President Muhammadu Buhari’s recent directive to the Central Bank of Nigeria(CBN) that it should not grant the much sought after Forex to importers of sundry food items has expectedly generated divergent responses from concerned Nigerians. Not left out of the heated debate are top-notch economists and understandably so.
The new policy appears noble and patriotic on the surface of it, at least to galvanize local food production, enhance food security and generate employment. That Nigeria has been an import dependent nation ever since the oil-boom days is stating the obvious. But it should not be encouraged by any serious administration.
A country that is supposed to be Africa’s largest economy still imports red palm oil, with which it once controlled 40 % of the global market in the sixties but has since drastically dropped to 1.8% in the New Millennium! Besides, it still imports all manner of fish species, stock fish, canned fish, milk, rice, vegetable oil, tomato paste and even toothpick! That Nigeria has the capacity to locally produce these is what must have left President Buhari outraged to the point of outright ban of their import.
In fact, he has vowed that the foreign reserve will be used strictly for diversification of the economy. And not for encouraging more dependence on foreign food items. But it goes much deeper than it seems. To begin with, Forex comes essentially as a short form for ‘Foreign Exchange’. It means the foreign currency one obtains from the bank in exchange for the hard earned Naira. It is the dollar, pound or Yuan one requires to do business outside of Nigeria’s shores.
One’s first response was that of surprise rather than shock, given the antecedent of several anomalous policy posturing by the current administration that have underlining politicking than being people-oriented. The wars waged against the twin evils of corruption and insecurity attest to this. The emerging economic scenario of the ban on Forex for food import, laudable as it is therefore, throws up some fundamental questions.
For instance, does the CBN have the legal or constitutional authority not to grant Forex to food importers? No! As Professor Kingsley Moghalu, a former Deputy Governor of the CBN recently reminded Nigerians: “The Central Bank act of 2007 makes it clear that the bank is independent. It is not supposed to be taking direct instructions from politicians. Moghalu is therefore, miffed by such directive. Said he: “The trajectory in this administration is that we have seen a very clear tendency for the president to direct people. Increasingly, Nigeria’s institutions have lost independence.” Well stated. But as usual, Nigerians may have their say but our president is likely to have his way, again! What manner of democracy is this, you may be wondering?
Should the president give a military-like directive to the CBN when it comes to economic matters? No! But Mister President has ordered the CBN Governor, Emiefele: “Don’t give a cent to anybody to import food into the country”!
Worried about this, Bismarck Rewane, an economist and the head of Lagos-based consultancy Financial Derivatives, also recently reiterated the fact that the apex bank is supposed to be independent. Did this policy emanate from a holistic, cross-pollination of ideas after the rubbing of minds from the relevant stakeholders such as farmers, food processors, marketers, the Customs Service as well as the Ministry of Agriculture across the country? It is a vehement nay again! It came up without their credible input. Yet, there is more to worry about.
How would this policy directive work effectively against the dark backdrop of epileptic power supply needed to enhance the capacity of food processing and preservation by the Small and Medium Scale Enterprises down to the rural areas, where the farm produce come in large amounts? How would it assist the value chain of food processing, preservation and marketing? As the much-respected economist, Bismark Rewane, recently highlighted, import controls on rice, imposed even as local farmers fail to meet demand, have kept prices artificially high and led to smuggling from neighbouring Benin Republic into Nigeria. What with over one thousand porous borders, inadequate personnel of the Customs Service to checkmate the expected upsurge in smuggling? Add these to the flourishing black market for Forex and the cloudy economic picture would start to clear a bit. As an observer stated: “If you want Forex for your palm oil or plastic rice henceforth, you may want to look the way of the Abokis or Mallams down the street corners. The banks who take orders from the central bank, will no longer listen to you”. Notwithstanding, there are still questions waiting for answers.
How would the policy mitigate the scourge of poverty, pitched against waves of insurgency, banditary and the killing spree of innocent farmers by fully armed Fulani herdsmen? That such mindless killings affect largely agrarian states in the North-East, the Middle Belt that has since snowballed to the North-Western states should be worrisome indeed.
Perhaps, Mister President must be waving the abracadabra magic stick! It is only in Nigeria’s aberrant brand of democracy that we have a centralized economy, where the federal government controls resources meant for state governments. In more organized societies issues such as education, healthcare delivery, agriculture, transportation and much of infrastructural development should, ordinarily be the duty of the state governments. There are other implications in the implementation of this directive.
As Rewane recently told Reuters, foreign exchange restrictions for food imports could backfire after Buhari signed up to the African Continental Free Trade Agreement (AfCFTA) in July, 2019. One of AfCFTA’s modalities is to create a continent-wide free trade zone where tariffs on most goods would be eliminated. “At this point in time these rules will be manipulated in the interest of smugglers and their accomplices,” Rewane surmised and he is right on point.
So, what is the way forward? The president should in the national interest and to fast track a more impactful economic gain for the people give a nod to the holistic restructuring of this country. That would enthrone true fiscal federalism and stop all the long-winding self-deceit. Even states that he is boastful of, with huge returns in rice farming such as Kebbi, Ogun, Lagos, Jigawa, Ebonyi and Kano would still do much better if they control their resources, instead of going cap-in-hand every month to collect crumbs from the masters’ table.
His policies should emanate from the stakeholders’ input and backed by law instead of command- and- obey structure. Besides, he should be mindful of the impact of such policies on the people, take actions to ensure security and regular power supply instead of putting the cart before the horse!