The raging controversy over withdrawal of forex for food imports

Buhari rejects Nigeria Maritime University bill
President Muhammadu Buhari

There has been considerable controversy regarding the recent directive by the President, Mohammadu Buhari, to the Central Bank of Nigeria to stop allocating foreign exchange (forex) for food importation. Presidential spokesman, Garba Shehu, in a statement last Tuesday, said the President had asked the CBN to stop issuing foreign exchange for food importation so as to stimulate the growth of Agriculture, and to ensure food security.

The President himself confirmed the statement in Daura the same day while celebrating the Eid-El Kabir with APC governors. Seated at the dining table with the governors around him, President Buhari said he had directed the CBN to stop providing foreign exchange for importation of food into the country because of the steady improvement in agricultural production and attainment of full food security.

He told the governors that by so doing, foreign exchange would be conserved and utilized strictly for diversification of the economy, and not for encouraging more dependence on foreign food imports. As if talking directly to CBN governor, Godwin Emefiele, who was not part of the lunch party, Buhari said, “Don’t give a cent to anybody to import food into the country.”

According to the president, some states like Kebbi, Ogun, Lagos, Jigawa, Ebonyi and Kano had already taken advantage of the federal government’s policy on agriculture, and are making huge returns in rice farming. He urged other states to key into the ongoing revolution to feed the nation. Thereafter, the president declared: “We have achieved food security,” saying he was particularly delighted that young Nigerians, including graduates, had started engaging in agric. business and entrepreneurship, with many declaring good returns on their investments.

But while the president indulges in self-congratulations, the majority of Nigerians disagree with his assessment of the food situation in the country, and the consequent withdrawal of forex for food importation. Many see the president’s declaration that, “we   have achieved food security” as wild and delusive.

In a swift reaction to the president’s directive, Oby Ezekwesili, one of the presidential candidates in the last presidential election and former Minister of Education, said the president was living in a bubble, describing him as “a completely out-of-touch leader”.

Venting her discontent with the president’s action on twitter, Mrs. Ezekwesili wrote:  “A completely out-of-touch ‘leader’. He is cocooned away in the grandeur of @AsoRock where they serve him delicatessen and praise-sing to him: ‘ranka dede sir’, your agriculture policy is working wonderfully. All farmers in Nigeria are now billionaires & exporting to the US.”

Another presidential candidate in the election and former deputy governor of the Central Bank of Nigeria, Mr. Kingsley Moghalu, expressed regrets at the directive which he said was against the independence of the CBN. He said such an economic policy should not be imposed on the CBN by a political authority, and doing that shows that the apex bank has lost its independence.

“Nigeria’s entire economy appears to have been sub-contracted to our central bank, including industrial and trade policy. In the process the economy has fared poorly and the bank has lost its independence. This is sad,” Moghalu said.

Organized groups also reacted to the president’s directive.

The Lagos Chamber of Commerce and Industry (LCCI) described the action as ill-timed as the country is yet to attain self-sufficiency in food production. The Chamber advised President Buhari to exercise caution over his plan to stop foreign exchange allocation for food importation into the country. The Director-General of the Chamber, Muda Yusuf, cautioned the federal government against introducing policies that will disrupt investments and further worsen poverty level in the country, without due consultation with key stakeholders.

“It is not too good to be tinkering with policies the way we do because those things create a lot of problems for investors, particularly existing investors. Many of them have invested billions of naira into their business and suddenly, we have this kind of policy, there is no discussion, no engagement. I don’t think that is fair to the investors. And for prospective investors, it is also not a good signal because it will create an environment that people will perceive as highly risky from a policy risk angle,” he said.

The LCCI Director-General faulted the claim by the President that the country has attained full food security, saying that the cost of food is still high as the country currently lacks the infrastructure that will aid agricultural development.

He also noted that the CBN’s intervention in rice production has not been successful as claimed by those promoting the policy.

“I don’t agree that we have achieved food security. We cannot at this time say we are already food secure because the cost of food is still very high. The food component of inflation is always high and that is an indication that we still have challenges especially on the supply side. Productivity in agriculture is still very low. The security problem has been affecting a lot of farming communities across the country and productivity has been very low.

“There has been a lot of smuggling of rice. Official figure is one thing, the reality on ground is another thing. We cannot see official data for rice importation through the seaport because it has been technically banned but the reality in the market shows that there is still a lot of smuggling. Close to 40 percent of what we have in the market, if not more, are smuggled. So we have to be cautious the way we celebrate our success in the rice policy.”

The LCCI DG also pointed out that many of those who are in rice farming are still doing manual farming and processing. “If we don’t have very good mechanization of agriculture, it will be very difficult to achieve food security and so far, we have very limited commercial farming. It is one thing to farm, it is another to process and transport the produce, and they all have implication on food security,” he said.

On the other hand, the Manufacturers Association of Nigeria (MAN) described the president’s action as a welcome development. The Director-General of MAN, Segun Ajayi-Kadir, said there should be no cause for alarm over the president’s pronouncement. Appearing to speak for CBN, he said the CBN will not carry out a blanket implementation of the policy, but will situate it within ‘the current effort of the federal government’s fiscal policy at diversifying the economy.

He remarked that if properly managed, the move will affect the economy positively especially in conserving the nation’s foreign exchange and promoting reliance on local food production. “On the economy, it will have the effect of promoting reliance on local sources even for food processing and for consumption. It is a policy that will promote backward integration and conservation of forex and also boost our self-sufficiency,” he said.

The MAN boss, however, said there was need to clarify what the directive is all about and what categories of food imports that will be affected.

To the Nigeria Employers’ Consultative Association (NECA), the presidential directive on food imports would precipitate unprecedented smuggling of food products. The association’s Director-General, Mr. Timothy Olawale, told newsmen in Lagos that although the directive might be well intended, it leaves much to be desired in the absence of a buffer time for adjustment.

According to Olawale, Nigeria currently lacks the capacity to meet its local food demand, and the demand that will be created as a result of the directive will be satisfied through smuggling. He observed that with Nigeria recently signing the African Continental Free Trade Agreement (AfCFTA) which is intended to open up the borders, smuggling would become the order of the day.

”With the recently signed AfCFTA, Nigeria will further create a thriving market for other countries and will remain a dumping ground for imported goods.”

Describing the president’s directive as a ‘knee-jack’ action, he maintained that “a wholesale immediate withdrawal of forex without giving a buffer period for businesses to adjust and source for alternatives would boost smuggling activities. And this, he said, will have serious consequences for the economy.

He equally observed that the withdrawal of forex would decapitate businesses leading to loss of jobs and relocation of some businesses to neighbouring countries where they will bring the products to Nigeria under the cover of AfCFTA.

He said that the timing of the policy called for concern, saying that with consistent support and policy stability, local food production might meet demand and also provide foreign exchange through exports. He maintained that Nigeria currently lacks the capacity for sufficient food production to meet local demand.

On conserving foreign exchange, Olawale said that conserving foreign exchange through the withdrawal or ban of forex for food importation was not tenable. He said if Nigeria was desirous of conserving foreign exchange, it should stop the allocation of forex for the importation of petroleum products, and ban medical tourism in order to aid investment in Nigerian hospitals. The same action should also be taken on payment of tuition overseas.

The NECA boss submitted that “rather than withdrawal of forex for food importation and indeed, milk importation, a gradual withdrawal with a buffer period of not less than five years should be given.” This will ensure proper and strategic implementation of government’s agricultural promotion policy, he said.

He advised government to resolve the myriad of challenges facing the food production value-chain, including the distribution system for fresh foods, post-harvest losses due to a lack of storage system as well as the security challenges especially the menace of herdsmen.

While the controversy rages over the presidential action, the CBN said it will proceed with the president’s directive, but that the implementation will be in phases.

But after all said and done, the bottom line is that the ordinary citizens are not seeing the abundance of food the president is seeing. They cannot believe that Nigeria has attained self-sufficiency in food production when they cannot see the local food items in the market and at affordable prices.