Home Finance For how long can Nigeria continue with this import (syndrome) madness?

For how long can Nigeria continue with this import (syndrome) madness?

by Business News Report

By Omoh Gabriel, Business Editor
UNBRIDLED importation of food items and other non essentials by Nigeria has attracted criticisms from organisations within and outside the country, which called on Federal Government to evolve a stitch-in-time initiative, as a foil against unwholesome depletion of the nation’s foreign exchange reserves. But the government seem not to care as more non essential items hitherto placed on import prohibited list are being lifted. Mid January the nation was informed by the minister of Finance Mr Olusegun Aganga, who probably advised the federal executive council of the desirability of the action, that toothpicks, table water, textile and other materials have removed from the import prohibition list thus further opening the flood gate for uncontrolled importation of non essentials.
Trade liberation is a global phenomenon that allows countries take advantage of the area where they have comparative advantage. Nigeria is the only country that refuses to accept this economic theory as even the crude oil it produces has to be exported and the refined products imported. It is the only country endowed with huge lime stone deposit yet it imports cement annually. The never ending round of Daho global trade negotiation is about countries insisting on getting the best for their products and delivering better welfare for their work force. The ongoing trade dispute between US and China is about protecting domestic market for the average American to take advantage of.
Toothpick made from bamboo stick are now to be imported from China, Vietnam and other Asian countries. Are there no bamboo trees in Nigeria? What about table water, how can a nation in its right in its right senses ask for table water to be imported into a country like Nigeria where the business of battled water is thriving. Funny enough the lifting of the ban on textile materials was announced a week after the President re-commissioned United Textile Mills in Kaduna. If any investor is interested in toothpicks could he not have been encouraged to set up a toothpick processing plant in Nigeria to generate employment? Does Aganga and his fellow travellers in the federal ministry of Finance aware of the damage they have inflicted on the economy of Nigeria by their actions?
If the minister is not aware he should read the figures released by the federal bureau of statistics which clearly showed that total trade figure for the year 2009 went down by 3 per cent from N 12.868.0 trillion in 2008 to N 12.4824 trillion, of which export was 59.6 per cent thanks to crude and import’s share was 40.4 per cent.

But the minister will observed that the value of import moved up by 53 per cent from N 3.2991 trillion in 2008 to N 5.0479 trillion in 2009. The value of Export dropped by 22.3 per cent, from N 9.5689 trillion in 2008 to N 7.4345 trillion in 2009. The value of crude oil also dropped by 28.2 per cent from N 8,751.6 billion to N 6,284.4 billion while non oil exports appreciated significantly by 40.7 percent.
Imports by Region table indicate that the continent of Asia placed first with a total value of N 613.7 billion or 34.4 per cent. Placed second was Europe with a contribution of N 601.9 billion or 33.7 percent. America followed with the value of N 328.9 billion or 18.4 percent. Africa was placed fourth with a contribution of N 214.1 billion or 12.0 percent. Import analysis by country revealed that the following countries took the first five positions: China- N 309.4 billion (17.3 %), Albania- N 201.9 billion (11.3 percent), United States- N 134.1 billion (7.5%), France N 98.9 billion (5.5%) and Belgium N 89.5 billion (5.0%). Will Mr Olusegun Aganga say he is happy with this import trend while add another burden to the already precarious situation.
The minister is apparently occupying an office he is least competent to function in. Perhaps he has not study the time series data of the economy or its trade trend. A close study of Nigeria trade statistics revealed that import has been growing rapidly. In 2005 import which stood at N 1,779,601.6 6 rose N 2,922,248.5 7 in 2006 N 4,127,689.9 in 2007, N 3,299,096.6 9, in 2008 and N 5,047,868.6 7 in 2009. Data for 2010 are still being compiled.
Nigeria’s growing import bill has shown a consistent pattern in which what could be grown locally and save the nation of huge foreign exchange are being imported with hard currency. In 1990 Nigeria spent a total of $43 million in food importation, it rose to $97 million in 1991, $1.46 billion in 1992, $1.73 billion in 1993 and $2.09 billion in 1994. Food import bill jumped to $10.99 billion in 1995, dropped off to $9.45 billion in 1996. It rose again to $12.52 billion in 1997, $12.71 billion in 1998, $12.88 billion in 1999, $14.35 billion in 2000 and $24.36 billion in 2001.
Available data points to the fact that in 1995 Nigeria without import would have had a food shortage of 0.53 million metric tonnes as it imported 0.67 million metric tonnes worth of food items. In 1996 while there was about 0.3 million metric of food shortages it imported 0.58 million metric tonnes of various food items. In 1997 an estimated 2.91 million metric tonnes of food shortage was envisaged food import had a record of 2.97 million metric tonnes. According to official figure while 3.34 million metric tonnes of food shortage was expected throughout the country in 1998 a total of 3.47 million metric tonnes was imported. In 2000 the food shortage estimated by the ministry of agriculture was 4.22 total food import was 4.48 million metric tonnes. Similarly in 2001 while food shortage in the country was envisaged and estimated at 5.34 billion actual food import for the year was 5.59 million metric tonnes. Food import has been consistently rising and the nation has been paying for it. Things that can be grown locally. Bulk of the import has been rice, beans, wheat etc.
A look at Nigeria import table show that 90 per cent of the goods imported are for consumption not for production purposes. Topping the list of imported items in 2009 is used passenger motor vehicles, 2nd is common wheat and meslin while in the 15th is frozen fish
A report by Oxfam noted that “in stark contrast to the 1960s, when agriculture provided the main source of employment, income and foreign exchange earnings for Nigeria, the advent of commercial oil exploration in the mid 1970s heralded an era of decay and decline for agricultural output.
The CBN monetary policy Committee last month reaffirmed its conviction that a stable exchange rate regime is critical to maintaining price stability but noted that in the absence of complementary policies the regime is only sustainable at the cost of significant attrition in foreign reserves. The MPC, therefore, continues to emphasize that the solution to reserve depletion lies in the implementation of appropriate reforms with regard to industrial and trade policies aimed at reducing import dependence, which are beyond the scope of monetary policy. Substantial foreign exchange is expended annually on JVC Cash calls and importation of
petroleum products due to the delay in implementing much needed reforms in the oil sector. This is in addition to the huge amounts spent on petroleum subsidies which are likely to increase with higher oil prices. The country is also expending foreign exchange on import of food items such as rice whereas what is needed is the implementation of policies that will lead to food security and total self sufficiency.
The Nigeria economy is facing financial haemorrhage as Nigerians, corporate bodies embark on massive importation of foreign made goods. In the last eight weeks a total of 2009 $13.894 billion went out of the country. While about $ 757 million went out in the week of ending 9th September, the amount of foreign exchange flowing out of the country rose to $ 1.359 billion for the week ending 19th September. It however dropped to $ 452 million on the 3rd of October and moved astronomically to $ 3.290 billion on 17th October. The foreign exchange outflow went further up to $ 3.356 billion on the 31st of October and decline a little to $ 2.397 billion on the 14th of November and $ 2.02 billion and $ 1.262 billion for the weeks ending 21st of November and 28th respectively. This has resulted in the crash of the naira exchange rate
The trend became noticeable in October 2008 where in fact in a matter of weeks several billion of dollars were purchased through the banks, bureau de change. The movement of funds is also in travels- business travel allowance, personal travel allowance, direct remittances etc. According to data obtained from CBN in the eight weeks the total amount of foreign exchange that went out through travels amounted to $ 72.067 million, Debt service/payment $ 799.19 4 million, Whole sale at the Dutch Auction market $ 6.276 billion, Direct remittance $ 851.809 million, letters of credit $ 3.205 billion and cash sales to banks and bureau de change $ 3.170 billion
Is this not a worrisome trend that the minister should develop a fiscal policy to arrest? What new thing has the minister brought into this government. The wealth fund the man is brandishing is not his idea. Works on it started with Mansur Ahmed his predecessor in office. It was one of the things that he canvassed at the 2008 Istanbull IMF/World Bank meeting. The minister for lack of ideas on what to do about the economy should please resign.

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