The Central Bank of Nigeria first implemented the restriction of official forex sales on the import of certain commodities.
In June 2015, the CBN restricted access to forex for 41 items at the Nigerian foreign exchange market which it said can be produced in Nigeria.
This was done to encourage backward integration and import substitution. The list later grew to 43 as more items got on the list.
Top among the items on the list are agricultural items like rice, chicken, eggs, turkey, palm kernel/palm oil products/vegetables oil and tomatoes/tomato pastes. Besides rice and cassava, the CBN is supporting value chains in maize, tomatoes, cotton and lately palm produce.
Even the restriction on forex to fertilizers was implemented by the CBN. In a circular signed by the Director, Trade & Exchange Department, Ahmed Umar, the CBN said the inclusion of fertiliser as not valid for foreign exchange became effective from December 7 2018.
The CBN rationalized the policy as unnecessary drains on the country's foreign exchange reserve.
According to a recent CBN report, the dogged implementation of the bank's policy of restricting access to forex from the Nigerian forex market to what is now a list of 43 items, has no doubt led to huge improvements in the domestic production of those items and a reduction in Nigeria's import bill.
"From an average of about $5.5bn, the nation's monthly import bill had fallen consistently to $2.1bn in 2016 and $1.9bn by half year 2017 to less than $1bn in 2018, thereby reversing the trend where imports were a drag to the nation's foreign reserves."
"Going by figures obtained from various official sources, the volume of rice importation into Nigeria (in metric tonnes) declined drastically in 2018, to the extent that India and Thailand, two dominant rice exporters to Nigeria, were only able to export about 5,161 metric tonnes and 426 tonnes of rice respectively to Nigeria as at the end of 2018," the CBN said.
The CBN indicated that the policy also led to a boost in the local production of other crops. "The growth of companies such as Psaltry International Limited (PIL), an agro-allied company based in Oyo State, the Baton ... and the likes are clear testimonies to how the forex restriction policy has helped to create jobs locally, improve the wealth of Nigeria's rural population, improve industrial capacities and ultimately attain economic growth in Nigeria" the CBN stated.
In August 2019, President Muhammadu Buhari gave a directive to the CBN to stop providing foreign exchange (forex) for food imports.
The president reiterated his position on September 10, 2020 where again he directed the CBN not to give a 'Kobo' of the country's reserves for food and fertilizer imports.
Some commentators have remarked that since Nigeria hasn't achieved a full food production capability, there could be negative consequences in the short term on food security.
An economist, Mr. David Aku, observed that Nigeria's crops yield are still low due to poor seedlings thus might not be able to feed itself from local food supplies. He also raised concerns about poor storage, poor food processing capacity, and preponderance of crude agricultural techniques as temporary set back.
"We haven't been able to do much in our agricultural production given the fact that our yield is still very low due to poor seedling, poor fertilizer, lack of extension workers, poor storages etc. For me, I'm an advocate of Made-In-Nigeria and backward integration, but are we not ready for it," he said.
Also commenting, Dr. Pascal Ebhohimen, a public policy strategic analyst, and former director at the NDIC, said, "It is a good policy not to allocate our scarce foreign exchange earnings on importing food items we can produce here, so long as these food items have no export market relevance and so the country would not be able to earn foreign currency."
Secondly, he said more local producers or farmers will be encouraged, provided they are empowered, and so become eager to plan ahead and produce food items for domestic consumption.
While realising that there is food wastage due to poor storage facilities in this country, he said the government should support farmers by building silos or preservation centres.
Dr. Ebhohimen, advised that for the policy to work, "local Investors should be encouraged through low interest loan facility to set up fertiliser plants in the country."
He noted that food security and the economy are in no way going to be affected by looking inwards in the production of certain agricultural products.
He also said research & development in agriculture should be intensified to boost varieties and quantity of food items. Soft loans granted to local farmers, and activities of off-takers in the agricultural value chain intensified.
He said more Nigerians should show interest in farming while encouraging foreign investors in the sector. "With foreign investors in the sector, emphasis should be in the production of agriculture products that have export relevance. The purpose is to earn foreign exchange and build up our external foreign reserve in addition to oil export earnings" he stated.
On the way forward, he said, "a more integrative approach in terms of national development is what is required. Agricultural development to make the desired impact on food security and the economy must be addressed within the ambit of national development by considering the place of education in terms of the required manpower in the sector, technology, banking and finance in terms of loans and advances, national security to life and property and addressing the issue of insurgency, and herdsmen."
Also commenting, a Professor of Finance and Capital Market, Prof. Uche Uwaleke, said President Buhari's directive was in furtherance of the government's efforts at supporting local industries including the border closure.
"Without a doubt, import of food items will increase supply and reduce food inflation in the near term. But it will not only deplete external reserves but has the potential of suffocating domestic firms. So, it is not sustainable and therefore not in the long run interest of the economy."
But the potential benefits and the impact of what can pass as a blanket ban on food imports will be manifest in the short, medium and long term.