The constraint most nations face in their quest to overcome the challenges of growth is the non-availability of the resources needed to finance the process. These resources could either be raw materials, relevant labor skills or the near-total absence of the needed financial capital to spur and propel the growth process.
For every economic entity Nigeria inclusive, revenue generation is directed towards meeting the basic social and infrastructural needs of its citizenry and to maintain sustained growth.
Before the 1970s, revenue generation in Nigeria was largely dependent on non-oil products such as agriculture and mineral resources. Foreign exchange was earned from the sale of different crops such as cocoa, rubber, coffee, cotton, palm produce, groundnut, etc. Non-oil export accounted for over 74% of the total revenue earned by the country while oil revenue accounted for the balance of 26%. However, with the oil boom of the 1970s, fundamental changes were experienced in the structure of the Nigerian economy.
The boom encouraged Nigeria’s over-dependence on oil revenue to the total neglect of other revenue sources. Available statistics indicate that oil contributes approximately 90% of foreign exchange earnings and about 80 percent of federal revenue.
This model is unsustainable due to the significant decline in oil revenue as a result of the emergence of alternative energy sources wold over.
The need for the Nigerian government to generate adequate revenue from non-oil sources has, therefore, become a matter of extreme urgency and importance. This need underscores the eagerness on the part of the government to look towards agricultural productivity for the needed growth.
Since coming to power in 2015, President Muhammadu Buhari has placed great emphasis on the agricultural sector through policies and programs aimed at improving output and productivity. These initiatives have led to an increase in the production of rice, maize, cassava, oil palm, groundnut, beans, ginger, and other products.
These reforms led to a substantial increase in the contribution of the Agric sector to Gross Domestic Product (GDP). Available data from the National Bureau of Statistics indicates that the sector grew by 3.17% in Q1 2019 from 2.46% in Q4 2018 and 1.91% in Q3 2018. In 2018, agriculture contributed about 22.86% to Nigeria’s GDP compared to 20.24% in 2014.
To further encourage local production and consumption of agricultural produce, President Muhammadu Buhari on Tuesday mandated the Central Bank of Nigeria (CBN) to stop the issuance of Foreign Exchange (FOREX) for the importation of agricultural produce into Nigeria. The policy according to the Apex bank will be implemented in phases to cushion the effect on food prices and inflation.
According to the President, Nigeria’s foreign reserve should be conserved and utilized strictly for diversification of the economy, and not for encouraging more dependence on foreign food import bills. Although the president’s directive did not state if the restriction is for processed or raw food items or both.
Statistics from the Economic Complexity Index shows that Nigeria is the 52nd largest importer in the world with over $22bn of FOREX consumed annually. A CBN report put monthly food import at $160.4m as of October 2018.
Worried by this ugly statistics, the CBN in 2015, imposed FOREX ban on the importation of some food items such as rice, palm kernel/palm oil products/vegetable oils, meat and processed meat products, vegetables and processed vegetable products, poultry chicken, eggs, turkey, tinned fish in sauce(Geisha)/sardines, tomatoes/tomato pastes.
Despite short-run fears that the new directive by Mr. Buhari my lead to scarcity, inflation and black market importation, the Nigerian economy, in the long run, will come out strong and better.
The directive will discourage the importation of agricultural products, thus encouraging local production.
Spurred by the resultant increase in demand, young school leavers and farmers will be encouraged to go into commercial agricultural production hence increasing output, employment, revenue generation, and export. Also, Micro, Small and Medium Enterprises (MSME’s) will seize the initiative and go into processing and packaging of this agricultural produce thus encouraging industrialization.
To cushion the negative effect of the policy and enhance food sufficiency, the government must as a matter of urgency empower farmers with improved seedlings, soft loans, fertilizers, pesticides, accessible roads, modern farm implements and provide a conducive and safe environment for farming activities to thrive.
MSME’s should also be provided with constant power supply, adequate security and tax holidays to increase their productivity.
Nigeria’s desire to diversify its economy from oil will require huge sacrifices and the time to start is now!