Food imports policy: Wrong concept, bad timing




Trump

Donald Trump does not hide his contempt for Jerome H. Powell, chairman of the Federal Reserve Board, America’s equivalent of the Central Bank of Nigeria (CBN).  The U.S. president would like to have the Federal Reserve as an appendage of the White House.  But Powell has his own mind.

Trump demanded a string of interest rate cuts to cushion America’s economy against the effect of his senseless trade war with China.  Powel ordered a rate cut on July 31, 2019 and warned that the U.S. economy does not need any more rate cuts. Trump sees Powell as his administration’s enemy.  Powell, who was nominated by Trump for the office in 2017, is not worried.  He knows his mandate is to the American people who would be the first casualty of a monetary policy blunder. 

The CBN is the reverse of America’s Federal Reserve.  It has become something of an appendage of the presidency.  Unlike Trump, President Muhammadu Buhari has no problem dictating to the CBN. Nigeria’s apex bank takes directives from the president rather than the president being forced to tailor his fiscal policies in congruent with CBN monetary policies.

The CBN has inadvertently been turned to a development bank as it floats and manages a flotilla of intervention funds in a clumsy bid to create jobs that have become intolerably scarce.

Last week the CBN exhibited the greatest sign of weakness and mortgaged its statutory independence by bowing to the dictates of the president on a matter that would worsen Nigeria’s food insecurity and deplete what was left of its lean income from import tariffs.

Last week the president shocked the world with a directive to a docile CBN that implicitly banned food imports. He ordered the apex bank to stop selling foreign exchange to anyone for the importation of food items.

The directive to the CBN is a clear indication of how much the president is worried about Nigeria’s senseless waste of scarce forex on importation of everything from rice to chicken and fish when it is naturally blessed with vast arable land and waters over-flowing with assorted species of fish.

Buhari might have been misled by data on local rice production from the Federal Ministry of Agriculture into thinking that Nigeria is producing enough food to feed itself.

The U.S. government has punctured the veracity of the data from the Federal Ministry of Agriculture on rice production.  The federal government contends that it imported 6, 000 metric tons of rice in 2018, but the U.S. government insists that three million metric tons of rice was imported into Nigeria in 2018.  

The truth of the matter is that the three million tons of rice was smuggled into Nigeria through Cotonou Port in neighbouring Benin Republic.  The ban on rice imports at a time Nigeria is still struggling to stabilize local production has robbed the federal government of billions of dollars in import tariff from the commodity.  The policy has enriched Benin Republic and priced rice out of the reach of 154 million Nigerians living below poverty line.  A 50kg bag of rice at Seme border is N9, 700. Smugglers bribe customs officials and sneak the commodity into the Nigerian market to sell at N16, 000.  The losers are the federal government of Nigeria and the Nigerian consumers of the product.  The gainers are the smugglers, corrupt customs officials and the government of Benin Republic.  The ban on rice import is counter-productive.

The implicit ban on food imports would add more items to the list of things priced out of the reach of Nigeria’s starving population.  It would not encourage food production because the items would still enter the market through the back door.  It would only escalate their cost because smugglers would bribe corrupt customs officials with two times what they would have paid to the federal government as import tariff. 

The policy is badly timed and ill-conceived.  Even the little gain made in rice production is gradually being eroded.  Lake Rice, a product of Lagos state government in collaboration with the efficient government of Kebbi state has vanished from the market.  No one knows why.  During the 2018 end-of-year festivities, the presence of Lake Rice in the market forced down the prices of imported rice.  With Lake Rice selling for N12, 000 per 50kg bag, the cost of imported rice was forced down from N18, 000 to N15, 000.

Now in the absence of lake rice, the cheapest rice in the market sells for N16, 000 per 50kg bag.  The security situation in the country is not conducive to the realization of self-sufficiency in food production. Thousands of farmers in the middle-belt, Nigeria’s food basket have been driven into internally displaced persons (IDP) camps by murderous Fulani herdsmen.

That development has taken a toll on food production.

Someone has to calm the frayed nerves of the murderous Fulani herdsmen, assure the IDPs of safety of their homes and farms and persuade them to return to business before a ban on food imports could be implemented with minimum pain.

Anything short of that would push the country’s food crisis to calamitous proportions.

The federal government must take the lead in mechanized farming to increase food production.  The food import ban should be a gradual process spread over a period of five years. The ban is designed to create scarcity and drive up prices in a desperate bid to encourage production.  It will not work. It will create the needed scarcity and drive up prices but would not encourage production because Nigeria’s economic and security architecture is very hostile to food production. The policy is a tactical blunder that would only worsen a bad situation. 




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