ECONOMY - 18 SEP 2017

Is Agriculture For Feeding Or Earning Dollars?

Is Agriculture For Feeding Or Earning Dollars?
The hike in the prices of yam and other food items has contributed to the rising levels of inflation

Nigeria has taken a serious beating in the last three years, with most of the blame put down to our reliance on oil. Diversification is probably the number two buzz word on the Nigerian media streets - after "restructuring", and agriculture has been identified as the key to achieving diversified Nigeria 2.0.

There are two separate schools of thought on how agriculture can help the Nigerian economy. The first group is easily identified by their solgan: "Nigeria can earn or save foreign exchange by exporting agricultural produce". This argument is directly related to reducing Nigeria's food import bill and increasing forex earnings - produce food, export it, earn dollars. 

Another group makes the case for agriculture as a means to food security. By this, they refer both to the rising price of a bag of rice in Mile 12 and the thousands at risk of starvation in the North-East. Agriculture can be used to make food more affordable. 

 

Growth Without Happiness

These two perspectives can be termed the domestic feeding and export earning argument respectively, and are recognised by the Federal Government in its Agriculture Promotion Policy (APP), the current economic roadmap for developing the sector. Yet the two sides are not mutually exclusive. Do not be fooled by my title question - agriculture can both feed the nation and export a fraction of it to earn dollars.  

Then again, this is Nigeria. Agriculture could boom, generating export earnings in the process, with affordability remaining unresolved. Recent experience shows how.

Despite Nigeria's woes, the agricluture sector has boomed, with the government going as far as claiming that the sector is "pulling Nigeria out of recession". Meanwhile, food prices have developed legs and are running, according to National Bureau of Statistics data which puts annual food inflation at 20.3%, its highest level since the 2008 global food crisis

Amidst this, Nigeria recently began exporting yam to Europe, in line with achieving the government's $8bn annual foreign earnings target for yam. So the sector is growing, and exports are on the move, but the man on the street is still struggling to afford high food prices. 

This reality highlights a problem with focusing too much on export earnings: it doesn't automatically improve welfare. Oil made billions in forex for the country, but the sector would struggle to reply if you asked what it has done to improve the lifestyle of the masses. In the same vein, the agriculture sector's growth and export earnings are yet to translate into happiness for our 190 million. 

 

The Yam Iṣu

The news regarding yam exports to Europe was met with mixed reactions. This was mostly as individuals, myself included, wondered why Nigeria was exporting yam when its price was still rising in the market. The assumption behind this argument is that a higher supply of yam kept within the borders of Nigeria would lower its price. If the assumption is correct, then team "export earnings" are directly making matters worse for the local food affordability fight by reducing the quantity of food in the domestic market.

Despite the government's local production and self-sufficiency targets, farmers might be motivated to focus on exporting. This issue is compounded by the weak naira, which makes Nigerian goods relatively cheaper abroad, and increases the demand for 'made in Naija' crops. 

One way to "encourage" farmers to sell their produce domestically is to impose taxes on exports. For example, the Australian government recently imposed export restrictions on gas in a bid to boost domestic supply and keep electricity prices low. We can directly relate this to the yam story back in Nigeria. Does it make sense to be the largest exporter of yam when scarcity issues, amongst other factors, are leading to a tuber of yam being over ₦600?

The Australians don't think so.  

 

Joining Forces

But export restrictions are flawed: they reduce the incentives for investment and future production in the sector. Australian gas producers have already made this clear. This could hamper long run production and make the further delay food security in Nigeria, contradicting the objective of feeding the nation. Moreover, preventing farmers from accessing external markets could perpetuate poverty; after all, some Nigerian farmers are so poor that they require a ₦5000 loan. 

Improving affordability and food security would be no easy task. Food prices are high partly because of one-off factors such as petrol prices, pests or diseases, and the exchange rate. But there are also structural causes related to infrastructure and productivity. Even illegal checkpoints across the country contribute to the high costs of transporting food. 

With all these mountains to deal with, the last thing the push for better food security needs is antagonising farmers and their exports. A more realistic plan is to have team "exports earnings" involved with the goal of feeding the nation. This means ensuring that both the domestic and export sides of the agriculture industry generate real growth that would reduce poverty. They need to work together to find technologies and farming techniques that can boost productivity, cut costs and allow for cheaper food for the population, whilst allowing farmers to earn good margins.  

The sector should avoid exporting for the sake of earning dollars, which during oil's reign did little for the poor and yet did them the most harm when export earnings fell. 

 

Follow this writer on Twitter @Teejay_A. Subscribe to read more articles here.

Tokunbo Afikuyomi, Jr.

Tokunbo Afikuyomi, Jr.

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