Nigeria spent 45 percent more foreign currency on food, fuel, and other imports in the first half of this year than it did in the same period last year due to persistent dollar shortages.
According to data on sectoral utilization for transactions valid for a foreign exchange provided by the Central Bank of Nigeria (CBN), the country spent $14.5 billion on imports during the six months, up from $10.04 billion in H1 2021.
The majority of the foreign exchange provided for imports went to the industrial sector, which was followed by manufactured goods, food products, the oil industry (petroleum products), and educational services.
According to CBN data, the largest economy in Africa had a decline in its external reserves from $40.52 billion at the end of last year to $38.92 billion on August 9, 2022.
Since almost everything in the nation is imported, the naira exchange rate has been under pressure as a result. Importers need foreign exchange, particularly the US dollar, to bring goods into the nation.
According to the central bank, the amount of foreign exchange used for fuel imports rose by 35.14 percent to $679.47 million in H1 2022 from a year earlier.
Nigeria’s loss-making refineries have been closed since 2020 for restoration, therefore, it is entirely dependent on imports to meet its petroleum needs.
To stabilize the naira and preserve the nation’s foreign reserves, the apex bank has implemented various capital curbs in recent years.
To preserve the external reserves and promote domestic production of such goods and services, the CBN barred importers of 41 commodities and services, including some food products, from accessing forex in June 2015.
Fertilizer was one of 41 goods the bank designated as “not valid for foreign exchange in the Nigerian forex market” in December 2018.
Other commodities include rice, tomatoes and tomato paste, chicken, eggs, tomatoes and processed meat products, vegetables and processed vegetable products, and rice.
In July 2019, the central bank announced that it would limit the sale of foreign currency for the purchase of milk from the Nigerian foreign exchange market.
President Muhammadu Buhari ordered the CBN to stop issuing foreign currency in September 2020 so that it wouldn’t be used to import food and fertilizer. He advised companies that wanted to import food to get their foreign currency from another source.
At a National Food Security Council meeting held at the Presidential Villa in Abuja, he was cited as saying, “Nobody importing food should be handed money.”
However, representatives of the nation’s agricultural industry criticized the president’s assertion, claiming that the nation does not currently produce enough food for its 200 million inhabitants.
According to the central bank, the amount of foreign currency utilized to import food products increased to $1.20 billion in H1 2022 from N1.04 billion during the same time in 2017.
Victor Olowe, a professor and agronomic at the Institute of Food Security, Environmental Resources and Agricultural Research, stated that “we still do not cultivate enough to sustain our fast-rising population; hence, we still need to import to augment the deficiency.”
To increase production of the crops over which we have a comparative advantage and turn our current deficit in the food trade balance into a surplus, Olowe noted that we must address the concerns of insecurity in the nation.
Despite having a comparative advantage in the production of cashews, ginger, cocoa, and other agricultural products that may be exported, Nigeria still makes little money from its exports because the majority of the crops are shipped in their raw form.
Kola Adebayo, a lecturer at the Federal University of Agriculture, Abeokuta, stated that value addition must play a crucial role in our agricultural revolution if we are to decrease food imports.
“We also need to solve persisting infrastructure issues that have prevented us from advancing the kind of agriculture that can support exports and generate jobs. This is what countries like Brazil did to become the top exporters of commodities, according to Adebayo.
Despite spending billions on various agricultural programs over the past seven years to boost domestic food production, the demand for the majority of country staples still outpaces domestic output.
Nigeria’s food trade imbalance increased by 61 percent, from N1.42 trillion in 2020 to N2.29 trillion in 2021. According to a recent report by Flour Mills of Nigeria, the agricultural industry reported a trade deficit of N1.3 trillion in 2019 and N1.02 trillion in 2018.
At a recent breakfast meeting hosted by the Lagos Business School, Boye Olusanya, group managing director and chief executive officer of Flour Mills of Nigeria Plc, stated that despite numerous attempts to replace imported food, the nation remained relied largely on imports.
“Despite ongoing attempts at import substitution, Nigeria’s food import cost keeps rising. “The food trade gap is steadily expanding as imports rise considerably faster than exports of food,” he remarked.