Nigeria: Rising Cost of Agricultural Imports

28 September 2021

For a country blessed with vast arable land, the growing cost of agricultural imports is raising eyebrows across the land, moreso as there are no strategic interventions or policies aimed at achieving food security. Gilbert Ekugbe reports on the need for economic managers to prioritize investment in the nation's agricultural sector to reduce the rising import of agricultural products

Data from official records indicate that Nigeria's agricultural imports rose by 57.5 per cent to N532.39 billion in Q4, 2020 from N503.4 billion recorded in Q3, 2020, while agricultural exports declined to N55.77 billion in Q4, 2020 from N60.63 billion in Q3, 2020, representing an 8 per cent drop.

The latest report on foreign trade by the National Bureau of Statistics (NBS) identifies Nigeria's major agricultural imports as wheat, sugar, fish, milk and oil palm, while sesame seeds and cashew nuts accounted for more than half of the agricultural exports.

Surprisingly, the top five agro commodities imported into the country are commodities the nation has the competitive and comparative advantage to produce in commercial quantity only if the sector has been given the necessary support and encouragement.

According to the Flour Milling Association of Nigeria (FMAN), Nigeria, despite being a major market for wheat, produces a paltry 400,000 metric tonnes per annum, a figure that is 5.3 million short of total demand.

To stakeholders in the agricultural sector, this abysmal output makes it imperative for the present administration to as a matter of urgency, encourage the production of wheat by assisting local farmers to acquire improved wheat seed varieties and other incentives to boost production of the commodity.

THISDAY had reported that the growing insecurity in the wheat-planting belt of Nigeria was frustrating wheat farmers' productivity, a situation that requires the federal government to up its ante by addressing insecurity across the country.

For sugar, the annual demand is projected at about 1.7 million metric tonnes. However, Nigeria is reported to currently spend between $600 million to $1 billion on sugar import annually. Disheartening as it sounds, the Central Bank of Nigeria (CBN) in July stated that only three sugar refining companies who made considerable progress in achieving the agreed national sugar backward integration plan would be allowed to source foreign exchange from official window to import sugar into the country.

However, it is a policy such as this that discourage local and foreign investors from investing in the sugar industry and that explains why the production of sugar has continually lagged domestic demand, hence creating a huge supply gap for importation.

Although, the apex bank in its attempt to boost sugar production is collaborating with the National Sugar Development Council (NSDC), but the challenges confronting the sugar industry, which ranges from inadequate funding, unavailability of land, and lack of human capacity, among others, remain unaddressed.

Despite interventions by the government, agriculture remains constrained by poor infrastructure such as poor transportation and logistics, ports and border infrastructure and Information and Communication Technology (ICT), according to PWC.

Maximising the Special Agro-Industrial Processing Zones (SAPZs), Nigeria has at least one natural resource in all the 774 local government across the federation, which underlines the establishment of the SAPZs believing that this would go a long way to encourage value addition as against the usual practice of exporting the products raw.

The establishment of the SAPZ is an integrated development initiative aimed at concentrating agro-processing activities within areas of high agricultural potential to boost productivity and integrate production, processing and marketing of selected commodities.

Although, the programme scheduled to be flagged off in January 2022 had seen 24 states participate in the bidding process even though the Minister of Finance, Budget and National Planning, Dr. Zainab Ahmed said all the 36 states including the Federal Capital Territory (FCT) would be eligible to participate in the programme.

According to the Senior Adviser on Industrialisation to the president of the African Development Bank (AfDB), Prof. Oyebanji Oyeleran-Oyeyinka, who would be co-financing the project with its development partners, the SAPZ model is an explicit industrialization strategy to transform poor rural spaces into zones of prosperity, stem rural-urban migration, end human insecurity induced by herder-farmers clashes and provide employment to Nigerian youths.

Development of Infrastructure

Nigeria records N3.5 trillion in post-harvest losses on an annual basis due to the lack of proper storage facilities and the poor state of roads across the country. Notably known as a country with great supply of agricultural products, post-harvest losses is still a great concern as majority of its farm produce are lost to pest, rodents and deterioration due to lack of proper post-harvest process and storage.

Estimates of post-harvest food losses in the developing countries like Nigeria from mishandling, spoilage and pest infestation are put at 25 per cent this means that one quarter of what is produced never reaches the customers for whom it was grown. Fruit, vegetables and root crops are much less hardy and are mostly quickly perishable if care is not taken in their harvesting, handling and transport, they decay and become unfit for human consumption Estimation of production losses in developing countries such as Nigeria is hard to determine where a 50 per cent reduction in post harvest food losses in Nigeria will reduce the need for food importation, increase food supply without any further increase in the use of vital resources such as water and agricultural input and improve the livelihoods of farmers and agro processors.

The federal government should encourage and promote local manufacturers in design and fabrication of post harvest equipment and the urgent need for government to invest more in post harvest research.

The programme being implemented by government to facilitate the attainment of food security should be properly maintained and improved upon. The local government is closer to the farmer and so should be in the forefront in preventing losses by promoting the maintenance of food stocks at household and enterprise levels.

Also, food storage at government level is a buffer to ensure price stability in the system. The need for consistency in policy by agricultural policies cannot be overemphasised as only good policies can ensure viable national farm factors, which would provide food for the people and raw materials for agro-industries.

An integrated approach must be adopted in shaping policies and plans, determining strategies, formulating programmes and managing their implementation. The research institute must provide post-harvest technologies for harvesting, processing and storage of agricultural produce.

The technologies developed by research institutes for harvesting processing and storage should be available for local users at a reduced price, the research institutes should make their achievements known nationally and internationally to all those that can use their findings. There is need for research institutes to develop appropriate post harvest approaches and equipment. The research institutes/universities should also carry out extension programmes, training on postharvest technologies for farmers' agro processors at the rural areas.

Security architecture upgrade

In the 2021 Appropriation Act (the 2021 Federal Government Budget), expenditure on defence was allocated N840.56 billion, which is far higher than any other sector. In 2020, the Ministry of Defence received N878 billion. In the course of the year, another supplementary budget worth about N983billion was approved for the procurement of equipment for the military and medical infrastructure as well as COVID-19 vaccines.

This vote of resources to defence operations show the commitment of the government to make Nigeria a safer and more peaceful nation, but despite the increased financial investments, the security situation in the nation is still bedeviled by numerous challenges, apprehension, anxiety, disrupted supply chains, and increasing economic cost from the impact of insecurity, according to the president, Lagos Chamber of Commerce and Industry (LCCI), Mrs. Toki Mabogunje.

According to the 2020 Global Peace Index by the Institute of Economics and Peace, the economic impact of violence increased in 2019 to a total of $453.1 billion, or $433 for each person in sub-Saharan Africa. Insecurity does not only impact society, but it also reduces the positive benefits that security and peace bring to the macroeconomic performance of countries. Since 2000, countries that have improved in security and peace have seen an average 1.4 percentage points higher GDP per capita growth when compared to countries that have become less peaceful as measured by the Global Peace Index (GPI). Furthermore, the average inflation and unemployment rate for the countries with the largest security improvements were substantially lower than those with the largest deterioration.

Recommending solutions to achieve better results in tackling insecurity, LCCI stated that a key turning point should be to understand the causes of insecurity as well as to investigate the sources of social disorder and instability, noting that it is necessary to distinguish between different causes as they may require different approaches.

The Organised Private Sector (OPS) also stated the urgent need for the Nigerian government to address challenges of poverty, unemployment, and business failures, stressing that they are some of the factors fueling insecurity in the country.

"There is a need for collective and integrative security architecture by the federal, state, and local governments in Nigeria. This arrangement should produce a strong and coordinated presence at village, community, local, state, and federal levels with the responsibility of providing sensitive security information for security agencies in their areas of operation. This will assist in identifying criminals, their sponsors, and hideouts in the country," LCCI stated.

"There have been calls for open and frank dialogue as a critical factor in addressing the security challenges of the nation, using the media and stakeholders' forums as catalyst for mutual cooperation among citizens to end the crises. We urge the government to sustain the needed funding for defence operations to equip the military with advanced weaponry and intelligence infrastructure. These should be supported by heavy deployment of modern military intelligence technologies."

With a total debt stock of N35.465 trillion as of June 2021, Nigeria's debt profile has been tagged by many scholars as a time bomb waiting to explode. Even more worrisome is the fact that the present administration does not seem to apply the brakes on borrowing anytime soon. It is imperative that a nation in dire needs of foreign exchange should focus more on creating value for its agro commodities to earn the much needed hard currency rather than export its commodities unprocessed.

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