Nigeria: Why the economic crisis is big opportunity (Opinion)

Although the impact of the removal of subsidy and abrogation of the multiple exchange rate regime has been harsh, they offer Nigeria a big opportunity to fundamentally change its economic course, argues Femi Awoniyi, Editor/Publisher of The African Courier

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Nigerians are hurting, now is time to take the bull by the horn!

For eight-long years, economists and international financial organisations, including the IMF, among others, called for an end to the fuel subsidy scheme and the multiple exchange rate regime.

The main reason for calling for the cancellation of both policies is that the resources that could be spent on education, healthcare and transport and other infrastructures were being expended on consumption.

Moreover, the two policies have been described as conduit pipes for a few connected people to massively loot the financial resources of the country.

Now that President Bola Ahmed Tinubu has finally decided to let go of these two polices, we are faced with a seemingly untameable inflationary trend that has worsened the living condition of most Nigerians.

Like Albert Einstein said, “in the midst of every crisis, lies great opportunity.”

The current national economic crisis offers a real opportunity to Nigeria to change course. Given our population strength, geographical size and natural endowment, we simply produce too little.

Increasing food production

Take the current high prices of foodstuffs which is often blamed on increased transport costs. However, the real cause of unaffordable food is underproduction.

The main near and medium-term response to the ongoing crisis is to increase food production.

The question that we should seek to answer is, should it not be more economical to grow tomatoes, peppers, carrots, beans and other perishable foodstuffs in our localities.

And the answer should be answered by the governments of the states that are ‘net importers’ of these produce from other parts of the country.

A friend recently mentioned the dependence on Abuja yams and Benue yams in Ekiti these days. This is a state where yam is not only food but also a cultural good. Why should we not be able to grow enough yam in Ekiti, whose people are famed for their love for pounded yam, at least to meet local demand?

Why should tomatoes produced in Ogun, Osun or Oyo not have competitive advantage over those brought in from Kaduna and Kano, about a third of which perish during transportation?

We all talk about the need for restructuring so that sub-national governments can control the resources in their territories. The fact is, the most precious resource, land, is already under the control of the states, courtesy of the Land Use Act of 1978.

States should take agriculture seriously now!

While efforts should be made to attract investment into industrial-scale agriculture, states should support smallholder farmers to boost production of foodstuffs. The goal should be that the supply chain of food consumed anywhere in the country start with the regional producers.

There are many young people who are unemployed. They can be trained and supported to start smallholder commercial farming with funding and extension service.

In fact, and like Parviz Koohafkan, the president of the World Agricultural Heritage Foundation, once said, “the future sustainability of agriculture depends on young people staying in rural areas, implementing farming innovations and creating sustainable livelihoods”.

Sustained support and promotion of smallholder farming can invigorate the rural economy.

Palm oil, sugar etc

Nationally, there should be a clear road map for the long overdue self-sufficiency in the production of palm oil, vegetable oil, sugar, rice etc. These are commodities that can easily be produced in Nigeria. In fact, we have the potential to become their net exporters.

Take palm oil, which is used in many products from food, cosmetics, detergents to biofuel, as an example. Nigeria’s current production of 1.4 million metric tons does not meet local demand of 3 million annually. Hence, we have to import the product, of which Nigeria was once the world’s biggest producer. According to experts, the oil palm is native to West Africa and is endemic to Nigeria.

Nigeria spends about $500 million annually on palm oil importation, according to the Central Bank.

In the early 1960s, Nigeria was the world’s largest palm oil producer with a global market share of 43 per cent. Today, its annual production of 1.4 million tonnes is a dismal fraction of Indonesia’s 44.5 million metric tonnes (2021).

Indonesia is not only the world’s biggest producer but also the world’s biggest exporter, exporting 28.4 million tonnes of palm oil in 2022 and earning about 30 billion US dollars.

Palm oil is a very valuable commodity that is even more expensive than crude oil on the international market.

A tonne of palm oil goes for US$900 while that of crude oil is about US$640 (July 2023). Please note that one barrel of crude oil equals 131.27 kg and a tonne is 1000 kg; hence, a tonne is equal to 7.618 barrels.

The current crisis is a challenge to states in the southern part of the country, which used to produce palm oil for export in the past, to revive the palm produce industry. These states can strategically begin to promote the cultivation of oil palm on a large scale and encourage the setting up of modern oil mills with incentives.

Edo, Lagos, Ondo, Ogun, Delta, Cross River, Rivers, Bayelsa and Akwa Ibom, among others, should wake up!

A thriving local palm produce industry will also create a new source of tax revenue for government in addition to creating jobs and leading to increased activities in many other economic sectors.

Sugar is another commodity, of which Nigeria can and should become a self-sufficient producer. Despite the efforts of the National Sugar Master Plan, initiated in 2008 to work for the attainment of self-sufficiency in sugar “within the shortest time possible”, Nigeria’s import has progressively increased. It’s today, 15 years after, nowhere near self-sufficiency.

Nigeria currently produces only about 10 per cent of its annual consumption of 1.7 million tonnes. The rest is imported mainly from Brazil.

The current Backward Integration Policy (BIP) policy of encouraging sugar refiners to invest their profit in growing sugarcane in a backward integration strategy has failed. And that much has been admitted by the Executive Secretary/Chief Executive, National Sugar Development Council (NSDC), Mr. Zacch Adedeji.

It’s simply easier and more profitable for these refiners to import raw sugar and refine and sell. And these companies – Dangote Sugar Refinery, BUA Sugar Refinery and Golden Sugar Refinery, are the only ones allowed to access forex at the CBN for the importation of sugar. Nigeria spent $980 million on sugar import in 2021.

A new strategy of bringing in other players to produce raw sugar for the local refiners, which claim to have the capacity to refine 3.5 million raw sugar, far in excess of local demand, should be initiated. This could be achieved by working in partnership with the governments of states most suited for the production of sugarcane.

In India, the world’s largest producer of sugar (36 million tonnes in 2021/22), 50 million farmers are involved in sugarcane farming. In Kenya, which produces around 700,000 tonnes (2022), more than 250,000 farmers are engaged in the production of sugarcane for the country’s 16 sugar factories.

This means that if local farmers are mobilised to supply sugarcane to the country’s millers, hundreds of thousands of jobs would be created in Nigeria.

Palm oil and sugar are just two examples. There are many other products whose production Nigeria can, as a matter of national priority, promote.

Better organised transportation

The current crisis also provides yet another opportunity to organise a more economically efficient public transport.

Take Lagos where thousands of small cars and mini-buses are the backbone of public transport. These are uneconomical means of mass transit. Moreover, these vehicles clutter the roads and are a cause of the traffic gridlock for which the city is notorious.

Lagos should begin to consider the ratio of fuel consumption to the number of passengers carried when licencing vehicles for public transport. Hence, only buses that can averagely carry passengers in a fuel-efficient way should be allowed to operate public transport in the long term.

For example, only buses that can carry 60 passengers should be allowed to operate on some major routes, such the Lekki-Epe expressway, and these will only stop to pick or drop passengers at designated bus stops. There are many other routes in the mega city where such a rule can be introduced. The same should go for other states and even interstate routes.

Like that we will reduce national fuel consumption and there would be fewer vehicles on the roads with the attendant benefits.

Time to go solar

A major use of diesel and petrol in Nigeria is to run power generators for private and commercial uses. This is not only bad for the environment and our health, it’s also ruinous for our economy.

These generators are grossly inefficient in the use of fuel to generate power. Technically, a substantial part of the fuel burnt is wasted as it is not converted into electrical energy.

There are better alternatives to these generators. While efforts are being made to improve electricity supply through the national grid, the use of renewable energy should be actively encouraged.

It has never been cheaper to generate electricity from the sun and wind!

Solar technology has become very efficient and are more economical than generators in the medium to long term for private homes, for example.

Government should encourage the use of solar technology by removing import duties on solar power equipment such as batteries, solar panels, inverters, charge controllers and other accessories needed to instal solar home systems.
Also, only energy-efficient electrical appliances should be allowed into the country. This will help reduce demand for electric power.

Moreover, renewable energy technology should be introduced into the curriculum of our technical schools, polytechnics and universities. We should not be left behind again as the world now races to develop the most efficient ways and means of extracting energy from the sun, wind and ocean waves, among other renewable sources.

While Africa is the sunniest continent in the world, it generates the least electricity from the sun. We need to end this paradox.

Making Nigeria investment-friendly

Long term, Nigeria has to create favourable environment and climate for economic production to take place. This country produces too little for its own use which is why most things used in daily life in Nigeria are imported. And that explains the mass unemployment and the poverty in the land.

This crisis calls for better economic governance as Nigeria cannot and will not be able to continue on the path it has threaded these past decades. Without matching an increasing population with the commensurate economic growth and development, Nigerians will continue to be poorer.

In conclusion, it must be admitted that no economic development can take place in the midst of insecurity. Hence, the absolute priority of the government of President Tinubu should be to improve the security of the country so that people can go about without let or hindrance to carry out economic activities.

Hence, the success of this government will be to the extent to which it’s able to improve the security situation in the country.