If there is one area of public policy that the Goodluck Jonathan administration got right, it is the attention focused on rice as a major economic issue during the last year of the administration. Although the outcome of the pervasive initiative did not result in a cascade of rice production across the mills, it nevertheless resulted in the release of new energy, motivation and the drive among farmers and would-be farmers across the country to partake in the upcoming bonanza. Public education (propaganda if you like) on the issue was a masterclass, thanks to the flamboyant former Minister of Agriculture, Dr. Akinwumi Adesina, who is now the President of the African Development Bank.
Endowed with fertile land, boundless energy and the technical expertise of her people, at least in the key area of agriculture, Nigeria, Adesina proclaimed, “has no business importing rice”. Rice is consumed in enough quantity in this country that any producer is apparently guaranteed sufficient market for every grain. So, it is really a no-brainer for investors desirous of a healthy return on their capital. Why is that not happening though? Why is there not a mad rush for rice farmers in this country, given its lucrative nature?
It is not happening simply because, first, there is a dearth of locally produced rice. Second, there is an avalanche of rice streaming through the borders of Nigeria from all over the world, especially Europe, America, Asia and Brazil. In case anyone is wondering, this is not a new phenomenon; it has been going on for as long as anyone can remember and when the importation of anything and everything into the country virtually became government policy.
The cost of importing rice in foreign exchange has been going up and it currently stands at $26bn annually. Now, imagine this amount of money going into the pockets of local farmers in this country instead of bolstering farmers in other countries. The more imported rice we entertain, the more the capacity of Nigerian farmers is diminished because it is more expensive to produce rice locally than to import it. Now think of the cost in terms of unemployment on top of the lost earnings. In addition, think of the loss in innovation and technical advancement in the area of agriculture due to indolent and abandoned machineries in the farming sector.
Before we get too gloomy about this, however, let us not forget the fact that rice importation has indeed produced mega millionaires and billionaires in this country, who now have a vested interest in the status quo and would go to any length to protect that. Furthermore, Nigeria is paying a lot of money to import rice because there is demand for it. So, how do we get out of the logjam?
What the Jonathan administration decided upon was the adoption of the tried and tested Import Substitution Industrialisation. It is also being carried over by the current administration through the minister of agriculture, Mr. Audu Ogbe, who asserts that Nigeria should be “self-sufficient” in rice production by the end of this year. Although this assertion is not backed by evidence, in my view, it is a statement of hope rather than expectation. Remember President Buhari claiming, in the same vein, that the Boko Haram had been “technically defeated” almost two years ago and how forlorn that hope has since become? May be Ogbe knows something that other Nigerians do not yet know. He is, after all, a farmer himself. His own pigs can fly I am sure.
The policy of substituting imports is not new. It is an economic concept that has been around since the 1970s and much favoured by development economists around the world. Put simply, it is a policy that places priority on locally produced (manufactured) goods instead of importing them. It is, on the surface, apple pie and motherhood stuff. Who can disagree?
The problem with ISI is that it leads in no small measure to government intervention in the running of the economy. Tariffs – very high tariffs – have to be imposed in order to ‘protect’ the local production from foreign imports. What this effectively does is to subsidise a whole load of local (inefficient) industries by protecting them from competition. High tariffs would also incur countermeasures on the part of countries whose products are being ‘unfairly’ targeted from the Nigerian market.
Furthermore, unless domestic production capacity is quickly increased, high tariffs may introduce artificial scarcity into the local market, thereby increasing prices in the short to medium term. For the sake of argument though, let us assume there is a total ban on rice importation. As a member of the World Trade Organisation, Nigeria will not be able to get away with this without contravening the provisions of the organisation which frowns on anything that impedes ‘free trade’. Let us assume that high tariffs and a ban on importation by land did the trick of encouraging local rice production in Nigeria and we became indeed ‘self-sufficient’, that would still not be the end of the story.
Also, let us assume that a typical rice producer, Mr. Bassey Okoh and his family of four decide to furnish their house with foreign items, buy foreign generators for use on their farm and at home, buy foreign cars, send their children to foreign schools and watch foreign programmes on their foreign plasma TV screen, among others.
Okoh would then have inadvertently used state subsidies on his farming business to import inflation into the country via the other sectors of the economy. Whatever gains he would have made as a bourgeoning farmer would have been eroded by the high cost of other consumer items that the economy would have forced on him. ISI as a policy, willy-nilly, becomes a circular idea.
The trouble with ISI is that once you target one particular industry for protection, one inevitably has to target every other sector in the economy in order to achieve an even balance; an implausible as well as impossible feat to achieve in the golden age of free trade. Apart from that, Nigeria will never stop importing rice because self-sufficiency per se is not a panacea against importation nor should it be. America, for instance, is self-sufficient in car production, yet, it is one of the biggest net importers of cars in the world, especially from Japan. The American car industry succeeds because it is a good brand and there is general belief in its reliability. Rice importation is a symptom, not the cause of our inability to produce and consume what we eat.