Assessing Nigeria’s Quest for Forex Ban for Food Importation
Peter Uzoho writes on the need for engagement of stakeholders before the federal government implements its plan to restrict foreign exchange for food importation
Public policy analysts and experts have advised the federal government and the Central Bank of Nigeria ( CBN) to ensure industry stakeholders are properly engaged in their plan to restrict access to forex from the central bank’s regulated window for the importation of milk and food.
The experts gave the advice recently at the fourth edition of the Regulatory Conversation, with the theme: “Foreign Exchange Restrictions on Food Imports and Implications for Regulating and Growing the Nation’s Economy,” suggested that the central bank should consult widely with the stakeholders in order to find a way to achieve a positive outcome for the country.
The event was organised by the Integrity Organisation/ Convention on Business Integrity in conjunction with Proshare, the Lagos Chamber of Commerce and Industry, BusinessDay, and ActionAid Nigeria.
Speakers at the panel included the founder of Centre for Values in Leadership, Prof. Pat Utomi; Publisher of BusinessDay, Mr. Frank Aigbogun; Director- General, Lagos Chamber of Commerce and Industry ( LCCI), Mr. Muda Yusuf; a member of Manufacturers Association of Nigeria ( MAN), Mr. Oluwasegun Oshindipe; official of the Consumer Protection Council ( CPC), Mrs. Sussy Onwuka; and Founder of Proshare and moderator of the discussion, Mr. Olufemi Awoyemi.
President Muhammadu Buhari recently disclosed plan by the country to stop providing foreign exchange for importation of food into the country.
A statement by a presidential spokesman, Mallam Garba Shehu, had quoted Buhari as saying the foreign reserves would be conserved and utilised strictly for diversification of the economy, and not for encouraging more dependence on foreign food.
“Don’t give a cent to anybody to import food into the country,’’ he said.
According to the president, some states like Kebbi, Ogun, Lagos, Jigawa, Ebonyi and Kano, have taken advantage of the federal government’s policy on agriculture with huge returns in rice farming.
He, therefore, urged more states to embrace the ongoing revolution in agriculture to feed the nation.
“We have achieved food security, and for physical security we are not doing badly,’’ he said.
Similarly, the CBN Governor, Mr. Godwin Emefiele, recently confirmed the move by the regulator to restrict milk importation into the country.
According to the Bank, the country spends between $ 1.2 billion and $ 1.5 billion annually on milk importation, which it described as unacceptable.
Owing to this, Emefiele, said domestic production of milk had the potential to reduce recurrent farmer-herder clashes, which have stifled the growth of the agricultural sector.
Emefiele had explained: “We believe that milk is one of those products that can be produced in Nigeria. Milk importation has been going on in Nigeria for over 60 years. If you Google West African Milk or Friesland Campina today, they say that they have been importing milk and that they have been in Nigeria for over 60 years.”
But the Director, The Convention on Business Intergrity, Mr Olusoji Apampa, argued that though the forex restriction for food and milk importation were aimed to create more local jobs and save forex, it may accentuate pain for the poor without palliative or remedy.
Apampa said the forex restriction may also create super profits for special interest groups suspected to have captured the regulator.
He added that the problem for industry would not be solved in the short- to medium term and costs would have to be passed on to consumers if the policy was implemented.
He stated that there was a need for inclusive business models that would improve access to good quality products by the poor, include the poor as producers earning higher incomes and employ the poor or partner with their collectives.
Furthermore, Apampa said the forex ban for food and milk importation would lead to a situation where dairy companies would start regressing with their value chain. He, however, noted in his presentation that the forex ban would lead to improvement in the market access for herdsmen, reduction in the farmer/ herdsmen clashes, creation of more jobs locally, and savings on forex.
Divergent Views Speaking on the planned policy, Aigbogun said there was need for the CBN to consult more with stakeholders and ensure that whatever comes out of the consultation reflect the wishes of the masses and the players.
“There should be a consensus that this policy is indeed the right one for Nigeria at this particular time. People should be given time to make the investment, because we are talking about private sector investment here,” he said.
He added: “People will need to do feasibility studies; they need to look at the entire value chain so that they will position themselves; they will need to look at things around packaging; they will need to then raise capital.
“Surely, they haven’t been given time to do that. Even if the goal of the objective can be understood, we are going about it in a very wrong way,” he added.
According to the newspaper publisher, “We have an issue here and the issue is one where the government or at least the central bank believes that we should be producing more milk locally.
“And I think that is just good. But you will then ask yourself: Before you get to the point of seeking to produce milk locally, are you able to produce more milk locally? Are you able to do it cost- effectively? Is that the best way to move the nation forward? Perhaps, yes.
“Where I have problem is in the communication. Has it been honest? Was there any consultation? Is the policy flexible enough? We are talking about a very vulnerable part of society.”
In his contribution, Yusuf said: “We have a situation whereby the CBN has taken over matters of trade market. It is a major problem and it is causing a great disruption.”
He noted that rather than address fundamental challenges in the nation’s business environment to make the nation globally competitive, regulators were busy doing otherwise.
“The regulatory environment is one of the biggest challenges we face currently in business. Surely, I have a feeling that the regulators mean well, because all these come under the ambit of the new wave of economic nationalism – you want to grow what you will eat, wear what you sew, do all sorts of things.
“It is a good intention and a noble objective. But the difference is in the strategy. How do you achieve it? But another issue is that there are too many regulations.
“We are talking about milk, but actually the bigger issue is the quality of regulatory environment. To do business with integrity in Nigeria today is a tall order.
“And unfortunately, we don’t seem to even learn from the failure of this kind of model or poor economic management. We have gone through this in the textile industry.
“We banned, we increased the tariff, we gave them intervention funds, our federal executive council members were wearing Made- in- Nigeria clothes, all of that. But did that revive the textile industries? The answer is no. We have not addressed the fundamentals,” the LCCI boss insisted.
For Utomi, he argued that the forex restriction on milk imports would not benefit the masses.
According to him, “We must try to understand the principles of trade. It just seems that the problem is that fiscal authorities have abdicated their duties and the CBN has taken over.
“What drives prosperity is production and not revenue. Revenues don’t create wealth, production does.”
Speaking further, Utomi said part of the problem was the lack of a national strategy.
“I have argued for a long time that the biggest risk of doing business in Nigeria is the regulatory risk.
“The regulator is more likely to kill a company than any market risk is likely to do in Nigeria.
“Seriously, we must try and understand the principles of trade. It just seems the problem is that the fiscal authorities have abdicated their duties and CBN has taken over.
“What drives prosperity is production and not revenue. Revenues don’t create wealth, production does. What are we going to be celebrating as a country? Is it this ban on FX for milk importation? If the logic of the ban on milk importation FX is right, let us ban also ban the importation of fuel,” Utomi added.
On his part, Awoyemi said: “With respect to policy on restriction, it should be about incentives, not restrictions. We should run an incentive-based economy, not one that is based on command.”
To Oshindipe, before a regulator would come up a policy, it should engage stakeholders in the sector.
“Milk production requires large capital outlay, specie of cow ( about eight of them), we don’t have good species here yet.
“So from the MAN’s perspective, the policy may look good, they are achievable but our position is that the CBN should set up a structure where stakeholders can sit and iron things out,” he added.
Onwuka, however, noted that in the short term, there might be pain, “but if the industry players can take it up, there might be change.”