by Wandile Sihlobo | Feb 3, 2020 | Africa Focus
On the 14th of August 2019, Nigeria announced that there would be restrictions on food and agricultural imports in the country. President Buhari took to Twitter to explain his rationale behind this step (see here). In summary, President Buhari wants to improve Nigeria’s agricultural production. His theory is that “restricting food imports, in the face of solid domestic demand will be a catalyst for domestic production”.
This was a bold move considering Nigeria being a notable importer of agricultural and food products. Over the past five years, Nigeria’s agricultural and food imports averaged US$4.7 billion, as shown in Exhibit 1 below. The products on top of the imports list are wheat, sugar, milk, palm oil, sauces and seasonings, bottled water, apples, pears, maize and vegetables oil.
Exhibit 1: Nigeria’s agricultural trade
Source: ITC, Agbiz Research
There is a potential to reduce the imports of some of these products, but this won’t be an overnight event like the Nigerian government had hoped. This will take years of investment in agricultural production and value chain, something that seems to be lacking as far as I can tell.
So, introducing a ban on imports of food might have been an oversight, perhaps the Nigerian government should have introduced import quotas and adjusted them along with improvement in production (to be clear, this is not something I particularly desire, but it could have worked for achieving the government goal).
Nevertheless, the negative impacts of the drastic policy of restricting food imports have now come to light. Bloomberg, a news organization, reports that staple foods’ prices, such as Jollof rice, have increased by 70% since the introduction of this policy in August 2019. What’s more, Nigeria’s overall food price inflation accelerated to a 20-month high in December 2019, reaching 14.7% y/y.
Nigerian farmers might be happy with these measures and adjusting production somewhat – something that government aims for. But this is coming at a heavy cost to Nigerian consumers.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Aug 19, 2019 | Africa Focus
The headline of this post captures the consistent question I kept getting from folks after publishing an essay arguing that the recently launched African Continental Free Trade Agreement would potentially open additional avenues for South African products to destinations where the country hasn’t largely participated in over the recent past.
So for a background; on 14 August 2019, we learned that Nigerian President, Muhammadu Buhari, has instructed the country’s central bank to stop providing foreign currency for food imports. President Buhari took it to Twitter to explain his rationale behind this step (see here). In brief, Buhari wants to improve Nigeria’s agricultural production and attaining more food security. And his hope, I think, is that a reduction in imports in the face of solid domestic food demand will be a catalyst for domestic production.
From a South African perspective, Nigeria is potentially an important market because of its purchasing power and population. My hope, as I explained in this essay, was that countries such as Nigeria would in future be areas that South Africa would have to expand its agricultural footprint under the African Continental Free Trade Agreement. This might still hold, but it is not clear how long will the Nigerian government restrict the foreign exchange for food imports.
As things stand, Nigeria’s action will have minimal impact on South Africa’s agriculture and food industry. Over the past five years, Nigeria accounted for a mere 2% of South Africa’s agricultural exports to the African continent. The products involved are apples, pears, prepared food, wines, grapes, fruit juices, sauces and seasonings, amongst other products. While these are high-value products, it’s a small share of South Africa’s agricultural (and food) exports that goes to Nigeria and can be diverted to other markets within the continent where South African has a footprint or in the global market.
What will be interesting to watch over the next few months is whether Nigeria succeeds in this policy approach (Let us face it; there are better ways of improving one’s agricultural sector than limiting foreign exchange for imports. This is a topic for another day). Over the past five years, Nigeria’s agricultural and food imports averaged US$4.7 billion, as shown in Figure 1 below. The products on top of the imports list are wheat, sugar, milk, palm oil, sauces and seasonings, bottled water, apples, pears, maize and vegetables oil.
Figure: Nigeria’s agricultural trade
Source: ITC, Agbiz Research
There is a potential to reduce the imports of some of these products, but this won’t be an overnight event. It will take years of investment in agricultural production and value chain. I will revisit this topic in a few months’ time when we have some evidence on how this policy approach has been accommodated by the Nigerian people and businesses.
The bottom-line view is that this development will have minimal impact over the foreseeable future to farmers in South Africa.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
