With the recent directive by President Muhammadu Buhari to the Central Bank of Nigeria (CBN) to restrict foreign exchange to food importers, experts are of the view that Nigeria may just be thinking of not fully implementing the African Continental Free Trade Area (AfCFTA) agreement; BENJAMIN UMUTEME reports.
Nigeria, which has the largest economy in Africa, is the continent’s top oil producer and relies on crude sales for about 90 per cent of its foreign exchange. Low oil prices led to a 2016 recession from which the country emerged two years ago.
In the 1960s, after Nigeria gained its independence from the British, agriculture was the mainstay of its economy.
The different regions of the country were mostly developed from proceeds from agriculture. Those were the days of the Cocoa House in the West, the Groundnut Pyramid in the North and Oil Palm in the East of the country.
However, the discovery of oil in Oloibiri, Bayelsa state, changed the dynamics of development as the federal and state governments shifted their attention to easy oil money thus, abandoning agriculture.
This, in turn, led to increased urban migration as the youth population abandoned the farms for lucrative white collar jobs in the cities.
With continued reliance on oil, the country started to import food as 90 per cent of its revenue was got from oil. The situation got to a head as the country at a time spent as much as $22 billion annually on food importation.
Over the years, there have been efforts by the federal government through various intervention policies to address the situation.
For instance, the CBN has for several years supported the agriculture sector its Agriculture Credit Guarantee Scheme among several others. And only recently, it partnered with several state governments through its Anchor Borrowers Programme (ABP) in the area of rice production and other agricultural products. There have been eloquent testimonies to the success story of the apex bank’s intervention policy.
Thinking in line with this, President Buahri directed the CBN not restrict foreign exchange to importers of food items – a move that many have described as “controversial.”
According to President Buhari, Nigeria currently has enough food for its citizens following several reforms in the agriculture sector by his administration, and that there is no need to continue to import the same into the country.
He said Nigeria’s foreign reserve should be conserved for the diversification of the economy.
“Don’t give a cent to anybody to import food into the country,” President Buhari was quoted as saying in the statement, which noted that the call was in line with efforts to bring about a “steady improvement in agricultural production, and attainment of full food security.”
“The foreign reserve will be conserved and utilised strictly for diversification of the economy, and not for encouraging more dependence on foreign food import bills.”
The move comes only weeks after Central Bank Governor Godwin Emefiele in July said the bank would ban access to foreign exchange for the importation of milk.
CBN’s forex policies
Since President Buhari first took office in 2015, the CBN has presided over policies aimed at stimulating growth in the agricultural sector to reduce dependence on oil. Those policies included a 2015 restriction on access to forex for 41 items it felt could be produced in the country.
And only recently, the bank had announced it was also restricting access to foreign exchange for milk importers. The president’s directive to the bank’s regulator further fuelled the frustration of many who felt, the apex bank was becoming over-bearing in its bid to make the country self-reliant in food production.
However, the CBN has come out to tell its critics that its forex restriction policies are in the overall interest of the country.
According to its governor, the president’s directive was in sync with the bank’s foreign exchange policies.
He said, “If you recall, we started with about 41 items (food and non-food items) because we believe that those items can be produced in the country. As we stand today, there are about 43 items on that list and I will say substantially most of them are food items.
“We are basically saying if we have a food item that can be produced in the country, why we should waste scare foreign exchange importing those items into the country, when those can be produced in the country.
“It is important for me to say that the attempt to misrepresent the comments of Mr. President is very unfair and unfortunate.”
He further said: “What we will say from the CBN is that Mr. President has made this comment purely to strengthen the position of the CBN to say that he believes in what the CBN has been doing since 2016 and there is need for us to reinforce that going forward.
“We would aggressively go more into the list of items that are being imported into the country, items that can be produced in Nigeria.
“I will like to stress that we would ensure that more of these items will get on the list of items that are going to be restricted from accessing foreign exchange in Nigerian banking industry not just from the CBN source.”
Asked if there will be any amendment to the implementation, the CBN boss said, “There will never be an amendment because the issue is this, why should we be exporting jobs to other countries?
“Today, we are complaining that there is a high rate of unemployment, leading to some extent the level of insecurity in the country, why should we allow people to import food that can be produced in the country? We need to improve wealth in our rural communities and I am saying we will not change course, we will even be more aggressive on this programme.”
An economist and CEO of Global Analytics Consulting Limited, Tope Fasua, while pledging support the move, said its implementation might have far reaching effect on the economy.
“Here, one has to be careful to ensure it does not impact the economy more negatively. I am of the view that we should produce anything we can on our own. But, the timing and implementation of the policy also matters. It will have a far-reaching implication.
“Already the private sector has been complaining about the restriction of forex to 43 items. It might lead to a rise in prices if one has to recover the cost of sourcing for forex to bring in what people need,” he said.
Meanwhile, the Manufacturers Association of Nigeria (MAN) thinks differently.
According to its president, Engr. Mansur Ahmed, the president did not say anything new.
He said the pronouncement was only trying to align its policies with realities of the times, adding that “the present administration has always talked about backward integration and significant reduction of imports of items that can be produced locally in the economy.”
“Each value chain has to be involved in the process towards backward integration. Each value chain should sit down with government to articulate and agree on how this will be realised.
“Because it will ultimately lead to local investments, which do not come overnight, there should be sufficient consultation between regulators and operators. It is the interest of the country to diversify and find a way to increase our national reserves,” he said.
A former deputy governor of the CBN, Kingsley Moghalu, is not impressed with President Buhari’s directive. He said “the directive will result in a negative outcome to the economy.”
“The implication of this draconian order is that importers will go to the parallel market to purchase dollars and in turn increase dollar value to Naira, and at the end put pressure on our reserve and Naira,” he said.
Also, Engr. Mansur is of the view that the directive should be pursued carefully and well-considered in implementation, adding that the policy remained one of the ways to diversify the economy and bring more local inputs to the production process.
In Nigeria, it has become a byword among various groups that while the country is not lacking in policies, implementation has always been the challenge.
Experts are of the opinion that the government should ensure that the right structures are put in place to support the pronouncement.
In a chat with Blueprint Weekend, the CEO of Gubenco Nigeria Limited, Engr. Godwin Ubochi, said the federal government should, as a matter of urgency, ensure that there are good roads that link the rural areas to the city.
Similarly, Zainab Abubakar of the Department of Economics, Federal University, Dutse, Jigawa state, said aspiring to be self-reliant was good, but certain things needed to be put in place.
The CBN is not lacking in this respect as it has the capacity to implement whatever policy it embarks upon; and the figures are there for all to see.