• Sunday, July 14, 2024
businessday logo

BusinessDay

The ‘Nigerian disease’ and implication for food security

Nigeria’s best-performing sectors in Q2 2022

In the 19th century, the popular belief was that countries that are rich in natural resources would be able to transition from the state of underdevelopment to a prosperous state. The apparent opposite occurrence was experienced by some countries after the discovery of a particular natural resource failed to translate into any meaningful growth for such countries. In the real sense, the term ‘Dutch disease’ started from the Netherlands in the 1870s with reference to how Netherland’s economic situation got worse after the discovery of huge deposits of natural gas in the country.

Overtime, the concept of ‘Dutch disease’ has come to be generally regarded as a situation in which the productive sectors and currencies of a country decline following the discovery and production of a particular natural resource.

Overtime, the term ‘Nigerian disease’ emanated from the basic ideology of the more popular ‘Dutch disease’ in relation to how the country’s economic condition got worse after the country failed to effectively utilise the large chunk of revenue it generated from crude oil exploration.

In other words, the country’s economic condition has continued to expound the ‘paradox of plenty’, otherwise known as the resource curse since it began the exploration of oil and gas.

Oil exploration and food security: How Nigeria missed it

The exploitation of the agricultural sector since the 19th century provided the main source of employment, income and foreign exchange earnings for Nigeria. This was due to focused regional policies based on commodity comparative advantage.

The sector employed over 70 percent of the labour force, fed the population estimated at 55 million and 60 million in 1963 and 1965 respectively, guaranteeing the greater percentage of the food security of the average household. In the same period, export of cash crops earned 70 and 62.2 percent respectively of Nigeria’s total foreign exchange and contributed 56.7 and 66.4 percent of GDP in 1960 and 1965 respectively.

The dominant position of the agricultural sector in this period in the Nigerian economy was, therefore, not in doubt. In the 60s, Nigeria was the world’s largest exporter of groundnut, the second-largest exporter of cocoa and palm produce, and an important exporter of rubber, cotton, In real terms, in 1970, the country produced 305,000 tonnes of cocoa, 800,000 tonnes of palm oil and kernel and over one million tonnes of groundnut.

Well over 50 percent of the country’s total export earnings came from the agricultural sector prior to the 70s. Thus, in the first decade of Independence, primary agricultural produce was the main exports. But as from the 70s, exports have been dominated by crude oil.

From 1974 to date, there had been no year when the proportion of crude oil exports in total export earnings fell below 91 percent. Indeed, between 1992 and 2003, the only year when it fell below 97 percent was in 1998 when it was 95.5 percent of total export earnings.

As at the year 2021, the agricultural sector contributed about 26 percent to the country’s GDP, a figure which is still a far cry from the country’s teeming population as the country’s quest for self-sufficiency continues to remain a mirage. The advent of commercial exploitation of oil resources, however, turned the trend against agriculture and its downstream industries from the rest of 1970s till date.

The oil boom heralded an era of decay and decline in agricultural output and in the overall contribution of the sector to the economy. Evidenced by the resource curse, the sector lost its foreign exchange earnings capacity, domestic revenue importance, and attracted continuous policy neglect.

This neglect turned into a threat to national food security leading to massive and continuous food importation with an erosion of value addition gains of the sector as agricultural raw commodities were exported only for finished goods to be imported.

Even though Nigeria’s failure to effectively diversify affected virtually all its major sectors, there’s a need to closely examine how the Nigerian disease exposed the country to food insecurity, especially at a time when Nigeria is facing a growing hunger crisis.

Presently, food prices have been on the high side while the northern part of the country that supplies the bulk of the country’s agricultural produce has continued to be threatened by the wave of insurgent attacks. According to a report by the United Nations Food and Agricultural Organization, an additional 19.4 million people will face food crises between June and August 2022, while a report by the Global Hunger Index also ranked Nigeria 103rd out of 116 countries in its GHI.

One thing is sure, Nigeria’s food shortage issue is not a novel occurrence; rather it began majorly as a result of irrational economic policies and a complacent stand in the midst of a potential danger. How exactly did Nigeria’s food security issues start?

Read also: Fertiliser prices double in threat to Nigeria’s food security

Rural-urban migration

According to a report by Britannica, a series of oil price increase from 1973 led to a great influx of rural people into the larger urban areas as agricultural production stagnated to such an extent that cash crops such as palm oil, peanuts and cotton were no longer sufficient commodities.

As Nigeria’s oil export increased, many people abandoned farming as a means of livelihood and moved up to the cities in search of greener pastures in order to have their own share of the ‘national cake’. As time went on, Nigeria was forced to begin the importation of basic commodities, which included maize, rice and cassava.

Nigeria’s urbanisation process made many people abandon the large expanse of lands at the urban areas while the urban areas continue to witness a dense population, accompanied with accelerated growth of structures and environmental distorts, all of which widened the level of food deficit.

More income, higher taste

As Nigeria began to make a huge amount of revenue from crude oil sales, this led to increased mismanagement and corruption on the path of Nigeria’s ruling class, which consequently resulted into a change of taste and preferences for foreign products at the expense of locally produced goods.

Meanwhile, the little volume of agricultural produce, which Nigeria exports to other countries, have little effort of value chain development. This consequently reduced the competitiveness of Nigeria’s produce, thereby reducing the level of revenue generated from the agricultural sector.

From then till now, Nigeria has continued to find itself in the enclaves of an import-dependent nation.

For instance, a report by Nairametrics revealed that Nigeria’s agricultural sector has continued to perform below expectation despite numerous interventions by the CBN as agricultural imports continue to gulp a larger amount of its forex reserves without a corresponding inflow from export earnings.

In the year 2021, the Food and Agricultural Organization (FAO) revealed that cumulatively, Nigeria’s agricultural imports stood at N3.35 trillion while its export stood at N803 billion, which implies that Nigeria’s agricultural import is four times higher than its emport.

Low level of wage competitiveness

As time went on, Nigeria began to witness a high influx of foreign exchange earnings in the 1970s; this led to the decision of the Nigerian government to begin a full-scale industrialisation strategy, which is paramount to the sustenance of any economy.

According to a report by Brookings, the establishment of industrial projects in the 70s inspired the need to increase the earning power of the Nigerian populace through the generation of more employment.

However, this had some major consequences for Nigeria’s agricultural sector as the huge foreign exchange earnings generated from oil during this period reduced the level of wage competitiveness in Nigeria’s once-vibrant agricultural sector, thereby reducing its level of competitiveness.

According to the World Bank, employment is growing and shifting away from an agrarian to wage working private and public services because most farming activities only serve subsistent family needs, which is not enough to offset the trail of poverty.

This stance was further corroborated by Oxfam’s report that most economic policies have been unfavourable to Nigeria’s agricultural sector, thereby making the sector incapable of reducing poverty. It is, therefore, not out of place to conclude that one of the reasons why there’s food security in Nigeria is because its agricultural sector is not attractive enough to attract its huge labour force.

Currency depreciation

The decision of the Nigerian government to reform its economy through the promotion of economic liberalisation in the 1980s saw the country introduce the Structural Adjustment Program (SAP), thereby leading to the influx of many multinational corporations in Nigeria’s major economic sectors.

The SAP has a record of a mixed performance; while some sectors such as the telecoms and the financial sectors witnessed a significant turnaround as a result of huge private investment, which led to the creation of more jobs and the generation of more revenue, the policy also led to the neglect of Nigeria’s rural areas, which have always been dominated by agricultural activities.

By the 1970s, Nigeria’s macro-economy was characterised by rising oil revenues amidst an overvalued naira. As at then, one naira to a dollar was around 1 naira; this complacent situation was accompanied by the liberalisation of imports, which marked the gradual decline in the production of the once-vibrant cash crops as the exchange rate over-valuation cheapened the importation of foreign food items which consequently reduced the quest for self-sufficiency.

Since the commercialisation of oil began, Nigeria has continued to find itself within the vicious circle of poverty and hunger, which has defied every effort and policy as the largesse of crude oil exploration failed to translate into any meaningful development.

Year in, year out, the ideology of diversification, which is aimed at using the funds from a particular sector to develop other economic sectors, seems to be a herculean task by successive administrations.

Presently, Nigeria does not have the capacity to fend for its teeming population, neither does the majority of its populace have the financial capacity to buy the ones imported from other countries as a result of the high exchange rate; a double jeopardy which the country brought upon itself on the account of bad economic management.

The only panacea to the Nigerian disease is a diversified economy away from oil as any oil-dependent country that fails to invest heavily in other sectors will collapse economically and politically. Therefore, all efforts must be made to channel more funds into the agricultural sector while also providing more infrastructures and security or rural dwellers so as to make the sector as attractive as possible.