Sunday Michael Ogwu, Kayode Ekundayo and Peter Moses — President Muhammadu Buhari on Tuesday gave a directive to the Central Bank of Nigeria (CBN) to stop providing foreign exchange (forex) for food imports.
The directive, which was contained in a statement by his spokesman, has drawn reactions from experts and industry watchers; while some applaud the move, others are raising concern on the independence of the bank. Daily Trust, in this exclusive piece, dissects these views.
A renowned economist, Prof. Sheriffdeen Adewale Tella, speaking to Daily Trust in Abeokuta, welcomed President Buhari’s ban on access to forex for food importation, saying it would curb wastage of funds in that area.
The expert who is a Professor of Economics, equally said Buhari ought to have specified if the ban was placed on manufactured foods or not.
“It’s good if we are sure we have been able to cover ground. Maybe he (Buhari) is talking of the manufactured food because we import a lot of manufactured foods. If it’s for manufactured food, it is okay. But do we produce them here? So, if we don’t produce manufactured foods here, it can’t be a blanket ban.
“But, it’s good to ban some of these things so that we don’t continue wasting money that is not there. We can use the money to import raw materials for our industries,” Tella said.
However, the Head of Research at FSDH Merchant Bank, Ayodele Akinwumi, said the directive seemed to undermine the independence of the apex bank.
“The point is that, the way the message came could connote that the independence of the Central Bank of Nigeria is in doubt,” he said.
Akinwumi said the overall objective was good but the way the message came out was not proper because “taken literally, it will worsen inflation and increase poverty. Policy has to be well timed and we are not yet ripe for this.”
He said the president’s message ran contrary to the recently consented Africa Continental Free Trade Agreement (AfCFTA). “I would have thought that the president would pass such a message in a private conversation to the CBN governor by saying, “we think this sets of policies would benefit the economy.”
But the financial analyst argued that that kind of statement was not new, as the United States President, Donald Trump made similar statement recently directing the Federal Reserve Bank to immediately take measures to devalue the US dollar in reaction to China.
On the overall objective of the statement, he said: “What President Buhari is saying is, “Let us see how we can grow the local economy. The CBN Governor himself said the apex bank will restrict forex to certain food items.”
Food security: A concern for policy success
Some of the experts raised concern that Nigeria was yet to fully grow local capacity in food production, adding that food security has not been fully attained.
FSDH researcher, Mr Akinwumi advised the Federal Government to first ensure that the country grows local capacity in the production of food. He also noted that if the directive was heeded without caution, the nation should be prepared for an escalation in the price of food.
Equally, Mr. Laoye Jaiyeola, CEO at the Nigerian Economic Summit Group (NESG) said since Nigeria hasn’t grown a full food production capability, there could be negative consequences in the short term.
“We haven’t been able to do much in our agricultural production given the fact that our yield is still very low due to poor seedling, poor fertilizer, lack of extension workers, poor storages etc. For me, I’m an advocate of Made-In-Nigeria and backward integration, but are we not ready for it,” he said.
But it has its benefits. “In the long run, it is the way to go when we have fixed all the broken links in the value chain of agricultural production” Jaiyeola said.
Also commenting, Dr. Bongo Adi, an economist and lecturer at the Lagos Business School said, “I don’t know the evidence the president based his pronouncement on. But on a general perspective, we can’t use monetary policy tools to fight every problem we have in Nigeria. That is very bad. The CBN has become a development bank; CBN has become an investment etc. The CBN is doing everything. It’s an anomaly,” he noted.
He also said the president’s directive indicated he was interfering with the functions of the CBN. “The president is confirming the fears that he is interfering in the CBN activities by issuing a directive to the bank on what to do and what not to do,” he said, adding that was against the CBN independence and a violation of its independence.
Another economist with a development financial institution, in confidence, said such policy as proposed by the president “is a responsibility of the Monetary Policy Committee (MPC), which is an independent legally binding body outside the CBN itself.”
“MPC is not part of the CBN. And to underscore the importance of monetary policy, members who are not part of the executive committee members of the CBN have to be cleared by the Senate to ensure their capability, capacity, competence, integrity and so on. They are the ones that should provide policy direction as it relates to monetary policy,” he further noted.
He however clarified that on a larger scale, the government has an oversight responsibility on the direction of the economy, but that the word of caution was necessary.
“What the president should have done is constitute his economic team first; the team can sit and consider raising tariffs on imports for agricultural items. Side by side, government can then come up with incentive measures that support local production of agricultural items,” he advised.
Employers’ group seeks 5yr process
The Nigeria Employers’ Consultative Association (NECA) on its part said a wholesale immediate withdrawal of forex without giving a buffer period for businesses to adjust and source for alternatives will only breathe life to the unresolved monstrous smuggling activities, with serious consequences for the economy.
NECA Director-General, Mr. Timothy Olawale, in a statement said, “If we are desirous of conserving foreign exchange, the government will do well to stop the allocation of forex for the importation of petroleum products, ban medical tourism to aid investment in Nigerian hospitals, withdraw forex for payment of tuition in foreign universities to enable the resuscitation of the perpetually under-funded Nigerian universities amongst others.”
Olawale argued that rather than an instant withdrawal of forex on food importation and milk importation, a gradual withdrawal with a buffer period of not less than five years should be given, stressing that that will ensure the proper and strategic implementation of the government’s ‘Agricultural Promotion Policy’ that was established less than five years ago.