imports of food contradicts the spirit of that agreement which is expected to boost intra-Africa trade by creating a single market for continent’s 1.3billion people.
More importantly, there are concerns over what has been perceived as executive recklessness on the part of President Buhari for veering into the monetary policy space to give orders to the CBN; an independent organ statutorily charged to administer such functions without political interference of any sort.
Consequently, tongues are already started wagging and raising many questions about the acclaimed independence of the CBN and whether it will still follow through with the directive; regardless of the president’s underlying good intentions.
Prof Kingsley Moghalu, a former deputy governor of the CBN and former presidential aspirant, said the directive is against the independence of the CBN.
He said political interference in economic policies of the apex bank is the major cause of poverty and weak institutions.
“Is @cenbank now a ministry to be “directed” by President @MBuhari ? Article 1(3) of the CBN Act 2007 states ‘In order to facilitate the achievement of its mandate under this Act…the Bank shall be an independent body in the discharge of its functions,” he said.
“The issue here isn’t whether or not CBN should allow access to forex for food imports. It is about whether such an economic policy of a central bank should be imposed by a political authority. A major reason for our poverty, instability and weak economy is weak institutions.
“Our marketplace should be regulated and guided in a rational manner that creates a level playing field. 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 Bank has lost its independence. This is sad!
“@NGRPresident should leave @cenbank alone to discharge its mandate independently within the ambit of the CBN Act, and stop “directing” it. @cenbank should on its part assertive its independence (assuming it actually believes it should be independent, but the Act says so, clearly!”, Moghalu said in a series of tweets.
But a CBN source said the policy remains a soothing one that will further save Nigeria billions of dollars in forex payouts that could be channeled into other viable but capital-intensive ventures.
He said: “Nigeria saved around $21 billion in 2018 following the restriction of forex on 41 items.
“With the addition of cotton, textile and garments, poultry, palm oil and their derivatives and other food/agricultural items imported into the country, it is expected that Nigeria will save more forex from the directive”.
The source added that if these imports that consume forex are checked as directed by the President, the first low-hanging fruit will be a robust growth in the foreign reserve, which now stands at over $44 billion.
The increase, he noted, will help keep the naira at an appreciable rate to the dollar, while the CBN will be better fortified to defend the naira against forex volatilities.
According to the National Bureau of Statistics, imports of agricultural products were valued at N236 billion (about $640 million) in the first quarter of 2019 and it is an attempt to curtail such humongous expenditure that the President gave Emefiele an express instruction to halt funding food imports forthwith to stimulate local production.
Statistically, Nigeria only produces 585,000 tons of cattle milk per year, covering just 40 percent of the demand of about 1.3 billion tons of milk annually, according to a recent data from the United Nations Food and Agriculture (FAO).
Prof Bashir Raji, President, Soil Science Society of Nigeria (SSSN) is of the view that the policy of halting forex for food imports via official window would be good if properly articulated.
He, however, advised that the president should put into consideration the nation’s food production and consumption volume.
According to him, Nigeria requires about eight million tonnes of rice annually, adding that “currently the country is producing just about 3.7million tonnes’’.
Raji added that the country was not meeting up to 50 per cent of its needs.
“With the outright ban, there is no way the country can meet up with the required 50 per cent in one year,’’ he said.
He suggested that the federal government embarks on the ban gradually over the next five years putting in place vital incentives and milestones to be tracked to ensure that the 50 per cent shortfall was met during the period.
But the former Attorney-General of the Federation (AGF) and Minister of Justice, Mr Mike Aondoakaa has hailed President Buhari for the audacious directive to the apex bank to stop funding food importation.
To him, the timing is right as the country has attained some level of food security.
He urged Nigerians to eat home grown foods so that farmers would have value for their products.
The former AGF, who is a rice farmer with one of the biggest rice milling plants in Makurdi, stated that agriculture is a huge employer of labour and the ban on food importation will increase participation in agriculture and many will now see it as a big business.
Experts note that Nigeria, despite being the largest country in Africa, is far from attaining food self-sufficiency due to a plethora of factors.
Firstly, the rising insecurity challenges and heightened farmers-herders clashes have forced farmers in most agrarian states like Benue, Adamawa and Taraba to abandon their farms and seek refuge in overstretched internally displaced persons camps; thus drastically shrinking food production volume.
Secondly, there are grave concerns over the mounting post-harvest losses averaging $9 billion annually.
According to Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, many rural farmers lack storage and processing facilities to handle their harvested crops like yam, tomatoes, maize and other perishable foods with short shelf life. The issue is worsened by dilapidated infrastructure and poor access to markets and off-takers to buy their perishables. In the end, more than half of the cultivated foods are lost, making it hard for the farmers to recoup their investments and repay their loans.
Thirdly, Nigeria has not been able to perfect the packaging of its locally produced crops to meet export standards to earn foreign exchange.
Some exported produce, at times, arrive their offshore destinations in bad state, leading to rejection and losses to the exporter.
Fourthly, majority of Nigerian farmers are still stuck with the primitive subsistence farming techniques that result in low yields due to poor seedlings, lack of pesticides, fertilizer misapplication and obsolete farming tools.
Consequently, vast hectares of arable land are uncultivated yearly.
These and more are what agriculture and economic experts want the government to address before shutting the official forex window against food importers.
Abdulhameed Aliyu, the Managing Director of the Nigerian Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) said the agency has begun seeking permanent solutions to the protracted challenge of trained farmers recording low viability and germination rates, low or average productivity and up to 30 per cent post-harvest losses, despite using certified hybrid seeds.
He added that the negative factors contribute significantly to Nigeria’s annual US$9billion worth of post-harvest losses which, in turn, have led to lower capacity to service the consumer, industrial and export grain markets, lower returns to the farmer, inability to fulfil financial obligations or repay loans, sustained poverty and impoverishment.
He reiterated that NIRSAL’s core mandate is making agriculture attractive to the financial sector by tackling various inherent challenges in a way that significantly reduces the current aversion of financial institutions to lend to this important value chain.
Bismarck Rewane, Chief Executive of Financial Derivatives Company Limited is concerned by what he considers an interfering role of the federal executive in the running of the CBN, warning that curbing foreign exchange for food imports could backfire after Buhari last month signed the African Continental Free Trade Agreement (AfCFTA).
“At this point in time, these rules will be manipulated in the interest of smugglers and their accomplices,” Rewane said.
Eze Oyekpere, Lead Director of Centre for Social Justice (CSJ) a non-profit organization described the president’s directive as one that erodes the independence and autonomy of the CBN and presents Nigeria in the image of the Idi Amin fable, when he gave directives to the Governor of the Ugandan Central Bank to print more currencies having learnt that the country was running out of money.