Duty-free grains a potential catastrophe for 2024/2025 farming season

One of the things President Bola Ahmad Tinubu will be remembered for is his quick response to Nigerians’ outcry. He does this by addressing Nigerians in a national broadcast. He echoes in his speech that he feels the pains being experienced and takes full responsibility. He calls on the Nigerians to endure as the pains […]

One of the things President Bola Ahmad Tinubu will be remembered for is his quick response to Nigerians’ outcry. He does this by addressing Nigerians in a national broadcast. He echoes in his speech that he feels the pains being experienced and takes full responsibility. He calls on the Nigerians to endure as the pains are temporary but the long-term benefits of those pains are worth the present ephemeral hardship. Yes, some of us with skimpy knowledge of political economy believe his assertions.

For Nigeria to get out of the present economic quagmire, tough, difficult and timely decisions need to be taken. The president believes he is upholding some of those decisions taken by past administrations and he is going further to take more. Unfortunately, some of the decisions taken were not timely, but it is better late than never.

Nigeria has operated many unsustainable economic policies since the beginning of oil exploration in the 1950s. Nigerian productivity in all sectors (except importation) of the economy nosedived and an export-driven economy gradually substituted an import-driven economy which led the country to the present catastrophic hyper stagflation.

As part of Mr President’s response to Nigerians’ outcry on skyrocketing prices of our staple food, he recently announced a 150-day import free on most of our staples: maize, husked brown rice, wheat, and cowpea (beans) to curb the hyperinflation. We thank Mr President for this gesture. However, we are calling on the president to, as a matter of urgency, cancel that policy for three important reasons.

Firstly, the timing of this policy is completely wrong and will ensnare our farmers in a debt trap. Nigerian farmers had borrowed heavily to buy fertilisers and other farm inputs at the highest rates in our nationhood history and they often repay these debts with the agreement of the period of harvest, usually, November to January.

Now, the 150-day duty-free import for these staples with a 14-day operational ratification period will be five months 14 days from the day of the announcement, July 08, 2024, and it will span the Nov/Jan harvesting periods for Nigerian farmers to pay back their debts. Recall, prices of farm produce are generally at their lowest levels during the period of harvest. The tax haven will flood the market with cheaper foreign food items which will further drive down their prices. Consequently, the farmers will end up selling these food items at pathetically lowest prices.

This period will significantly decrease the amount of money the farmers will earn from their produce and may either force them to sell off everything they produce to enable them to settle their debts or be at the mercy of their creditors if the produce fails to pay back their debts due to exceptionally lower prices.

The reason above is what led to recent farmers’ protests across Europe in response to the EU import duty-free on Ukrainian grains into the EU countries as part of their economic gesture to assist Ukraine raises money. The duty-free importation makes Ukrainian grains cheaper than those ones produced locally and this forced many local farmers out of the market. This shows that policies with the potential to lower the prices of some commodities financed at a higher rate will definitely decrease profit merging and can impoverish the producers of such commodities.

Secondly, fertilisers and other farm inputs the farmers used for the 2024 farming season were obtained from laissez-faire market forces without accountable government interventions. I remember a bag of Fertiliser, as of February/March was hovering around N25,000 to N28,000 in Zaria where I reside.

As we ushered in the first rain in April, prices began to rise geometrically, daily and today, a bag of fertiliser is sold at between N48,000 and N67,000; depending on the brand. Thus, Mr President ought to have made duty-free imports for fertilisers and other farm implements. Policies should be more production-driven than consumption-driven. This would have encouraged more people to farm and would help produce a surplus that would directly bring down the prices of those food items.

The last reason is what, I believe, explains the capability trap syndrome (persistent implementation failure) of the Third World. Whereas a tax-free window for desperately needed commodities works for countries with tolerable corruption, it hardly works for countries with institutionalised corruption like Nigeria. This has two ramifications.

First, the businessmen will cash in on this quick-fix approach of the duty-free window for importation of these food items to bring in what is approved but hoard them. They will begin to release these food items to the market when the duty-free window expires, say February. If the government sets up a task force to prevent this incidence, the officials of the task force will also cash in and begin to collect kickbacks for their benefit to the detriment of the nation.

This is an open secret with the premium motor spirit (PMS, popularly known as petrol) hoarding across the country during scarcity. Yes, they do stage-manage one or two hoarders as saboteurs of the government’s well-intended policy with media hype, but the reality is that many hoarders operate brazenly in the eyes of law enforcement officers.

Second, the licensed importers will bring in their allocation, or even excess, to the country and begin to smuggle them out to the neighbouring countries as was done during heavy PMS subsidies.

Our dear President, cancel this policy as it is a quick-fix approach. Focus on the long-term pragmatic agenda to address overarching national problems. Quick fixes have never solved any national problem anywhere in the world, including Nigeria. They only produce short-term fantasies. This can be seen in all the quick fixes that have been used by past administrations and your administration to strengthen Naira against hard currencies, US dollar, pound sterling and euro.

Within a few days of the implementation of those policies, the news was everywhere that the policies were working as Naira was seen gaining value against the hard currencies. One week or so afterwards, the naira began a free fall against the hard currencies.

The policy will certainly produce the envisaged effect of lowering the prices of those food items but at a more disastrous effect on our farmers than the PMS subsidy. Unlike the PMS subsidy which was argued to benefit fewer individuals than the generality of Nigerians, this policy will have the added effect of making our farmers insolvent this year and will discourage borrowing to finance the 2025 farming season. They might not have recovered from the effect of this policy on them and they will be hesitant to borrow for the 2025 farming season as they may think a similar fate awaits them somewhere. Policies should be more production-driven than consumption-driven.

God bless the FRN

 

Tauheed is of the Department of Veterinary Pharmacology and Toxicology, ABU, Zaria [email protected]