• Saturday, June 15, 2024
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Why Nigeria must succeed at backward integration for food

Why Nigeria must succeed at backward integration for food

In 1989, when the Structural Adjustment Programme (SAP) of the IBB administration that banned the importation of wheat from the US led to a diplomatic rift between him and George Bush Senior and a 1988 face-off between the US ambassador and the Nigerian government, wheat prices were $2.49 per tonne, Nigeria had a population of 100 million, the naira was trading at seven-naira, thirty-nine kobo (7.39), and Nigeria was producing 500k metric tonnes of the 1.4m metric tonnes of wheat that it consumed.

In 2024, Nigeria’s population has gone up from 100 million to 209 million; wheat consumption has also gone up from 1.4 million metric tonnes to 7 million metric tonnes; a tonne of wheat has gone up from $2.49 to $670; and the naira to the US dollar has dropped from 7.39 to 1,495. Nigeria’s failure to save its petro-dollars as not only reserves for balance of payment but also funds in the stability part of its sovereign wealth fund, it’s quickness to migrate from revenue to debt (expanding the fiscal strategy deficit financing of government budget from 16 percent to 50 percent), its penchant to borrow from its Central Bank without recourse to the act that guides and governs section 38, its reliance on its external asset managers without attention to the consequence of a Central Bank holding such negative balance sheet in dire need of repair, led to a 92 percent drop in its currency and fueled food inflation above 40 percent – a level that would be considered war-time conditions.

It is interesting that since General Ibrahim Badamosi Babangida (IBB) picked up a diplomatic battle with Washington under SAP to ensure backward integration for a key commodity that, at the heart of the war between Russia and Ukraine, the Kremlin made a bargaining chip for getting its naval fleet to consolidate in the Black Sea, Nigeria has not made progress towards self-sufficiency. What is wheat, and why is it so important? Wheat is a grain that is used in milling flour, a commodity that goes into many food staples, from bread to cakes to biscuits, etc. Contrary to the western propaganda that we have always seen that the Nigerian weather is not good for growing wheat, Brazil (a tropical country like Nigeria) has actually developed a variety that is drought-resistant and has a higher yield per hectare than what is currently produced here.

After the ’89 diplomatic rift that started because US farmers reported to the United States Department of Agriculture (USDA) that they were unable to export their wheat to Nigeria from an import ban, the government of Abdulsalam Abubakar tried banning wheat imports again in January of 1999. In 2021, the government of President Buhari tried restricting the importation of wheat to only five (5) companies and hiking the levy required to import wheat to 15 percent as a tool to create a backward integration levy the government can then use to develop the wheat value chain locally. In all these bans, restrictions, and impositions of a high levy to prevent dumping and vailing, the Nigerian government has failed in not only designing but also implementing vigorously, like Brazil and Ethiopia did the following:

-Finance its agricultural research agencies to come up with drought-resistant varieties that actually have a higher yield per hectare above 5 tonnes.

-Invest in mining for potassium to process muriate of potash and di-ammonium phosphates (DAP).

-Invest in irrigation channels for water.

-Coordinate a private public sector programme for invoice discounting that can enable off-taking companies to fund mechanisation with indicative off-take agreements.

-Include food production in the national security basket and work vigorously to ensure that farms are not only secured but that bandits are unable to impose a black-market tax on either farmers or middlemen moving harvest from rural to semi-urban and urban areas.

While we can say that progress has been made with the last two courtesy of the work the Flour Mills Association of Nigeria (FMAN) has done to raise output to nearly 300k metric tonnes per annum, with an average cultivation spread of 7,000 hectares that is returning 3.6 tonnes per hectare, and the 2023 decision by the Federal Executive Council to include food security in the national security basket, there’s still a lot to be desired in the way the government has handled a problem that has defied solution for 35 years and counting.

Yes, the consequence of crashing food prices might be to temporarily open the borders to food imports and suspend levies on the importation of key raw materials, but it’s important to realise that not diverting the wheat levy of 15% to finance something like religious pilgrimage for a political bloc (who need the intervention the most) has hurt any chances we have of investing in research for improved seed variety, mines for components of fertiliser blending, irrigation clusters for the water required to grow the crops, and a special task force to provide the security necessary to guarantee production and processing.

Wheat is such a consequential crop, and we saw the wheat diplomacy Russia and Ukraine did to win international support during the height of crises in Eastern Europe. The question is not just the current minister of agriculture (who has not shown any evidence of performance), but the National Security Council should be asking themselves: If a war were to break out in Sub-Saharan Africa or a potential invasion of Taiwan by China and all the attendant geo-political rifts were to lead the Global South to wage World War III with the Western NATO bloc “How long will Nigeria be able to feed itself before it surrenders its sovereignty to a foreign power because of starvation or famine?” In 2001, after the bombing of the World Trade Centre in New York, George Bush Jr. ordered the US Department of Energy to build a 900-barrel underground salt tank in the State of Utah to add nearly a billion barrels to its strategic petroleum reserves (SPR), and in only one decade, it came up with hydraulic fracking as a deep drilling technology that could produce shale oil (America moved from paying nearly $1 billion per day at the height of the 2008 financial crisis to becoming the world’s number one producer of crude oil at more than 14 million barrels per day).

My message to the Nigerian government is simple: “Your response to the average Nigerian spending 59 percent of their income on food and food occupying 51 percent of your CPI basket cannot just be opening the borders and temporarily suspending levies on importation of critical raw materials for food processing. It has to be more foundational and deliberate.”

Kelvin Ayebaefie Emmanuel is an Economist.