Experts in the nation’s financial sector have said there is no cause for alarm over the directive by President Muhammadu Buhari to the Central Bank of Nigeria (CBN) not to release foreign exchange to food importers.
Receiving the governors elected on the All Progressive Congress(APC) platform Tuesday, President Buhari said he had directed the CBN not to allow food importers access to food importers..
He also said his administration had made significant inroad in the area of agriculture, concluding the nation was already there in food sufficiency.
Lauding the directive, financial experts said the statement was in good faith, saying the decision was a good one that would encourage the country’s food industry to grow and eventually make Nigeria self-sufficient in the area of food production, a primary need of the people.
Some, however, expressed fears that the country, as it were, may not yet have achieved food sufficiency as stated by the president.
They said the directive, if implemented without the right strategy, would lead to increase in food prices and eventually lead to higher inflation.
Food, alone, they said, accounts for a substantial part of the inflation basket.
Chief Executive of Financial Derivatives Company (FDC) Limited, Bismarck Rewane, in an interview with Channels Television, said, so far, the statement by the president, was still an intention of government and should not be viewed as one being implemented already.
He said , it is like the president saying, “we will create a 100 million jobs this year.”
Rewane said, in such cases, there were technicalities to be applied in achieving such goal stage by stage.
For him, such decisions would take some time for the impact to be felt.
He further said, government agencies that would actualise such policy statements needed to “articulate ways, look at various factors that will produce the desired results without much negative impact.”
In his own reaction, Managing Director APT Securities and Funds Garba Kurfi said the president’s directive was like other 43 items banned from bidding for forex from official market some years ago.
He said, for agricultural sector to be more committed in the food production, there was need for government to close borders for importation of some food items “which we can comfortably produce locally.”
Kurfi said “For the restriction of imported goods in the country to be more effective, government needs to ban the importation and also close the border.”
He, however, said “if we produced locally, it will go a long way to boost the economic growth of the country and will as well increase the demand for dollars in the other segment of the forex market, especially BDCs, thereby forcing the naira to depreciate against dollar in that sector.”
Also speaking, an economist, Mr Iheanyi Ndubugha, said the directive was a step in the right direction.
He said most of the rice imported into the country were warehoused for years before arriving Nigeria, saying local rice was more nutritious.
The financial expert said available data showed CBN currently spends between $1.2 billion and $1.4 billion annually for dairy importation, noting that such amount of money would have been enough to enhance dairy production’s infrastructures, research and local subsidy.
He said the current administration had always been in the forefront of promoting local production, stating that “there is need for all Nigerians to support Buhari administration and promote domestic products for the nation’s economic growth.”
Also, a political analyst, Alex Egunjobi said, most producers of food items in the country were driven out of the market because of the cheaper products imported into the country.
“If you run a business, and are struggling to break even, and someone just directly beside you keeps flooding the same thing you produce with cheap and inferior products from Cotonou, you will understand and appreciate this move. Where are all the factories in Ikeja today?” he quizzed.
He agreed that prices may skyrocket, but in the long run it will stabilize at a fair price.
Also in another comment, an agriculture analyst, Dr Guendouzi said the Obasanjo administration out-rightly banned the importation of poultry products among other things, even when the country couldn’t meet 20 per cent of its daily consumption.
Today, he said, “Nigeria has the second largest chicken population in Africa after South Africa, (SAHEL, 2015) – producing 650 000 tonnes of eggs and 300 000 tonnes of poultry meat in 2013 (FAOSTAT, 2017).”
In recent weeks, the CBN has been premeditating the move to add to the 43 items restricted for FOREX in Nigeria. To drive home the point, the CBN, in a recent circular, said it was set to restrict forex for the importation of milk and other dairy products.
CBN Governor Godwin Emefiele said Nigeria spends between $1.2 billion to $1.5 billion annually on importation of milk and other dairy products.
Nigeria’s external reserves dropped by $482.18 million from N45.14 billion as of July 8 to $44.65 billion as of August 8, latest statistics from the Central Bank of Nigeria have shown.
The reserves which had maintained a steady rise in recent months, started suffering decline.
A research by FSDH showed in its monthly economic and financial markets outlook, that it is time to create buffers’ for the month of August, and that this could be linked to fall in oil prices.
The average price of Bonny Light in July 2019 stood at $66.24/b compared with the average of $66.52/b in June.
However, in the last few days, crude oil price has dropped below $60/b as a result of trade tensions between United States and China which have impacts on the global economy. This is expected to have a negative impact on revenue and other key economic indicators.
Significant declines in the price of crude oil will not only reduced Nigeria’s export earnings, but may lead to higher inflation and lower growth, given our dependence on imported goods,” he said.
“Restricting foreign exchange for food importation is indeed a welcome development”. He however said the presidency needed to approach the policy cautiously.
He however said, blanket restriction of foreign exchange to food importation at this time may do more harm than good, both to investors and the citizens.
According to him, Nigeria at the moment is not yet self-sufficient in food production, and denying importers of food items FOREX will only make the available items more expensive.
A facility manager at Ayokunu Farms, Banji Ogundeji explained that farmers in the country cannot produce all the foods needed to feed the country at the moment.
“It’s a good decision, but it is coming at the wrong time. The infrastructure to provide a replacement of what is being banned is not there. Even when we have the produce which are still not enough, where is the power to store? Where is transportation/infrastructure system to sustain the various parts of the value chain?”
Ogundeji argued that the federal government should instead invest more in agricultural infrastructure for local farmers, because what they all produce now cannot feed the nation. “The directive will only make food prices to go up as many will be chasing the few products available thereby making the price to skyrocket,” he said.