Foreign traders flout global practice on access to farms
Foreign traders in Nigeria’s agriculture sector are flouting the internationally acceptable practice on access to farmlands as they move in to purchase agric produce directly from farmers while exporting them using improper channels.
This practice is against the globally acceptable standards and robs Nigeria’s governments of revenue accruable to them, given that the produce are moved out of the country without payment of export taxes and necessary registration with government and private sector agencies such as the Nigerian Export Promotion Council (NEPC) and the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).
Nigeria’s exporters are by law expected to pay 0.5 percent of their export products (Free on Board) as well as other fees collectable by the NEPC, NACCIMA and other government parastatals, depending on the type of commodity. This is what the foreigners have evaded over the years, which has disrupted the distribution value chain.
“The international practice is through the commodity exchange or licensed warehouses. But in Nigeria there are no regulations stopping foreigners from going into our farms to source for agric products, “said Obiora Madu, chairman, export group of Lagos Chamber of Commerce and Industry (LCCI).
“The implication is that the economy is being shortchanged in the process and government is losing revenue because in a situation where it is foreigners that are taking our products out, it is possible that all the money will not come back into the country,” Madu added.
Most of the foreigners that are involved in this practice do not bring back foreign exchange into the country as their transactions do not take place through the banks. Key players say this is bad for Nigeria’s economy which is badly in need of foreign exchange, hit by recession arising from oil price lows, which have slashed government revenue by over 50 percent, creating market distortions, and job losses.
According to industry players, the international practice on purchase of agro produce is through the commodity chain or licensed warehouses. A commodity chain is a process used by firms to gather resources, transform them into goods or commodities, and finally, distribute them to consumers.
Most foreign traders, especially work in hand with some dubious Nigerians in purchasing the produce directly from farmers, thereby creating unemployment for agro exporters who also source agro produce for exports.
“The foreign traders cut us off from accessing the produce from farmers, as they prefer selling to foreigners than Nigerian because of higher price offer. This makes it difficult for us to source locally and also increase our cost,” said Francis Irubor, chief executive officer, SJ-Emerald Global Limited, in a telephone response to questions.
“It is not done anywhere in the world that foreigners will come into the country and source their produce directly from farms. Government at all levels need to regulate their activities,” he said.
The country’s export sector is still largely unorganised, undocumented and hard to track, as the majority of trade takes place in the informal sector which is wide open to corruption and robs government of much needed revenue.
“There is high rate of smuggling of agric produce through the borders to Benin, and some foreigners go into our farm gates to buy from farmers, using improper channels to take produce out of the country,” said Tola Faseru, the national president of the National Cashew Association of Nigeria.
“All these affect our statistics and we are calling on the government to support farmers and stakeholders in the sector in controlling the way foreigners go into our farm gates,” Faseru added.
The Nigeria Export Promotion Council (NEPC) confirmed in early 2015 that 80 percent of non-oil export transactions in the country were not being recorded, accounting for the wide disparity in official statistics in the country and those provided by the ITC, a subsidiary organisation of the World Trade Organisation (WTO) and the United Nations Conference on Trade& Development (UNCTAD.)
There is often a wide disparity between the ITC data and data from Cobalt International Services, which is the indigenous company assigned with the role of calculating non-oil exports in Nigeria. This is because Cobalt calculates Nigeria’s non-oil exports from the point of exit or at the ports, while ITC calculates countries’ non-oil export figures from import countries or points of arrival, the point NEPC acknowledges.
BusinessDay compared data between the two and found that more goods are leaving Nigeria unrecorded, due to lack of formalisation of several businesses in the country.
Stakeholders in the sector called on the government at all levels to organise the commodity chain and regulate the activities of foreign traders in the country.
Madu stated that the issue is with the country’s commodity chain. He noted that the governments need to organise commodity chains in a way each group plays it role, thereby ensuring that agric produce gets to the buyers through the proper distribution channels.