FX, execution hitches threaten food waiver policy as farmers kick
• Importers yet to key into policy, say insiders
• Stakeholders seek clarifications, sceptical about govt sincerity
• Muda Yusuf faults exclusion of SMEs
Except the 150-day duty-free import window for certain food items is backed with foreign exchange (FX) support among others, there are indications importers targeted by the fiscal policy will boycott the exercise, findings have suggested.
Over a month into the effective date of the programme, which is meant to crash the prices of essential food items, sources at both the Ministry of Finance and the Nigeria Customs Service (NCS), told The Guardian that there is nothing “on the ground” to show that the implementation has kicked off.
This comes as the existing farmers who are targeted are said to have continued to approach the process with scepticism. Sources said the majority of the farmers have boycotted the exercise while a few said they would need more clarification before committing resources to importation.
Chief of their concerns is sourcing FX for importation. Sources said, “the government would need to back the policy with FX support”, otherwise the mere pronouncement of duty-free would not move the needle in the efforts to crash prices of food.
Another source said the farmers have continued to press home their demands for incentives to boost local production, which they consider more strategic to the business goals as opposed to importation.
Eligibility to participate in the window is restricted to established businesses with track records of good governance and tax compliance for a minimum of five years. Participants are also expected to have “sufficient farmland for cultivation, feed mills or agro-processing companies with out-grower network”.
Dr. Muda Yusuf, a private sector advocate and ex-Director General of the Lagos Chambers of Commerce and Industry (LCCI) said the conditions have excluded small and medium-scale operators, which may have weakened the effectiveness of the programme.
According to the guidelines as explained by Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, which recommended the intervention, a minimum of 75 per cent of the imported food items would be sold through recognised commodities exchange – a clause that has increased the uncertainty of the programme.
Widespread are fears that lack of clarity and absence of clear-cut mechanisms may threaten the implementation of the scheme. Information obtained from different sources at the Federal Ministry of Finance, yesterday, did not show that concrete steps are being taken to ensure hitch-free implementation.
Sources also said that no concrete strategy for commodities exchange participation yet even as the clause gives out the scheme as a government-led programme.
As the country eagerly awaits the take-off, there is anxiety that the closure date, December, could pass without any substantial progress in the scheme. Owing to the tight time frame, there are some suggestions that the closure could be extended by another six months – a possibility the Ministry of Finance is said to be considering.
There is also apprehension among importers that NCS, which now runs as a revenue mobilisation agency as opposed to its trade facilitation mandate, may truncate the idea or be completely aloof to its administration.
Experts think that there is no infrastructure to support the plan. They pointed at the unstable power supply, lack of good roads and insecurity as factors that may threaten the distribution of the imported food and add significantly to the prices, thus narrowing the net gains.
An energy and development expert, Henry Adigun, said the challenge of the duty-free import is not the idea, but what it means. Yusuf, the Director and Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), expressed apprehension regarding the readiness of importers and the potential effectiveness of this policy.
He expressed concern about the delay in rolling out the guidelines, saying: “We are talking about a 150-day window, and almost a month is gone already. The urgency of the situation cannot be overstated, as the primary objective of this policy is to reduce the soaring cost of food, particularly food inflation, which has been a major concern for Nigerians.”
On August 14, 2024, the NCS released another set of guidelines outlining the eligibility criteria for companies wishing to benefit from the waivers.
The zero-duty waiver ranges from five per cent on grain sorghum, millet and maize to 20 per cent on wheat and beans and 30 per cent waiver on husked brown rice.
The guidelines stipulate that qualifying companies must have milling operations with a minimum capacity of 100 tonnes per day and have been in operation for at least four years.
While these measures are intended to support companies that have invested in backward integration and are involved in both milling and farming, Yusuf cautioned that the strict criteria could exclude SMEs in the sector. He said the emphasis on large-scale operators may inadvertently shut out smaller players who have also made significant contributions to the industry.
The Rice Millers Association of Nigeria has already raised concerns that many of its members may be unable to meet the stringent requirements, potentially limiting the inclusiveness of the policy. Yusuf suggested that a review might be necessary to ensure that the waiver benefits a broader spectrum of the industry, including SMEs.
Regarding foreign exchange (FX) support, Yusuf acknowledged that while the FX market is now open and accessible, high exchange rates remain a challenge.
“If the FX rate is high but duties and levies are waived, it could still result in lower costs overall,” he said. However, he dismissed calls for concessionary FX rates for importers, warning that such measures could lead to market distortions.
With one month already lost, stakeholders say the waiver implementation is still marred by confusion and lack of clarity.A former member of the Ministerial Committee on Fiscal Policy and Import Clearance Procedure, and President of the National Council of Managing Directors of Licensed Customs Agents (NCMDLCA), Lucky Amiwero, said these have created significant uncertainty within the industry.
He raised concerns over the conflicting circulars and the potential impact on the effectiveness of the policy, noting that the initiative is facing significant challenges due to discrepancies in official communications and concerns from industry stakeholders.
Amiwero pointed out that backdating the circulars has compounded the challenges faced by importers, particularly those needing to meet the stringent requirements set by the government.
Amiwero stated that only a few companies in Nigeria can meet these guidelines, noting that the guidelines are designed to support those who have already invested in milling and farming, but risk excluding SMEs that are also significant players in the sector.
Meanwhile, the President of the Nigeria Agribusiness Group, Kabir Ibrahim, said key players in the agricultural and food production sectors are already taking steps to benefit from the initiative.
Ibrahim, who is also the National President of the All Farmers Association of Nigeria (AFAN), said several major companies are prepared and have already started taking advantage of the policy.
A financial analyst, Abubakar Umar said the timeframe must be extended if the initiative would succeed. He noted: “People need a prolonged period to sufficiently utilise the opportunity and make an impact on the general economic activity. Economic benefit would lag before we see the fruit of it.”
However, Umar, who expressed fears about the tendency of the massive food import to destabilise the backward integration policy of the government on food self-sufficiency, urged an exit strategy for the duty-free import regime.
“Market distortion in the form of over-reliance on import rather than building the capacity for local production and smuggling and abuse where bad people might smuggle the duty-free imports into neighbouring countries for profit rather than selling them locally to reduce prices.”
On the non-involvement of state governors in the policy, Umar said governors should support local farmers to produce more food and develop effective storage facilities while focusing on rehabilitation of roads at the state level. He added that the government can check abuse by insisting on strict customs oversight, tracking and monitoring the supply of imported food.
“The government needs to impose strict penalties and set an example for erring people who violate the initiative. Stiff penalties and prosecuting people are some of the shortcomings of this government and even the previous ones. Bad behaviour often goes unpunished,” he stated.
An economist, Kelvin Emmanuel, who described the initiative as a good step, bemoaned the issuance of conflicting directives that may truncate the policy. He also feared that a lack of effective regulation to check price gouging may spell doom for duty-free food imports. Stakeholders in the industry urged the swift execution of the guidelines to ensure that the policy’s implementation is effective.
Industry experts are also calling on the government to streamline the process and ensure that the policy benefits the intended recipients, thereby helping to stabilise food prices and provide relief to millions of Nigerians.
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