HOW NOT TO GO ABOUT BOOSTING LOCAL INDUSTRIES IN NIGERIA OR IT'LL CAUSE INFLATION
fter waiting patiently for quite a while now just to understand the rationale behind the Central Bank of Nigeria's idea starving the economy of foreign exchange (in the name of regulating the flow of forex) needed by especially the manufacturing sector in running a smooth business operation, I am tempted to conclude that unless the CBN is under orders from either the President, World bank or some organization in which Nigeria is heavily indebted to; there is no sensible justification for burying the real sector of the Nigerian economy in favor of only a segment - the Agro-allied and Agricultural-related industries.
It was wrong for industries in Nigeria to rely only on the Nigeria market for business in the first instance, as there are other markets on the Africa Continent. This is because if every Nigerian should become a farmer today there arises the problem of who was going to buy from the other. Hence, I reasoned that it was all unsound and illogical to hurt the real sector just because of a so-called Agricultural revolution. Therefore, it looked foolish for an Agro-entrepreneur to become adamant over the idea of venturing into the African continent because the government got it wrong by the way it shielded the Agro sector from realities.
Commenting on the scarcity of the dollar sometime back in December 2016, Flour Mills of Nigeria PLC's Managing Director, Paul Gbededo had this to say, "Everyone is trying to see how to source locally and that is good for Nigerian farmers and processors. We have tripled production in refinery of palm oil, palm kernel and soy beans. Fifteen months ago, one ton of corn was sold for #60,000.00. Today it is #125,000.00."
And if this was the case that the scarcity of Forex was a healthy development for the agro economy as Mr. Gbededo puts it, one may wish to know why then the standard of living just suddenly turned unbearably high and why the mostly non agro-allied industries in the country are shutting down operations and laying off workers? The harsh realities are simply pointing to the fact that the Nigerian economy can never be founded on Agriculture except in complimentary capacity! Also the over-protection of the sector by government may not help the sector compete favorably with foreign markets.
The federal government's inability to see this economic reality is unfortunately an incompetence we all have to deal with. To make matters worse, as the erstwhile subsidy regime on PMS was removed in order to open the downstream sector of the petroleum industry up for a healthy competition; this government forgot the fact that with the scarcity of Forex, availability of PMS could be hampered. Incidentally, the petroleum industry had every help to lend to the agro sector, so why cripple the real sector in favor of the agro sector?
The effect of Forex scarcity on the cement manufacturers cannot be better imagined than from the effects that stared us now: people no longer built structures! For crying out loud, does the price of cement (which is at almost #3,000.00) not strongly suggesting that Forex scarcity is causing inflation and therefore doing more damage than good? Since when has the Agro-allied industries been considered as a revenue source? Hasn't it been dependent upon the real sector for its own survival?
Presently, Agro-allied industries are the only viable department of the real sector especially since the call for diversifying the economy from oil. But was it not better to not destroy the other existing sectors of the economy in order that agriculture became viable and attractive for investment? The local materials which is been promoted are themselves not cheaper than the quality ones that are imported into the country and, since our attitude of covetousness are not helping matters; it becomes as if citizens are forced against their will to part with hard-earned monies for a piece or pieces of rubbish in the name of promoting agriculture!
I have said this before in another forum and let me repeat it again. In Nigeria, businesses that had survived the harsh and unfriendly economic environment to remain in business were largely driven by passionate and very determined personalities. Conversely, the many government backed business or concept revolutions had woefully failed because of the average Nigerian's greed. So, the agro sector should have been allowed to grow and compete with foreign markets on its own just like the Nollywood, the Naija Music, the Naija fashion designs, and the Naija shoe industries are doing.
Recently, the news reported about how OLAM Mills Ltd imported about 7 ship loads of maize from India. That news scared the living day light out of the local farmers who immediately cried out to the government to intervene by restraining the Miller from continuing to jeopardize the efforts to encourage farming. Was it sensible for government to heed their calls? I do not think so and these are my reasons:
If government should stop OLAM Mills from importing grains, then it was not helping the local farmers who needed to understand that the fact of government's encouragement did not mean for them to relax on standard of final products or sell at exorbitant prices because they enjoyed government's brotherly hug.
If the local market sold grains for high prices, where was the room for foreign investors to play?
If the likes of OLAM Mills had one complaint or the other which made them decided to buy abroad; will their complaints be attended to if government sided with the farmers?
Finally, the local market should not remain the local farmers only avenue to sell their produce. It was necessary that the traffic of importation did not stop but is minimized and that exportation increased. This way, our farmers can stay up-to-date with world's best practices.
This is why I am of the opinion that the other sectors of the economy should not be paralyzed because of the fact that government promoted agricultural revolution; because doing so would otherwise spell disaster. Yes, Nigerians are naturally drawn to cheaper commodities but that is solely because the purchasing power of the Naira has been so weakened both by government policies. Hence, using the agro sector as case study for this essay, we have seen the how not to go about boosting local industries or it'll simply cause inflation.