President Muhammadu Buhari on Tuesday ordered the Central Bank of Nigeria not to issue FOREX for food importation. Is such an order within the powers of the executive?
No. He cannot direct the Central Bank on how to manage its monetary and FOREX policy. He doesn’t have that power but as the chief executive he could say Nigerians elected me and I owe them as a duty to make the economy pro-growth, prop investment and pro-jobs.
There are better ways to do that. The president could do a memo to CBN but not stay in his house during sallah and make such order. It is dictatorial and unethical. It is undemocratic.
Does such order not amount to violation of Article 1(3) of the CBN Act 2007 that says the Bank should be independent body in discharge of its functions?
I have answered your question in the first question. The president can invite the CBN governor to his office, using memo, discussing why certain Monetary and FOREX policy has to be taken. First it is more of a fiscal policy than a monetary policy.
Such policy direction would have been given to minister of finance, not the CBN governor. Minister of finance in collaboration with minister of agriculture could be given the direction to make it difficult for finished food products to be imported into the country.
This is because you cannot ban at some level due to World Trade Organisation. Since it is not a monetary policy, it is more of fiscal policy and trade policy.
So the CBN wouldn’t have been involved. But then the CBN in collaboration with ministry of finance, and ministry of agriculture will harmonise a FOREX policy which will state that certain agricultural product should not enjoy official FOREX.
With the kidnappings and killings people are avoid going to their farms in places like the food basket of the country, Benue State. So, it is a wrong time to come up with such policy
How would such order impact food sufficiency and production in the country?
This policy would have been excellent had it been that herdsmen menace has not driven people out of their farms.
With the kidnappings and killings people are avoid going to their farms in places like the food basket of the country, Benue State.
So, it is a wrong time to come up with such policy. But, be it as it may, it is a good policy because it will make us inward looking.
For instance, in the palm oil industry, it has been discovered that the so called three major producers are undermining the development of local palm oil industry by importing cheap and substandard palm oil from Malaysia and Indonesia.
Now with a ban on FOREX for importation of food products, there is a need for investors to take advantage of the high price of palm oil in the country to invest in the palm oil industry by establishing palm plantation and processing plant.
So in all, it is a good policy but not supposed to be driven by CBN based on the order of the president. This is democracy.
The prices of food will rise in the next 12 months because supply is lower than demand. So prices will rise. Inflation will rise. So many families will have to ration their meals
Do you mean the policy is a good one if carried out through the right channels?
Yes. Nigeria cannot continue to be a dumping ground. We have 200 million persons to feed and we cannot depend on imported food stuffs. Look, palm oil industry is $200bn industry.
Malaysia and Indonesia are making more money from palm oil export than Nigeria is making from crude oil. And Nigeria used to be the number one in the world in the 50s and 60s, having 40 per cent of the market share.
Why can’t we go back to that? We have rain forest, good soil and climate for planting palm trees, why can’t we do that? So it is a good policy but not done through the right channel and right time.
How will this policy impact the ordinary man on the streets?
The prices of food will rise in the next 12 months because supply is lower than demand. So prices will rise. Inflation will rise.
So many families will have to ration their meals. That is the way I see it because this policy is a good policy but this is not the right time.
Farmers/herders clashes have stopped some farmers from going to farms. So harvest will be low. Imported food that should have been allowed to come in to cushion the effect is blocked. It is a good policy but coming at the wrong time.