Chief Economic Adviser to Nigeria’s president Muhammadu Buhari has disclosed that Nigeria spent N1.85 trillion to import food for nine months during the closure of international land borders.
The adviser further stated that the development is a signal of the nation’s lack of capacity to feed itself.
This disclosure was made by the Chairman of the Presidential Economic Advisory Council (ECA), Dr. Doyin Salami while speaking at the National Economic Outlook for 2021 organised by the Chartered Institute of Bankers of Nigeria (CIBN).
It was the seventh edition held virtually on Tuesday in Lagos.
Salami, an ex-member of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) said: “Despite border closure, our national import of food amounted to N1.85 trillion between January and Sept 2020 – a 62 per cent increase when compared to same period 2019. This suggests a weakness in our ability to feed ourselves and raises the need to consider review of intervention policies in agriculture.”
He said agriculture continues to decelerate, growing at 1.7 per cent year-to-date while consumer-sensitive sectors like manufacturing and distribution continue to contract, in double digits.
According to him, serious climatic concerns are undermining agricultural output with 2.5 million farmers being impacted by flooding in 2019.
Preliminary assessments suggest that 2020 was worse with persistence into 2021 to adversely affect output and food prices.
Nigerians’ spending on food rose significantly in 2019, according to a report by the National Bureau of Statistics (NBS).
The report, released in May last year, showed that total expenditure by households on food and non-food items for 2019 was N40.21 trillion, up from N21.62 trillion recorded in 2018.
The report showed that of the total household expenditures, food accounted for 56.65 per cent; 43.35 per cent accounted for expenditures on non-food items.
Food consumed outside the home constituted the largest expenditure followed by transportation costs.
Salami said during the period, Nigeria’s cumulative trade deficit amounts to N4.6 trillion ($12 billion).
He said Nigeria’s external imbalances are increasingly precarious, with continuing concern over exchange rate differentials.
He said uncertainty around foreign exchange – convergence, market-reflective rates and transparent determination mechanism, Balance of Payment imbalances are large and would remain key questions in 2021.
Salami said by the measure that drives the value of the naira based on the naira/dollar inflation differential, the currency should be trading around N439/$ at the official market.
To the economic adviser, the agricultural sector, ICT, real estate and oil and gas are vulnerable to a probable major adjustment to the foreign exchange rate.
Salami said official payment data showed that approximately US$30 billion (almost 10 per cent of our national economy) is obtained from sources outside the CBN, adding that the gap between the official and other exchange rates is a source for concern.
He said the COVID-19 shock of 2020 represents the third major shock to the Nigerian economy in 12 years.
According to him, ahead of the crisis, the Nigerian economy was contending with a set of pre-existing conditions such as macro Instability, stagflation – slow growth and rising inflation, pressure on households – in the form of rising inflation, unemployment, and poverty and pressure on corporate(s) margins – weak consumer and cost pressures.
He said there were also growing fiscal and external imbalances, monetary Policy distortions – the bifurcation of sovereign instruments leading to a distortion of the interest rate term structure.
He said with the impact of COVID-19, prices continued to rise – at the end of November 2020, overall inflation was 14.8 per cent with food prices increasing at 18.3 per cent when compared with November, 2019.
On the upside, he said stay-at-home imposition implied greater use of telco/tech communication platforms.
“A health crisis morphed into an economic crisis resulting in humanitarian and in some cases, security challenges, a global development visiting great disruption to established norms – largely negative short-term impact but some positives – especially with technology deployment, the full impact of which will manifest in the years ahead,” he stated.
For Salami, the international economic environment deteriorated very sharply last year but recovery expected in the new year, is contingent on the capacity to suppress the virus through vaccination.
He said Transport and Hospitality sectors were gravely affected by the lockdowns of April/May as well as by voluntary containment measures and/or imposed restrictions post-lockdown.
The Oil & Gas sector, given lower oil prices, OPEC quantity restrictions on Nigeria output, and long standing impediments to investment in the sector (not to mention the pass-through of the sector – through government revenues and forex – to the rest of the economy), is another major driver of recession.
President/Chairman CIBN, Mr. Bayo Olugbemi, said the National Economic Outlook initiated in 2014 was designed to bring together industry leaders, subject matter experts, seasoned practitioners, and relevant stakeholders together to discuss emerging and pertinent issues facing both the national and global economies and their implications for businesses.
The CIBN president was represented by second Vice President Prof. Pius Olanrewaju.