One of the key points raised by President Muhammadu Buhari in his Independence Day speech was a seemingly in-congruent relationship between the country’s food production capacity and the continued rise in the prices of food items.
According to the president, while the country’s food production capacity has increased, food prices have been going up.
He blamed this on what he described as “artificial shortages created by middlemen who have been buying and hoarding these essential commodities for profiteering”.
He proffered a solution, specifically the question of rehabilitating the country’s National Food Reserve Agency, an order that he gave to the Ministry of Agriculture and Rural Development to undertake. He added that the ministry is to work with security agencies, the Nigerian Commodity Exchange, and the National Assembly to find solutions to the problem.
This presidential order implies that right now Nigeria does not have a working or an effective strategic food reserve, or that the physical facilities have become inoperative or dysfunctional. Whichever is the case, what that means is that there are probably no food reserves now that the country can fall back on to meet emergencies.
Strategic food reserve management has become an integral part of modern economic management tools that nations employ to avoid becoming victims of other countries’ “beggar thy neighbour” policies. A strategic food reserve policy is as effective or important as a defect strategy because it makes a difference between a country’s defeat and success in the face of external aggression.
Such reserves form part of intervention measures by governments to address situations of market failure, which include cases, as in this situation, where the consumers’ welfare seems to be at variance with the output or supply condition.
But Nigeria’s current situation needs more context. Is the current food price hike really due entirely to hoarding? Nigeria’s strategic grains include such items as rice, millet, wheat, sorghum, etc. Where are they produced predominantly?
Anyone conversant with Nigeria’s geography and agriculture knows that these grains are mostly grown in the northern part of the country. “A large swathe of the northern countryside has been taken over by bandits, by kidnappers by the herdsmen, who are on a rampage, destroying farmlands, whether maize, or wheat, or rice,” says Dr. Bongo Adi, Senior Lecturer in economics at the Lagos Business School. So how do you stock food produced from those areas?
Food to be stocked in strategic silos first has to be harvested from the farms and evacuated to the sites where they are to be stored. This raises another question about distribution or logistics. How do you stock those grains when you have challenges on your supply network, plus the challenges in the production system.
“So, how are you going to stock the reserves? That is the question. We have not addressed that,” says Adi.
Perhaps Nigeria has to import the grains and then store them. While it could be an option, Adi notes that the country’s current fiscal position makes that option impossible. Yes, because even if the government would be willing to do that, current foreign earnings do not permit that.
He points out, for instance, that although the price of crude oil has risen in recent times, the fall in volume production has knocked off the benefits from a price increase. Brent crude oil sold for about $78.61 on Friday, October 1.
In the 2021 budget, the government set a target production of 1.86 million barrels per day, including a daily production of condensate of between 300,000 b/d and 400,000 b/d. It assumed a crude oil price of $40/barrel.
Besides, Nigeria’s continued dependence on importation is also robbing off negatively on the country’s foreign exchange position, again neutralising any potential benefits from crude oil price gains. So, as imports rise, import costs and value rise.
“So, even if we decide to import the grains, where are we going to get the money from? This is a government that is borrowing to fund the budget deficit of 2021,” says the economics teacher.
“ I am not talking about 2021 because they are now talking about selling assets and all manner of things to fund the budget. We are challenged about funding the budget. So when you talk about that, how are you going to marry things?”
Nigeria is challenged with insecurity, and if the government does not address that, there is nothing that can be done about the economy, says Adi. “The economy is already on its knees.”
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