Way out of recession: Keep the focus on agriculture and manufacturing

That our economy is in recession has been established and the symptoms are crystal clear. I identified some of them last week. The question I believe that the government and the people of Nigeria must be asking is how do we recover from recession and restore growth to our economy? First, I believe that the bullish and reflationary 2016 budget (though some disagree that it is reflationary) was crafted with this in mind. The government clearly saw the direction the economy was going and decided to borrow to spend our way out of recession. With further decline in revenue the borrowing may be more than the projected N2.2 trillion if the budgeted goals must be achieved. But there are a couple of challenges. Are we actually able to find lenders within the time frame of Budget 2016? How soon will the spending be done and how quickly will the impact be felt? The rumoured ’emergency powers’ being sought by President Muhammadu Buhari must be directed to this end. If this is only to shorten procurement processes and allow virement of budgeted sums, I will support the move. But nothing more because I think the President already has enormous authority and discretion to fire the economy on all cylinders.

We have long spoken about agriculture as a major and present opportunity to grow and diversify our economy. Though we have largely been short in action for a long time, it must be admitted that some action was seen during the stewardship of Akinwunmi Adesina as Minister of Agriculture. He seemed to have pursued a lot of initiatives captured under the Agricultural Transformation Agenda (ATA). Agriculture was being projected as a business, serious business, not a vocation, not a hobby. Visible efforts were made to show that agriculture is not a business for the old, women and the uneducated but for young people as well. A crop of young people called Nagropreneurs were born and showcased. Several funding initiatives were opened by the Ministry and the CBN at single digit interest rate. What I cannot vouch for is the ease with which these facilities were accessed by the applicants. It has never been easy to borrow money in Nigeria from the banks, especially for the target prospects. Those who often benefit more from these schemes:  Operation feed the Nation, Green revolution, NERFUND to the recent schemes such as Agricultural Credit Guarantee Scheme Fund (ACGSF), Agricultural Credit Support Scheme (ACSS), Commercial Agriculture Credit Scheme (CACS) etc, are usually emergency farmers and fly- by- night businessmen. Nevertheless, we saw big investments into agriculture by Dangote Group, Dansa, Teragro, Olam, Okomu, Presco in addition to the existing big farms such as Obasanjo Farms, Maizube Farms (Abdulsalami Abubakar), Sebore Farms (Murtala Nyako), Anadariya Farms (Usman Dantata),Ojemai farms (Joseph Arumeni-Ikhide), Jorama Farms (Arinze Onebunne), Folawiyo farms (Wahab Folawiyo), Anuoluwa farms (Peter Adeniyi) and a few others.

Recently, we have heard of the Green Alternative Agriculture Promotion Policy – the new agriculture programme launched by the present government. The Agric Minister, Audu Ogbeh, who is a reputed farmer, has been speaking so passionately about this new programme in and outside the country including in Kenya last week. We know it is not in the nature of Nigerian politics for new regimes to continue with the projects or programmes of the previous regimes (more so if they are from different parties), but our hope is that this new programme is building on the platforms and successes already achieved. We do not have the luxury to reinvent wheels at this time, besides we do not have the money I think. But no matter the colouration of this new programme, five issues continue to dog Nigeria’s agriculture .One is land tenure system and the ease of getting land for commercial agriculture. The second is extension services and appropriate technology and expertise which are in very short supply these days. The third is availability of seed stock and fast maturing species and access to affordable fertilizer. The fourth is access to capital that is friendly to agriculture. The fifth and perhaps most critical at this time is how to process the harvest through value addition to ensure preservation and higher returns. Most of our agric exports are mere commodities with little value addition that becomes easily susceptible to global market price volatilities. Many agric enthusiasts have had their fingers burnt by watching their harvest spoil and lose value before they could get off-takers. Those are critical issues which the minister must focus all his attention on to resolve if we must go beyond slogans and symbols.

To be sure, the major economic challenge we have is not shortage of dollars or foreign exchange but low productivity. We export rubber and import tyres, export cocoa and import chocolate, export hides & skin and import shoes & hand bags; export crude oil and import PMS, DPK, DIESEL and JET A1. We still produce a lot of tomatoes but consume so much of imported tomato concentrate and purée. Much of the packaged cashew nuts we buy from our supermarkets are imported, made from the raw cashew nuts we export. And because the cost of buying a unit of the processed items is higher than what we earn from the export of the raw materials, we find that we are perennially short of forex. Therefore if I have one advice to give Nigeria as the surest way of working ourselves out of this recession and perhaps never to return to it again ever, it is to advocate a single minded focus on manufacturing- production through value addition. If our country pursues a determined manufacturing policy, most of our current economic challenges – high unemployment, high inflation, high exchange rate etc will abate.

And that’s why I think that the recent directive of the CBN to banks to allocate 60% of their foreign exchange to manufacturers is revolutionary. In my reckoning it is a better option than banning anything. Since we have proven incapable of enforcing bans and also because bans are becoming anathema in our current global market space, preferential allocation of foreign exchange to manufacturing operations represents one key way of incentivizing manufacturing in our country at this time. If the government follows this with other fiscal incentives like the Export Expansion Grant Scheme, then we may not only be promoting local manufacturing but also exports that will help diversify our national revenue sources, lessen our current over-dependence  on crude oil while reducing foreign exchange scarcities and pressures in the long run.

Of course, the challenge, as always, is how to enforce the directive. This is always our default line. Good policies, good intentions, good pronouncements and launching ceremonies but after that, the ‘Nigerian factor’ steps in. I believe that the CBN will have to watch the backs of the banks and analyse their monthly returns and publications on forex utilization. The manufacturers themselves have to set up a mechanism to monitor weekly allocations and provide feedback to the CBN and to the people of Nigeria.  Also because emergency manufacturers will arise which will not be entirely bad, if only they will actually manufacture, industry groups have to authenticate their memberships. To eliminate abuse by the manufacturers themselves, because anything is possible in Nigeria, the CBN and the banks must ensure that the forex allocated is used strictly to import manufacturing inputs only and not finished goods or diverted to other uses. There are many smart Alec’s around!  Additionally we must have a way of assessing the impact of this initiative to be sure it is achieving the intended objective.

Let me conclude by saying that my normal preference is for a level playing field for all economic agents. I am usually for the free interplay of the forces of supply and demand to determine allocation of resources in a free market. But given the perfect imperfection of our market and given our known penchant to follow the least line of resistance which makes us import whatever is importable including toothpicks, rubber toys and apples, it is justifiable to create a regime of preferences and discretionary allocation of scarce resources to force a behavioural change that could prove revolutionary if all the precautions are taken. We must work ourselves out of this crippling recession. And an undivided focus on agriculture linked to manufacturing looks to me to be a necessary and viable policy option.

Mazi Sam Ohuabunwa OFR