Nigeria FX ban aimed at boosting food production
In its drive to boost local production and keep the economy out of recession, the Nigerian government has cut food importers from access to foreign exchange.
This signals a continuation of a strategy adopted since 2015 when Nigeria’s central bank cut off importers of some 41 items from benefitting from its controversial foreign exchange subsidy regime.
Now, it is to follow up with all food importers after President Muhammadu Buhari gave a directive last week that not a single cent should be extended to any importer.
The FX ban directive came barely two weeks after the apex bank cut off foreign exchange supply to milk importers.
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Mixed reactions have continued to trail these decisions as Nigeria looks to wean itself of food import dependency, decades after cheap access to petrodollars had fuelled a voracious appetite for anything foreign.
“It is a good idea. It will assist us to really improve in our own production. We know it will be difficult as prices of food will go up, but at the end of the day it will benefit everyone,” a bus driver in a commercial city of Lagos, Biodun Alake told a Nigeria Today reporter.
According to recent statistics, Nigeria spends $22 billion on food imports annually. These food items include rice, sugar, wheat, milk, poultry products, tomato paste, fish etc.
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However, over the past four years, President Buhari’s government has made huge investments in agriculture including central bank-backed interventions in rice production and other cash crops.
This, in addition to falling commodity prices squeezing out foreign exchange inflow, has forced the government to implement some of these measures which are also targeted to ease increasing pressure on the Nigeria naira.
In December 2018, the central bank Governor, Godwin Emefiele, said the country’s monthly food import bill had fallen from $665.4 million in January 2015 to $160.4 million as of October 2018.
The thinking behind the FX ban decision is that food importers, unable to access foreign exchange at a government subsidised rates for any profitable food import, will be forced to invest in local agriculture, thereby increasing food output, saving billions in much-needed foreign exchange annually.
“Once this decision is implemented, commercial farmers will be able to build their capacity. They will be able to generate enough revenue for themselves. They will get better funding,” said Kamal Ojo, a Lagos-based banker.
Ojo said that the directive will likely boost the local food processing industries since they will be able to source raw materials locally.
“This will definitely help our local processing industries to grow. Instead of waiting for raw materials all the time, they will have an abundance of raw materials locally to produce and at cheaper rates.
“We all know that if a manufacturer gets raw material locally, without having to import from overseas, production costs would have been cut by 40-50%. That means the product will be cheaper,” he argued.
He added that producing in Nigeria also means more jobs will be created.
“Again, if we get raw materials here, it means we produce here, this also means more jobs are created as more hands are employed in the factories that will spring up. With this, more people are empowered,” he added.
Besides challenges such as clashes between farmers and herders and lack of credit to farmers, a dearth of storage facilities to preserve harvested foods has also made food shortages a perennial problem in Nigeria. And in the face of stringent measures against importation, unscrupulous traders had resorted to smuggling.
But according to Ojo, storage facilities require huge investments, but such investments are not likely unless self-sufficiency is achieved, and importation reduces.
“It is true, most people argue that there are no storage facilities in Nigeria. But how do we encourage people to build and invest in storage facilities when we are not producing enough food. We have to eat before we have extra to store. And we cannot do that if we keep importing everything we eat. It is just common sense.
“When we must have attained food sufficiency, then we have a surplus to store for the future. Many investors will see there is actually a niche there; an opportunity to build silos and other storage facilities because we have food to store,” Ojo argued.
But not everyone agrees Nigeria can afford to feed itself without falling into severe food crisis.
“To me, this idea seems like it’s for the rich and against the common Nigerians. The rich Nigerians will have no problems with it because they have the money to buy foreign milk and other food items,” complained Rachael Ovie, a shop-owner and mother of two who lives in Surulere, Lagos.
Ovie argued that there is no evidence that the government’s efforts have led to sufficient food production in the country.
“The government knows that food production in Nigeria is very low and that ordinary Nigerians are able to buy food in the market today because of the imports which supplement what we have. But, instead of investing money in Agriculture so we can produce enough food first, they decide to take away the imports that supplement the food in the market. How do they want the poor and ordinary Nigerians to survive?” she asked.
Ovie also added that the government has also not chosen the best of time to announce the policy.
“Again, this came out the wrong time. Salaries are being owed, the market is not moving, and then you wake up one day and remove forex on food imports. It is not right,” she added.
This echoes the response of Nigeria’s main opposition party, the People’s Democratic Party to the directive, which said in an official statement by its National Publicity Secretary, Mr Kola Ologbondiyan on Thursday, that the directive was ill-timed and completely against the well-being of Nigerians.
“The PDP states strongly that Nigerians do not, in any way, deserve such suffering being foisted on them by such directive on food.
“Such situation will only breed further despondency among our citizens, heighten our security challenges and put more pressure on compatriots, many of who, in the face of current suffering, are resorting to suicide and slavery mission as options,” the party said.
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