The Central Bank of Nigeria (CBN) has barred foreign exchange (forex) allocation to fertiliser imports. The inclusion of this critical farming input on the list of 41 items not valid for forex may have reinforced the Federal Government’s commitment to delivering commercially-significant quantities of affordable and high-quality fertiliser to farmers. Assistant Editor CHIKODI OKEREOCHA reports.
Before the inuaguration of the Presidential Fertiliser Initiative (PFI) in December 2016, the non-availability of fertiliser was, arguably, one of the obstacles to increased productivity in the agriculture sector.
The scarcity of the critical farm input was a major disincentive to farmers’ efforts to contribute to economic diversification through small, medium and large-scale agriculture.
But, the Federal Government, through the PFI, moved to change the narrative. It was part of its efforts to deliver commercially-significant quantities of affordable and high-quality fertiliser at the right time to farmers.
The initiative, which involved a partnership with the Government of Morocco for the supply of phosphate to produce fertiliser locally, was an instant success.
It resulted in the revitalisation of 14 blending fertiliser plants across the country, with a total installed capacity in excess of two million metric tonnes (MT). It also saved the government about $200 million in foreign exchange annually, and N60 billion annually in budgetary provisions for fertiliser subsidies.
Other multiplier effects, according to the Minister of Information & Culture, Lai Mohammed, include the provision of about 60,000 direct jobs and several indirect jobs.
The substitution of imported inputs of NPK with locally-sourced inputs also made it possible for farmers to purchase fertiliser at 30 per cent cheaper than previously available.
However, in a renewed push to consolidate on the gains of the initiative and ultimately, achieve self-sufficiency in fertiliser production, the Federal Government, through the Central Bank of Nigeria (CBN), this week, barred official foreign exchange (forex) allocation to fertiliser imports.
In other words, the apex bank has included fertiliser on the list of items not valid for forex. The CBN in a circular dated October 10, 2018 and signed by its Director, Trade & Exchange Department, Ahmed Umar, said the inclusion of fertiliser on the list of items not valid for forex took effect from Friday, December 7, 2018.
The circular, however, noted that the “CBN will ensure that transactions (Form M) on fertiliser for which payments are outstanding, are settled at the appropriate settlement dates”.
Recall that the CBN had on January 1, 2015 announced a forex policy that restricted the availability of forex to the importation of 41 items, which it said could be produced in Nigeria. Those who export products that fall under the 41 items were also barred from using their export proceeds to fund the importation of raw materials classified as not valid for forex.
The apex bank had argued that the policy was necessary to promote locally-produced goods, build robust foreign reserves, and also create jobs. “We need to aggressively begin the process of feeding ourselves by ourselves and producing much of what we need in this country.
“The huge amounts of money the country spends on importing things we can produce locally have become a significant drag on our foreign exchange reserves…,” CBN Governor Godwin Emefiele, had said.
But manufacturers and other members of the Organised Private Sector (OPS) kicked, describing the forex restriction variously as “obnoxious, superfluous, and ill-conceived”. Many of them argued that they were not consulted by the CBN and other regulators before the restrictions were placed on the items.
They also pointed out that the vague nature in which the items in the import prohibition basket were described in the circular impeded the access of several local manufacturers to foreign exchange for procurement of their raw materials.
They accused the CBN of emasculating manufacturers by failure to properly appraise domestic capacity for production of some of the excluded items, and therefore, called for a review.
But the CBN has insisted that the policy was in the interest of the economy and Nigerians. It reiterated that the policy was necessary to re-awaken the consciousness of manufacturers on the need to look inwards and embrace the utilisation of local raw materials, conserve foreign exchange and create jobs.
The apex bank, at some point, hinted of its plans to add more items to the import prohibition list. This was why the inclusion of fertiliser on the list of 41 items not valid for forex may not have come as a surprise to industry operators and stakeholders.
For one, the strategic move may have reinforced government’s avowed commitment to achieving self-sufficiency in food production and consumption through unhindered access to adequate and affordable fertilisers to farmers.
This holds true, considering the fact that before the PFI, the activities of fertiliser black marketers were hurting efforts at leveraging large-scale agric for job and wealth creation. They were the powerful middlemen in the sector, who allegedly ensured that critical farming inputs like fertiliser from the government never got to farmers.
Apart from controlling the Federal Government’s fertiliser distribution system for several decades, the black marketers, whose activities clearly verged on economic sabotage, also denied farmers access to other subsidised inputs such as disease-resistant, high-yield rice seeds and palm oil seedlings.
The inputs, which would have seen farmers’ output rising and contributing to food security, job and wealth creation, were brazenly sold in the open market or in neighbouring West African countries at exorbitant prices.
Beyond the democratisation of access to fertiliser, which the PFI encouraged, the latest forex intervention by the CBN, according to experts, may have also brightened Nigeria’s chances of becoming a major player in the global fertiliser market.
Recall that before the CBN barred official forex allocation to fertiliser imports, Nigeria had on the strength of the revitalisation of the fertiliser industry, set her eyes on claiming a substantial share of the global fertliser market, starting from the West African sub-region, where it plans to reclaim her position as food basket.
Based on this, Chairman, Fertiliser Producers and Suppliers of Nigeria (FEPSAN), Mr. Thomas Etuh, predicted that Nigeria will begin to export fertiliser soon. He said Nigeria was already selling fertiliser to Benin Republic, Chad, Cameroon and Niger Republic.
According to Etuh, the gradual, but steady revolution in the nation’s fertiliser blending industry will restore Nigeria’s position as the food basket of the West African sub-region, noting that it has helped farmers access critical agricultural input at affordable prices.
He also said this has reduced farmers’ overheads, boosted yield and encouraged more players to invest in the agric value chain. He recalled, for instance, that before the PFI, Nigeria had 32 fertiliser blending plants most of which were moribund.
Of the 33 plants, five were functional, but produced at 10 per cent capacity because of the emphasis on importation. With the forex restriction for fertiliser importation to encourage local production, it means that Nigeria is inching closer to becoming a dominant player in the regional and global fertiliser industry.
