Opinion: “Restricting Imports Without Improving And Investing in Local Products is a Failed Policy.” By Sylva Praise.
For decades, Nigerian government has been placing a ban on imports in order to deal with the problems of import and oil dependencies. But this for long has not helped the economy since the government failed to take the right measure
Nigeria’s first major economic crisis of the oil era hit the Shehu Shagari government in the early 1980s. When the Buhari military regime replaced Shagari’s government in December 1983, it escalated Shagari’s import restrictive policy by placing all imports under licensing and closing Nigeria’s borders, the economy suffered as it went into a high inflation rate. The Babangida regime that succeeded Buhari in 1985 was, broadly speaking, economically liberal, with the pro-market elements of its structural adjustment programme, but it started by imposing a 30% levy on all imports. Although Babangida later abolished the import levy, General Sani Abacha took over power in late 1993 and introduced wide-ranging regulations and controls. However, by 1995, to assuage the concerns of foreign investors, Abacha announced what he called “guided deregulation” and reversed some of the existing controls. But this change did not last, for, as Abacha became increasingly dictatorial and unpopular, his economic and trade policies became very restrictive.
The situation did not improve under the civilian dispensation that started with Olusegun Obasanjo’s administration in 1999. Indeed, President Obasanjo once vowed that “We are certainly going to ban more products”, adding that “The idea is to protect our local industries and boost our manufacturing capability substantially”. And his government used import bans extensively. It continued down to the administrations of Umaru Yar’Adua and Goodluck Jonathan to our present administration.
Recall, CBN has been compiling an import ban list since June 2015, it banned importers of 41 foreign products from accessing the foreign exchange market. This means that the central bank will not grant foreign exchange to import those goods, most of which are consumer or intermediate products.
The immediate trigger for this policy was the plummeting exchange rate of the naira, Nigeria’s currency. But the central bank governor, Godwin Emefiele, insisted that the more important aim of the policy was to tackle the problem of import dependency and to diversify the economy. According to him, the intervention would help to “resuscitate local manufacturing” and “change the structure of the economy”.
The policy did not resuscitate the local manufactures or the economy instead it crumbled the economy so much by increasing food inflation. Which definitely increased the cost of living. In August 2019, President Muhammadu Buhari ordered a ban on dollars for food imports, forcing importers to source for dollars at parallel markets. He stated this on his tweeter account.
After the ban by the president, importers of food were forced to source for dollars at N462/$1 at the parallel market, driving food inflation. Last year, Nigerians spent N1.9trillion or 4.7% of their budget on rice alone, according to NBS data.
The Monetary Policy Committee(MPC) of CBN has asked the Central Bank of Nigeria (CBN) to add more items to the list of forex ban for imported goods which can be produced locally.
On Tuesday 25th of May 2021, MPC made their position about expanding the ban list in an MPC communique released on the CBN website. It was stated that the 0.51% growth of the Nigerian economy hasn’t cleared the dangers yet, as GDP of 0.51 percent was still far below population growth rate.
In order to increase the growth of the economy, MPC advised CBN to adopt certain economic administrative measures that will help boost consumption, exports and investments, as well as fight inflation.
This was stated by MPC:
“There is a strong need for the Monetary Authorities to consolidate on all administrative measures taken not only to rein in inflation, but also on the actions so far taken to grow output.
“In the Committee’s view, such measures should include boosting consumption and investments, as well as diversifying the base of the economy through FX restrictions for the importation of goods and food products that can be produced in Nigeria.”
Recently, there has been a ban on imported wheat, sugar and cars. The Association of Master Bakers and Caterers of Nigeria (AMBCN) has come out to say that there will be a 30% increase in bread and pastries.
In a statement made on Wednesday 26th of May 2021, AMBCN said;
“The baking business is bleeding due to the rising cost of flour and other raw materials and a truck of flour now costs N9 million, against the N6 million price within the last six months, In order to survive, bakers have to increase prices by 30%.”
Meanwhile, Major terminal operators in Nigeria have come out to announce a 50% increase in terminal handling charges, and this would lead to an increase in the price of imported cars. This would take effect from 1st of June 2021, as reported by The Guardian.
The terminal operators said the reason for the increment is as a result of increased inflation and huge cost of operation due to the nature of Nigeria ports and it has been difficult for them to operate with the current price.
However, rising food prices and other commodities driven by government’s policies means that Nigerians earning A N30,000 monthly minimum wage will have to pay more for the food they eat. Nigerians spend nearly 60% of their earnings on food purchases, the highest in the world, compared to Americans, who spend just 6.4% and Britons who spend 8.2%, according to data from Euromonitor, cited by the World Economic Forum.
Just imagine how the price of common bread that is everywhere has gone higher. A whole frozen chicken that once sold for N3,000 per one kilogram now sells for N5,000 to N5,500, should i talk about the prices of rice, beans, table water and the rest that are too difficult to afford. Yet the government is expecting everyone to live off the minimum wage. An average Nigerian can barely afford 2 square meals a day let to talk of having a balanced diet.
Government should look into empowering local producers
Restricting imports without improving and investing in local products is a failed policy. I am not saying that the ban on imports is a bad idea but there should be a standard set out for local industry by the government. The government should empower or invest more on infant industries in order to improve and increase production which can sustain the citizens as well as promote exports. By doing this the prices of locally produced goods will reduce and it will also be good for consumption. Therefore increasing the economic growth of the country.
Nigeria is right to be concerned about import dependency, but it cannot deal with this problem by simply banning or restricting imports. It must tackle it primarily by promoting exports and also by allowing the market to regulate imports through a competitive foreign exchange regime.