The primary aim of every nation is to be self-sufficient in food production to feed its teeming population. Nigeria cannot be an exception. This is more expedient as the nation’s oil wealth dwindles following the glut in the crude oil market which in near term may limit capacity to import food to augment local production.
The abundance of petrodollars resulting from the oil boom era that started in the early 1970s led to gradual shift in our taste from local to imported food items and neglect of the nation’s farmers and food processors. We became a food-importing country and expended over N2 trillion or about $12 billion on food imports annually until lately .The sharp drop we are witnessing in our food import bill of recent was due to the considerable success of the government’s agricultural programmes in the past decade and the significant drop in global commodity prices. The sizeable success of the medium-term agricultural transformation agenda (2011-2015) is an indication that we could achieve our own farm miracle soon, like Brazil, an oil-producing and tropical country which in 2010 was celebrated as the first non-temperate country to become a net exporter of food. The end of the oil boom era may, however, halt the process unless we make conscious efforts to look beyond the present situation in funding and providing support for our agriculture.
We have had over 50-percent drop in crude oil price (Brent) from its peak of $115.19 per barrel on 19 June, 2014 to $46.49 per barrel as at 20 January, 2015. Chances of early recovery, like we had in the 2008 crude oil price collapse, look slim because of the causative factors. The previous crash was due to production disruption restoration and fall in demand due to the recession that followed the global financial and market crash of 2007/8. The present causative factors are not likely to abate soon. This is because they are rooted in the global glut in the market. There is more production than demand because of entrance of new non-OPEC producers following the US shale oil and gas boom and slow recovery of China with the attendant subdued oil consumption. The development portends serious danger for the health of our economy and our quest for self-sufficiency in food production. It is therefore expedient to examine how the changing oil market fortune will affect our dream to be the second tropical country to be not only self-sufficient in food production but a net exporter.
Petrodollar while the boom lasted was responsible for over 90 percent of Nigeria’s foreign exchange earnings and close to 80 percent of the budgetary expenditure. The receding foreign exchange earnings means that the nation’s reserves, which at the peak of the boom could only fund about nine months imports, will have to be drawn to defend the naira and fund essential imports. The naira has been devalued by 8.4 percent while the base interest rate has been raised to 13 percent to reduce demand for credit, curtail foreign exchange demand and stabilize the economy. The countervailing fiscal measures are being expected with the 2015 national budget. There is no doubt that the size of the budget will be reduced as the benchmark budget exchange rate of $65 may be adjusted further based on the prevailing crude oil price. Austerity measures to reduce imports, cut waste and curb demand will be put in place to balance the budget. As exchange rate is depreciated to reduce demand for imported goods, the cost of imported raw materials for agricultural production and other industrial goods will escalate. Food prices will go up just as the inflationary rate will increase.
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The distributable federal revenue to the three tiers of government through the federation account has dropped by over 50 percent since the outset of the crude oil market crisis and that has led to a situation where the three tiers of government cannot balance their budgets and have to resort to drastic reduction in spending. In spite of the oil boom in the past, Nigeria has been spending less than 3 percent of its national budget on agriculture whereas a nation like Malaysia, despite its level of development, has been spending over 25 percent of its budget on agriculture for close to 30 years. African countries like Niger, Mali, Kenya and Tanzania have been spending over 10 percent of their annual budgets on agriculture in compliance with the directive of the African Union, through Comprehensive African Agricultural Development Programme (CAADP), that 10 percent of members’ national budget should be devoted to agriculture for the sector to grow at 6 percent per annum by the end of the year 2015.
The good news about Nigeria is that spending on agriculture is moving away from fertilizers to development areas such as irrigation, research, extension services and price support. The imminent end of oil boom is a clarion call that a greater portion of budgets at the three tiers of government must be devoted to agriculture. We should aim to allocate not less than 20 percent of our budgets to agriculture. The medium-term agricultural transformation agenda should translate to a 10-year food plan and should have measurable goals and specific targets for each of the crops and livestock being produced in Nigeria. We should leverage on the experience of the agricultural transformation agenda which had smart goals, measurable targets and milestones. A lot of government funding is required to create enabling environment for the private sector to continue to play leading role in the five segments of agribusiness value chain of input supply, farm production, storage processing and distribution. The government in collaboration with the private sector must seek creative means to fund research, extension services, irrigation, rural infrastructure and input supplies. Farmers must be supported to access inputs, credit and insurance, especially when rare low frequency and high severity disasters such as the bird flu occur. Government taxes and tariffs as we adjust to current realities must promote and not discourage agricultural production.
The global attention given to Brazil’s feat as the first tropical country to be a net exporter of food means that there are bio-climatic constrains to food production in the tropics. This is further compounded by the underdevelopment of many sub-Saharan African countries. Nigeria with its oil wealth even as it declines must not only feed itself but become the second tropical country to be net exporter of food and this must be between the next five and 10 years. Rather than recede in line with the decline in collectable revenue of government, spending on agriculture in terms of proportion must rise to appreciable level of not less than 20 percent so that the sector can continue to play its traditional role of providing food for the teeming population, employment for the labour force, source of foreign exchange earnings for funding vital imports and raw materials for the industries.
Bolade Agbola
