The Central Bank of Nigeria (CBN), at the end of its Monetary Policy Committee (MPC) meeting in Abuja last month, hinted of possible restriction of foreign exchange (forex) to importers of milk. Importers of milk will be required to source forex from alternative sources. The policy is expected to help government conserve forex for critically needed areas and promote local milk production, writes COLLINS NWEZE
Taking bold decisions demands courage and foresight on the part of the government and its agencies.
The Central Bank of Nigeria’s (CBN’s) restriction of 43 items from accessing foreign exchange (forex) from official windows was one of such policies.
More than three years after the policy shift, its objectives such as encouraging local production of the affected items and boosting local industries suffocated by the importation of competing products are being realised.
And just last month, the CBN added milk to the list of items that cannot have access to official forex for its importation. CBN Governor, Godwin Emefiele disclosed at the last Monetary Policy Committee (MPC) meeting in Abuja that there will be restriction of forex access to importers of milk.
Emefiele lamented that between $1.2 billion and $1.5 billion are spent yearly to import milk into the country. “We can no longer continue to spend close to $1.2 billion to $1.5 billion, importing milk into the country, a product we can produce. To some extent, they (milk importers) should help us also to reduce the rate of herders, farmers conflict,” he said.
The CBN said the present administration and the Governor of Central Bank are in support of local manufacturers and believe in growing local industries rather than making Nigeria become a dumping ground for all kinds of imported goods.
The policy implementation was part of the home-grown solutions introduced by Emefiele to sustain forex market stability and ensure the efficient utilisation of available forex to grow critical segments of the economy.
The policy implies that those who import milk and other items within the restriction list can no longer buy forex from the official window to pay overseas’ suppliers. Rather, they will have to source forex from the parallel market or Bureaux De Change (BDCs) to pay for their imports.
Emefiele said the bank has been developing home-grown policies to ensure that forex is channelled to a most critical sector of the economy.
The policy makes a clear case for investments in local milk production to promote new jobs creation and forex conservation.
One of the critics of the policy was former education minister Obiageli Ezekwesili. She said the CBN’s forex policy on milk importation is dangerous to the poor.
She said that Nigeria has the highest number of children less than 5 years with chronic malnutrition (stunting or low height-for-age) in sub-Saharan Africa at more than 11.7 million, according to the most recent Demographic and Health Survey (DHS) (National Population Commission.
CBN defends policy
But the CBN has defended its policy restricting foreign exchange access to importers of milk. The apex bank said there were attempts by some interests, who feel hurt by the planned policy aimed at promoting the local production of milk, to mislead the public by misrepresenting the unassailable case for investments in local milk production and the medium to long-term benefits of the planned policy.
“While we are aware that some of our policies may hurt some business interests, we are thankful to Nigerians for the buy-in and intense interest in the policies of the CBN. As a people-oriented institution, however, we shall remain focused on the overarching and ultimate welfare of the Nigerian masses.
‘’We, therefore, wish to, once again, reiterate our policy case as it relates to the planned restriction of access to the Foreign Exchange market by importers of milk,” the statement said.
Continuing, the CBN explained that the country and the welfare of Nigerians come first in all its policies. “Being an apolitical organisation, we do not wish to be dragged into politics. Our focus remains to ensure forex savings, job creation and investments in the local production of milk. For over 60 years, Nigerian children and indeed adults have been made to be heavily dependent on milk imports. The national food security implications of this can easily be imagined, particularly, when it is technically and commercially possible to breed the cows that produce milk in Nigeria.
About three years ago, we began a policy to encourage backward integration to conserve foreign exchange and create jobs for our people,” it said.
CBN Director, Corporate Communications, Isaac Okorafor, said: “For the avoidance of doubt, Milk importation is not banned. Indeed, the CBN has no such power. All we will do is to restrict the sale of forex for the importation of milk from the foreign exchange market. We wish to reiterate that we remain ready and able to provide the needed finance to enable investors who genuinely want to engage in milk production”.
“Arising from the success of the restriction policy, we approached some milk importers, like we did for rice, tomato and starch and asked them to take advantage of CBN’s low-interest loans to begin local milk production instead of relying endlessly on milk imports. Today, although there have been some successful attempts at producing milk locally, the vast majority of the importers still treat this national aspiration with imperial contempt,” he stated.
Okorafor said the ongoing resort to blackmail and undue politicisation through the use of social media attacks can only serve to strengthen our resolve to wean our country from the clutches of powerful and highly influential traders and dealers who have kept the masses of our people hostage to foreign consumption and condemned our youths to perpetual unemployment.
“We call on Nigerians to enlist in this vanguard to take our economy back from vested interests, make our country a productive economy and create jobs,” he said.
Also, Nigerian farmer based in Ogun State, Abiodun Adeoye, explained that Nigerian farmers were in support of CBN to stop issuing forex to importers of milk. He said that companies in the milk import business should look inwards and begin local production of the commodity. He urged the CBN to give local producers of milk the needed support that will enable them to produce needed quantity locally to avoid a rise in price.
Besides, when the CBN policy that placed official window forex ban on 43 items was introduced, some parties that benefitted from the old plan condemned it. They used intrigues, subterfuge and even blackmail to try to upturn that decision. But Emefiele stood his ground.
And Nigeria is the better for it as many products including toothpick, which used to be imported are produced locally today with the added benefit of job creation and self-reliance in the production of items like rice for instance.
Over time, Nigerians were encouraged to key into that policy and other similar policies of the CBN that are expanding and developing the economy. Instead of yielding to disingenuous tendencies that had held the nation down over the years, the CBN under Emefiele decided to remain focused on the overarching and ultimate welfare of the Nigerian masses.
Emefiele said that: “About three and half years ago, when the policy on restriction of forex started, we considered including milk on the list of items under restriction from forex, but we conjectured that based on sentiment some people are bound to express, that we should be very careful.
The CBN Governor continued “We called on the management of the oldest milk importer into Nigeria, WAMCO into Central Bank office in Lagos. We held at least three meetings with them and we told them this would have happened but we decided not to allow it to happen, that we are trying to use the opportunity to appeal to them to do backward integration. Integrate backwards and begin the process of developing and producing your milk in Nigeria”.
One way of doing this Emefiele added is for importers to support the pastoralists, get them concentrated in one place instead of moving around. Provide them facilities like water, hospitals, and schools. ”If you are in a community and you want to enjoy the proceeds of that community there is nothing wrong in providing certain things for the communities to blossom. The proceeds of what you get in return will be your milk to recoup your investments.”
The CBN boss pointed out that “Those are the kind of things we expect companies that are importing milk into Nigeria to do. Unfortunately, after three years, nothing has happened. If the journey was started three years ago, perhaps the herders, farmers’ conflict that we see today would not have been as intense as it is this time.”
Data on local milk production/consumption
The poor support by the government in the past via a conducive policy environment had for long affected growth of the country’s dairy sector. In fact, if the government had shown enough commitment to the sector, Nigeria would have by now started obtaining the highest possible yields per hectare and a kilogramme of milk per cow per year.
Currently, Nigeria’s output of milk per cow per day is about 1 litre, compared to other African countries like Kenya and Uganda with between 30 to 40 litres of milk per cow per day.
Compared to Africa and Asia’s average of 0.9 million tonnes and 6.6 million tonnes, respectively, Nigeria’s 0.6 million tonnes of milk production is the lowest in the world.
The rating agency said in its report that Nigeria consumes an estimated 1.7 million tonnes of milk annually, but her production output only meets about 34 per cent of demand.
Impact of previous forex restrictions on the economy
The CBN boss, Emefiele, said the bank has been developing home-grown policies to surmount challenges that confronted the economy in recent times.
“As I have always emphasised, it is our collective duty to ensure that the potentials and prospects of the Nigerian economy are optimally realised. The ongoing economic recovery requires the joint efforts and wise counsel of everyone if we must make giant strides forward. The CBN is more determined now than ever to remain at the forefront of the effort to ensure that the rebound is not overturned,” he said.
He said that Nigeria’s political-economy experienced significant challenges over the last few years revealing its structural deficiencies particularly with regards to its dependence on crude oil, as a major source of its revenue and foreign exchange, as well as over-dependence of our people on imported items even when these goods could be produced locally. The 60 per cent decline in crude oil prices between 2015 and 2016 helped shape the trajectory of our economy, ultimately triggering the economic recession in the first quarter of 2016.
He said that with improved availability of foreign exchange, the exchange rate at the Investors & Exporters FX window has remained stable over the past 12 months and the parallel market exchange rate premium has narrowed significantly. At the bureaux de change segment, there was a significant appreciation of the Naira from over N525/US$ in February 2017 to about N361/$ today. Rates at the I&E window also appreciated from nearly N382/$ in May 2017 to N360/$ at present.
He said that with regards to our over-dependence of imports, the economic recession triggered mainly by the drop in crude oil prices, only strengthened the case for the need to move from a nation wholly dependent on consumption, to a nation that produces a large proportion of what it needs, particularly in areas where the resources or inputs needed for production are widely available across the country. This thought process shaped our decision to impose the restriction on access to forex for 43 items that can be produced in Nigeria.
“There has been considerable discourse particularly on whether the restriction on access to foreign exchange for 43 items is driving local production, with some nay-sayers stating that it has constrained productivity and growth in the economy. Based on our internal research conducted at the Central Bank of Nigeria, there is strong support that the recovery of our economy from the recession may have been much weaker or even negative, without the implementation of the restriction on 43 items.”
“Our research supports the conclusion that the combination of the restriction on 43 items along with other measures imposed by the fiscal and monetary authorities has helped to promote the recovery. Any attempt to reverse the course of these actions may have untold consequences on the growth trajectory of our economy particularly in our push to diversify and restructure our economy. In fact, recommendations are being made to the CBN that the list of 43 items is expanded to include other additional items that can be locally produced.”
Emefiele said many entrepreneurs are taking advantage of this policy to venture into the domestic production of the restricted items with remarkable successes and great positive impact on employment. “The dramatic decline in our import bill and the increase in domestic production of these items attest to the efficacy of this policy. Noticeable declines were steadily recorded in our monthly food import bill from $665.4 million in January 2015 to $160.4 million as at October 2018; a cumulative fall of 75.9 per cent and an implied savings of over $21 billion on food imports alone over that period. Most evident was the 97.3 per cent cumulative reduction in monthly rice import bills, 99.6 per cent in fish, 81.3 per cent in milk, 63.7 per cent in sugar, and 60.5 per cent in wheat,” he said.
Emefiele, who spoke on the theme: “Strengthening the Economic Recovery Process in Nigeria”, said : “In my inaugural address after assuming office as the Governor of the Central Bank of Nigeria in June 2014, I indicated that my mandate would be to ensure that the Central Bank of Nigeria is more people-focused, as its policies and programs would be geared towards supporting job creation and fostering inclusive growth, in addition to key macroeconomic concerns such as inflation and exchange rate stability. I hope to use this opportunity tonight to convey a sense of the strong commitment of the Central Bank of Nigeria towards supporting measures that would wean the nation from its dependence on imported goods, create wealth and jobs for our teeming youths, and promote a more stable and resilient financial system”.
Continuing, he said the CBN will always act in good faith, with the best available information and in cognizance of current economic conditions, to pursue the goals of price and financial system stability, as well as in supporting job creation on a massive scale and inclusive growth in the country.
“After a wave of scathing criticism that trailed some of our past policies, many of these measures are today widely applauded as brilliant and conscientious actions. As policymakers, our perspectives are typically different from those of the public; but our data, information and outlook remain superior. I, therefore, enjoin our critiques to avoid being hasty in their condemnation of our policies”.