The report on naira devaluation and its impact on agricultural value chains in the Niger Delta released by the Foundation for Partnership Initiatives in the Niger Delta (PIND) and the UK Department for International Development (DFID) Market Development (MADE) Program released on Thursday, 6 July, 2017, provides key policy insights and recommends actions for government and the private sector to mitigate the impact of the recent naira devaluation on Nigerian agriculture.
This report emphasizes the need for government and international organizations with a focus on agriculture to reshape interventions to reflect the economic realities of a dynamic situation, especially relating to the aquaculture, poultry, palm oil and cassava sectors.
As the global crude oil price fell from above $100 per barrel in early 2014 to below $30 per barrel by the beginning of 2016, Nigeria’s oil revenues and foreign exchange reserves dropped. The decline in reserves exerted pressure on the Naira against the dollar, and meant the Central Bank of Nigeria (CBN) was unable to defend the Naira’s peg to the Dollar. To reduce imports and conserve its diminishing foreign exchange reserves, the CBN implemented a ban on access to foreign exchange at the CBN official window for a list of 41 items including rice, poultry and palm oil products. Additionally, the Federal Government increased import levies on these goods and other agricultural products, and even banned imports of some entirely.
The impact of this devaluation and the subsequent ban on importation differ from one agricultural value chain to another. One of the results of the devaluation on aquaculture, for example, is that “Catfish prices have increased as consumers turn to it as an alternative to more expensive imported fish and poultry, meaning that the farmers who have stayed in business have seen their revenues increase”. Additionally, the devaluation has made foreign feed more expensive, creating an opportunity for local producers to meet demand.
The report also explains that demand from the food sector has more than doubled the price of imported rice between 2015 and the beginning of 2017. The drop in rice import by about 2 million tons since the devaluation has led to higher demand of cassava food products and cassava tubers.
Similarly, the study noted that the palm oil subsector has also seen increased demand for both Technical Palm oil (TPO) and Special Palm Oil (SPO) as imports of refined palm oil are banned while crude palm oil imports are subject to combined import tariffs of 35%, and are invalid for official foreign exchange access.
“The increase in demand has led to increased prices for palm oil and the fresh palm fruit which has been higher than the increase in prices that producers and processors have faced when purchasing inputs,” the report observed.
Among their recommendations, both PIND and MADE advocate adoption of mechanized and commercialized agriculture to maximize the nation’s agricultural potential to earn foreign exchange from exports, produce raw materials for the industries and as well as create massive jobs for the teeming unemployed youths.
The report will be published following the private sector stakeholder engagement event due to hold in Lagos later in July 2017.