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Border reopening, smuggling as demotivation to agribusiness

By Femi Ibirogba, Head, Agro-Economy
18 January 2021   |   3:03 am
As land borders were closed in August 2019, and emphasis was placed on locally-produced and processed rice, Mr Afiz Oladejo, a medium-sized rice processor based in Lokoja, Kogi State

‘Farm settlements, CBN’s pact with states as the way out’

As land borders were closed in August 2019, and emphasis was placed on locally-produced and processed rice, Mr Afiz Oladejo, a medium-sized rice processor based in Lokoja, Kogi State, pooled more resources together from friends, relatives and microfinance institutions to acquire a better stone-removing machine for his rice mill business. He had thought that the policy of the Federal Government would mean a permanent paradigm shift in rice production, processing and food business in Nigeria.

He operates the rice mill put in place by the Lower Niger River Basin Authority, Ilorin, in a public-private-partnership initiative. However, he became pessimistic and his spirit was dampened when the government announced the reopening of the land borders in December 2020. His business now teeters on the verge of collapse, he said.

“With the new opening of borders, smuggling of imported rice would rise and (this would) create doom for a lot of farmers, particularly those spending so much on dry season farming,” Oladejo said while expressing frustration over the situation.

The founder of Coscharis Group, Dr. Cosmas Maduka, also explained recently that “rice is not banned in Nigeria. What the government did was to impose a 100 per cent duty on its importation. What this means in effect is that if you import and pay 100 per cent duty, you cannot sell, because the price will be too high. It is only a business of smuggling.”

Again, a lecturer at Lead City University and rice processor in Ibadan, Oyo State, Dr Nike Olagunju, expressed frustration over how her rice aggregation and value chain business had suffered after the reopening of the porous borders, done without adequate preparation to nip smuggling.

She explained to The Guardian that she sourced fairly processed rice from cottage operators from Kebbi, Kano and Niger states, destoned and packaged the rice into smaller bags of 5kg, 10kg, 25kg and sometimes 50kg. She made extra income from the business while the borders were effectively controlled through closure, but sale became difficult immediately because demand again shifted to the consumption of smuggled imported rice.

Standing order to CBN to snob forex application for food imports
During his fifth meeting with the Presidential Economic Advisory Council at the State House, Abuja, the Federal Government, on December 29, 2020, re-emphasised that the Central Bank of Nigeria (CBN) should avoid granting foreign exchange to any firm or individual for food importation.

The implications are that the reopening of borders does not imply importation of food into the country and if the Joint Border Patrol System put in place by the Federal Government and neighbouring countries works, coupled with the presidential order on forex for food importation, Nigeria’s efforts and investments to become food secure would remain on course.

In other words, the numerous CBN’s initiatives to grow the agricultural economy must be protected from profiteers and commercial adventurers and not sacrificed on the altar of trade liberalisation. 

Though importation of most agricultural products remain prohibited and technically hindered, the inability of the Nigeria Customs Service to effectively man the borders due to corruption, smuggling would make investments in farms, agricultural processing plants and other agro-allied industries unbearably risky, industry players have said. This, they argue, could demotivate smallholder farmers who produce rice and other food grains in the country.

Based on the foregoing, smuggling of rice and other foodstuffs may increase, according to stakeholders and farm investors.  

While expressing views on the situation, President, Catfish and Allied Fish Farmers Association of Nigeria (CAFFAN), Mr. Rotimi Oloye, said though the reopening of land boarders was a welcome development, poor structures to prevent smuggling of agricultural products would be exploited by economic saboteurs.

“There will be attendant flooding of the food market with cheaper and unhygienic products brought in by traders across the loose borders. It will definitely hamper the recovery of investors in the agri-business as cheap products, enhanced by better-operating conditions in the country of such imports, flood the country.

“There will surely be losses of investments and jobs with the collateral effects of uncontrolled trade across the borders,” Oloye said.

Local agribusiness investors, Oloye added, would find other areas to deploy their funds, and more jobs would continually be exported to those countries where products are imported.

Mr. John-Bede Antonio, a Lagos-based food exporter, said: “You cannot check to smuggle. Why? Our production is small and not cost-effective. We do less than three tonnes per hectare [of rice], while Asia does six to10 tonnes per hectare.

“It was a waste of time closing the borders for rice production. Sorry for those who have invested in rice mills.”

Also, the chairman, Kano State chapter of All Farmers Association of Nigeria (AFAN), Mr Abdulrasheed Magaji, said: “It is all a matter of two things: commitment and corruption.”

Magaji argued that often, the government agencies and officials that were supposed to guard the borders, such as Nigeria Customs Service, Immigration Service and other supporting agencies like the Nigerian Security and Civil Defence Corps, National Agency for Food and Drug Administration and Control (NAFDAC) as well as the National Agricultural Quarantine Service, were not really committed to checking the importation of banned or even hazardous items because of corruption and indiscipline.

In the same vein, Kebbi State chairman of Rice Farmers Association of Nigeria (RIFAN), Sahabi Augie, said: “It is very difficult to check smuggling in this country. Even at the time of border closure, it did not stop.
“Our borders are porous, but the customs officers are ill-equipped while the smugglers have unwavering determination to continue. In so doing, they engage the support of the border communities by bribing them. They also collude with the foreign countries that are determined to scuttle the success of our quest for national food security because it is a big threat to their economies.”

Demotivation to local rice farmers, processors
FOLLOWING the reopening of the borders, price of smuggled and locally-made rice could reduce as local brands are forced to compete with snuggled but cheaper brands. Estimated to have reached over 4.5 million metric tonnes of the grain yearly, Nigeria may relapse to lower quantity if farmers find cultivation unprofitable and processors find the business unsustainable.

Dr Olagunju the lecturer and processor, while speaking on the likely demotivation of farmers, said: “Let it be stated categorically that it is no more a presumption but a reality. The re-opening of our land borders has caused serious infiltration of foreign rice and has downturned the acceptance of our dear highly nutritive Nigerian rice.

“This festive season, the untoward rate at which the foreign rice flooded the market has grossly and negatively affected the expectations of our farmers, who have gone all the way to get loans and other supports to produce rice and other produce like poultry, in readiness for the festive season.”

She advised that the government should take drastic measures in seeing to the continued enforcement of the ban on importation of rice and other products to checkmate further infiltration through the land borders.

“Or else, farmers will suffer great losses and their morale for farming and trusting in the policies of the government would be dampened,” she added.

Threat to CBN loan recovery
Smuggling and discouragement of local production will also hinder recouping of loans from the CBN intervention beneficiaries.

Conservatively, the CBN has advanced over N240 billion on ‘revolving’ credit facilities to predominantly small-scale farmers and processors, including rice farmers, in the Federal Government’s Anchor Borrowers’ Programme.

The CBN Governor Godwin Emefiele had told the Senate Committee on Banking, Insurance and other Financial Institutions in May 2019, when he was screened for the second term re-appointment, that over N190 billion had been disbursed to about 1.1 million farmers holding fewer than five hectares each.

Also, a microfinance bank of the CBN-funded Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) got applications from 80,000 Nigerian farmers and agro-allied industry operators in April 2020 for N50 billion loan for Micro and Small Medium Enterprises (MSMEs).

NIRSAL Microfinance Bank had also said the CBN introduced the N50 billion Targeted Credit Facility as a stimulus package to support households and MSMEs following the COVID-19 pandemic.

On the impact of CBN’s support programmes on the local rice industry, Coscharis boss Maduka said the schemes “are having the desired effect, but people need to be a little bit patient…. The Anchor Borrowers Programme is supportive to farmers and it is yielding results.”

He argued that there would be a time when supply would be higher than demand, and the price would start crashing and stabilise. “It is natural,” he added.

Stakeholders, however, have said with the reopening of the borders, the existing and expected gains from such special interventions would be jeopardised through economic sabotage if the joint border patrol system fails.

The way forward
On ways around the imbroglio, the National President of the All Farmers Association of Nigeria (AFAN), Mr Ibrahim Kabir, said certainly, all the gains made during the lockdown would be lost if smuggling goes unabated.

“The Customs should be charged to stop the menace of smuggling, and whosoever is caught should be severely dealt with aside forfeiting all items impounded and promptly auctioned.” He added that Nigeria should also apply capital punishments on economic saboteurs, as China does.

To the Kano State chairman of AFAN, Abdulrasheed Magaji, checking to smuggle requires strong political will from the part of the government to deal with any corrupt agent involved in collaboration with smugglers. 

“If I may suggest, farmers’ associations should be involved in identifying and prosecution of any person involved in smuggling any banned agricultural product; in the same way that (MAN) should be involved in other manufactured banned products,” he said.

Stakeholders are unanimous that the Customs Service should be made to do its jobs effectively working with other military and paramilitary agencies to curb smuggling of prohibited items, including foods, through the borders and unathorised routes.

CBN’s move to partner with 36 states on food production
To boost food production, analysts have also said the proposed partnership between the CBN and 36 states of the federation on production and value addition using the ABP template is a move in the right direction.

Mobilising farmers for rice and other staple food crops production, processing and industrialisation with state subsidies and support, in addition to farm and rural infrastructural development, they argued, would go a long way in entrenching agribusinesses, farmers’ productivity and deepening of crop industrialisation.

The Executive Provost of the Federal College of Animal Health and Production Technology (FCAH&PT), Ibadan, Dr Olatunde Owosibo, suggested resuscitation of farm settlements in each state of the federation in collaboration with the CBN to revive commercial crop production, employment opportunities and wealth creation.