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Economy

Food Imports: Experts Warn of Economic ‘Catastrophe’

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  • Food Imports: Experts Warn of Economic ‘Catastrophe’

Following President Muhammadu Buhari decision to restrict the Central Bank of Nigeria from providing foreign exchange to importers of food items, experts across the country have called on the President to respect the independence of the central bank and warned the Federal Government of the danger of a total ban of food imports in a nation that imports over 90 percent of its consumption.

President Muhammadu Buhari had ordered the Central Bank of Nigeria to stop providing foreign currency for Nigeria’s food import bill to ease pressure on the foreign reserves and speed up diversification process embarked on by the administration.

“President Muhammadu Buhari … disclosed that he has directed the Central Bank of Nigeria (CBN) to stop providing foreign exchange for importation of food into the country,” Tuesday’s statement said.

“Don’t give a cent to anybody to import food into the country,” Buhari said, according to the statement, which said that the call was in line with efforts to bring about a “steady improvement in agricultural production, and attainment of full food security”.

“The foreign reserve will be conserved and utilised strictly for diversification of the economy, and not for encouraging more dependence on foreign food import bills.”

Experts, however, warned that lack of central bank’s autonomy could hurt economic growth as vital economic decisions will be made by those that lack economic fundamentals.

“But his comments will continue to drive home the sense that Buhari has no idea how to manage an economy and will raise uncertainty about what other [foreign exchange] restrictions are coming, and contribute to already low business confidence,” said Amaka Anku, Africa director for the Eurasia Group.

She said the central bank “should know that a total ban of food imports is not practical and I doubt that will be the policy.”

Godwin Emefiele, the Governor of the Central Bank of Nigeria, an advocate of local production, had earlier restricted importers of milk from accessing forex from the apex bank and refuted a nationwide criticism that the decision will hurt the industry as Nigeria is only producing 600,000 metric tons per annum while the nation needs 1.3 million MT per year.

On Wednesday, another group of local palm oil producers disagreed with the central bank’s nine percent loan initiative that was introduced under the Anchor Borrowers Scheme for palm oil producers.

According to the National President, National Palm Produce Association of Nigeria, Henry Olatujoye, it would be suicidal to take a nine percent per annum interest loan in an industry where you need a four-year maturity period to grow crops.

“It takes four years for oil palm tree to fruit. It then means that the person will pay N360m on interest alone by the time the fruits come out,” he said.

“If one obtains a minimum loan of N1bn at an interest rate of nine per cent, one would be paying N90m every year.” Suggesting that while the central bank is curbing importation of food items, it is unable to stimulate local production through the right initiatives as sold to the Nigerian masses.

Local investors are wary of high-interest rates in an economy with weak consumer spending, high unemployment, and poor infrastructure.

In fact, continuous restriction without a viable alternative will lead to scarcity and higher consumer prices as more cash will be chasing a few smuggled products.

Bismarck Rewane, an economist and the head of Lagos-based consultancy Financial Derivatives, also pointed to the danger of the new policy.

According to the economist, a curb on foreign exchange for food imports after signing the African Continental Free Trade Agreement (AfCFTA) will create a dumping ground in Nigeria as those scarce goods can now find their way into the Nigerian economy ‘tax-free’.

A study conducted by the Centre for Trade and Development Initiatives, University of Ibadan, noted that with Nigeria’s manufacturing sector still not competitive compared to other top African nations, Nigeria’s imports would rise by 251 percent in the next 15 years after the AfCFTA agreement is implemented in 2020.

This highlighted the significance of healthy local manufacturing while simultaneously pointing to the contradiction between the Federal Government’s goal and the recent economic policies.

Restricting importation of foreign food items after signing the AfCFTA will merely create opportunities for African producers in the absence of competitive local production.

The move “stands in stark contrast to the strategy outlined in the Africa Continental Free Trade Area agreement, and this policy will certainly not set Nigeria’s agricultural sector up to take full advantage of a liberalisation of trade barriers across the continent,” Cobus de Hart, chief economist at NKC African Economics wrote in a research note.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

NNPC Supplies 1.44 Billion Litres of Petrol in January 2021

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The Nigerian National Petroleum Corporation (NNPC) supplied a total of 1.44 billion litres of Premium Motor Spirit popularly known as petrol in January 2021.

The corporation disclosed in its latest Monthly Financial and Operations Report (MFOR) for the month of January.

NNPC said the 1.44 billion litres translate to 46.30 million litres per day.

Also, a total of 223.55Billion Cubic Feet (BCF) of natural gas was produced in the month of January 2021, translating to an average daily production of 7,220.22 Million Standard Cubic Feet per Day (mmscfd).

The 223.55BCF gas production figure also represents a 4.79% increase over output in December 2020.

Also, the daily average natural gas supply to gas power plants increased by 2.38 percent to 836mmscfd, equivalent to power generation of 3,415MW.

For the period of January 2020 to January 2021, a total of 2,973.01BCF of gas was produced representing an average daily production of 7,585.78 mmscfd during the period.

Period-to-date Production from Joint Ventures (JVs), Production Sharing Contracts (PSCs) and Nigerian Petroleum Development Company (NPDC) contributed about 65.20%, 19.97 percent and 14.83 percent respectively to the total national gas production.

Out of the total gas output in January 2021, a total of 149.24BCF of gas was commercialized consisting of 44.29BCF and 104.95BCF for the domestic and export markets respectively.

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Economy

NNPC Says Pipeline Vandalism Decrease by 37.21 Percent in January 2021

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The Nigerian National Petroleum Corporation (NNPC) said vandalisation of pipelines across the country reduced by 37.21 percent in the month of January 2021.

This was disclosed in the January 2021 edition of the NNPC Monthly Financial and Operations Report (MFOR).

The report noted that 27 pipeline points were vandalised in January 2021, down from 43 points posted in December 2020.

It also stated that the Mosimi Area accounted for 74 percent of the total vandalised points in Janauray while Kaduna Area and Port Harcourt accounted for the remaining 22 percent and 4 percent respectively.

NNPC said it will continue to engage local communities and other stakeholders to reduce and eventually eliminate the pipeline vandalism menace.

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Economy

Nigeria’s Food Inflation Hits 22.95 Percent in March 2021

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Food inflation in Africa’s largest economy Nigeria rose by 22.95 percent in March 2021, the latest report from the National Bureau of Statistics (NBS) has shown.

Food Index increased at a faster pace when compared to 21.70 percent filed in February 2021.

Increases were recorded in Bread and cereals, Potatoes, yam and other tubers, Meat, Vegetable, Fish, Oils and fats and fruits.

On a monthly basis, the food sub-index grew by 1.90 percent in March 2021. An increase of 0.01 percent points from 1.89 percent recorded in February 2021.

Analysing a more stable inflation trend, the twelve-month ended March 2021, showed the food index averaged 17.93 percent in the last twelve months, representing an increase of 0.68 percent when compared to 17.25 percent recorded in February 2021.

Insecurities amid wide foreign exchange rates and several other bottlenecks that impeded free inflow of imported goods were responsible for the surged in prices of goods and services in March, according to the report.

The Central Bank of Nigeria-led monetary policy committee had attributed the increase in prices to scarcity created by the intermittent clash between herdsmen and farmers across the nation.

However, other factors like unclear economic policies, increased in electricity tariffs, duties, subsidy removal and weak fiscal buffer to moderate the negative effect of COVID-19 on the economy continue to weigh and drag on new investment and expansion of local production despite the Federal Government aggressive call for improvement in domestic production.

Nigeria’s headline inflation rose by 18.17 percent year-on-year in the month under review.

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