Nigeria's grain prospects challenges food security

14.04.2017

Nigeria's grain production began to stagnate with government of Nigeria’s lowering support to agricultural efforts over the last two years. The country's devaluing currency is expected to sustain rising domestic food prices, the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS) said in an April 6 report. Interestingly, the same factor makes food prices relatively cheaper for consumers in neighboring countries, resulting in increasing demand for Nigerian grains in countries around the Sahel region. These emerging developments could indicate potential threats to Nigeria's food security.

Sources indicate that competition from neighboring countries has promoted informal exports of Nigerian grains by 40%; reportedly, the country's highest agricultural export level over the last 15 years.

According to the FAS, Nigeria's market year 2017-18 production for wheat, rice, corn and sorghum is set at about 16.3 million tons, representing a slight drop from the current market year 2016-17 estimate of nearly 16.5 million tons. Overall market year 2017-18 imports will likely decline by nearly 3% to 6.6 million tons from 6.8 million tons in market year 2016-17. Market year 2017-18 exports are noted at 850,000 tons, an increase of more than 21% over that of market year 2016-17 due to growing demand in neighboring landlocked countries, the report said.

Over the last two years, market prices have been doubling just as costs of farming inputs such as fertilizers, farm labor and agro-chemicals. Declining purchasing power and the Nigerian government’s  lack of funds to continue with grain purchasing for strategic grain reserve also are discouraging farmers from increasing production. According to the FAS, there are few farmers who are able to export to neighboring countries, where prices are higher and cover local production costs; however, the majority remains to be mostly subsistence farmers.

The Nigerian government continues to face challenges with conserving the country's depleting value of its local currency, the naira, despite measures initiated by Central Bank of Nigeria (CBN) in 2015 that excluded importers of 41 selected goods (including rice) and services from officially accessing foreign exchange. The excluded items classified as “Not Valid for Forex” would not be funded at the interbank from proceeds of exports or supported with port clearance documents issued by CBN — even when foreign exchange is procured from the legitimate market at high costs. This translated into a technical barrier to trade for the affected products.

Nigeria continues to employ trade restrictions such as high tariffs, levies, import bans and other measures to protect its domestic agriculture.
 
In June 2016, the Nigerian government reviewed the earlier foreign exchange policy and replaced it with the current “single rate flexible” forex measure. Through this action, the government aimed to increase its forex supply. However, rising demand continued to outpace the increasing supply, leading to continued local currency depreciation in the informal market. Presently, the exchange rate on the informal market is around 500 naira to $1 compared to the official rate of 320 naira to $1, the report said.

Nigeria continues to employ trade restrictions such as high tariffs, levies, import bans and other measures to protect its domestic agriculture, despite the country’s membership to the World Trade Organization (WTO). The country’s current trade-threatening measures on essential grains such as rice, wheat and maize will likely continue in the upcoming year. According to the FAS, Levies continue to be imposed on wheat imports, and this will likely remain in force along with the technical import ban on rice and other food/agricultural items classified as “Not Valid for Forex.” Import ban on corn was lifted about 10 years ago; however, “special clearances” are required before any buyer could import corn — a situation that is expected to remain during market year 2017-18.

“In late January 2017, the Nigerian government re-launched the Growth Enhancement Scheme (GES) to provide support to farmers through subsidized agricultural inputs,” the FAS said. “Despite this news, rural/small holder farmers and cottage agribusinesses, who contribute to over 80% of the country’s agricultural production, continue to note the absence of government support which helped increase agricultural productivity under previous administrations and better economic conditions.”

Conversely, the few large-scale agri-businesses note that the Nigerian government’s withdrawal of support, especially the Growth Enhancement Scheme, allows them to better plan as government support was typically provided towards the end of the production season when it was least beneficial.


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